The purchase of a home is usually the single largest purchase ever made. Alongside, most people don’t have the hundreds of thousands of dollars to pay for the house in full, therefore a purchase of a home also results in the largest loan you’ll ever have. There are many things to be aware of when purchasing a home, and to make sure you don’t overlook anything, we’ve put together a “First Time Homebuyer Checklist” to help you get the most out of your new endeavor.

First Time Homebuyer Checklist:

• Find out how much you can borrow by getting pre-qualified by a lending institution

• Decide what you can afford to spend in terms of down payment and monthly payments

• Understand the total costs of purchasing a home

• Get in touch with your agent and determine a comfortable price range

• Realize the ongoing costs of owing a home

• Figure out what style of house you like and what features you prefer

• Consider the general location you’d like to live in or near

• Check out the neighborhood

• Analyze the specific site

• Invest in a home inspector

Find out how much you can borrow by getting pre-qualified by a lending institution.
The majority of lending institutions will lend up to 75% of the value of the property, meaning that you will be required to come up with 25% of the purchase price, referred to as the down payment. This type of mortgage is called a conventional mortgage.

When borrowing more than 75% of the property’s asking price, you will be required to have mortgage insurance, which is an extra fee added on to the mortgage amount, insuring the loan. You may be eligible to borrow up to 100% of the purchase price with an insured mortgage.

The benefit of being pre-qualified by a lending institution is that you will know the amount you can qualify for before looking into purchasing a home. This helps to narrow down your search for your first home and speeds up the purchase procedure. With this, it is a standard practice of lending institutions to understand your ability to repay the money they lend you. Lenders are looking to see if and how you can afford the extra burden of mortgage payments and will determine this by looking at the Gross Debt-Service and the Total Debt-Service ratios.

The Gross Debt-Service (GDS) ratio examines your monthly payments on a conventional first mortgage, including property taxes and heating costs. As a rule of thumb, the total of the mortgage payments, property taxes and heating costs should not be more than one-third (1/3) or 32% of your gross monthly income. By calculating the GDS ratio, you can establish the amount of your pre-tax monthly income that will be devoted to the above monthly debts.

Example:
A family that has a gross annual income of $54,000, with mortgage principle and interest payments of $720.00 per month, property taxes of $210.00 per month and heating costs of $160.00 per month would have GDS ratio of:

The Total Debt Service (TDS) ratio allows you to establish the amount of your gross monthly income that will be required to cover all your debts, including your mortgage, car payments, taxes, and other applicable loans. Typically, your total monthly payments cannot go beyond 40% of your total monthly income.

Example:
A family that has a gross annual income of $54,000, with mortgage principle and interest payments of $720.00 per month, property taxes of $210.00 per month, heating costs of $160.00, and other debts of $350.00 per month would have TDS ratio of:

Decide what you can afford to spend in terms of down payment and monthly payments.
It’s important to know where your money goes every month. By having an idea of what you spend you earned income on, you can determine how much you can afford per month. Remember, no matter how much a lender says you can borrow, it’s crucial for you to do your own analysis. The GDS and TDS ratios are valuable when determining how much a month you can afford.

Having some save money to be used as a down payment will also help in reducing the amount of monthly payments. For example, if you’re looking at purchasing a home for $300,000, and have no money to put down, your monthly mortgage payments (depending on interest rates) may be around $2,100 per month (this is only the mortgage payment). Alternatively, if you have 10% to put down ($30,000), your monthly mortgage payment could be around $1,700 per month.

When deciding how much you can afford, consider your day-to-day cash flow and how it will be affected with a new monthly payment.

Understand the total costs of purchasing a home.
Owning a home entails more than the monthly mortgage payment. There are costs involved in the purchasing of a home including inspection fees, legal fees, sales tax, land transfer tax, moving fees, and possibly renovation/repair costs. Having knowledge of the full costs of home ownership will prevent a lot of unnecessary stress and surprises down the road.

Get in touch with your agent and determine a comfortable price range.
It’s a good idea to sit down with your real estate agent and discuss what it is you’re looking for. This entails some of the previous points made about knowing how much you qualify for and determining the size of your down payment.

Realize the ongoing costs of owing a home.
Besides the mortgage payments, there are additional costs to running a home. For example, there are bills for utilities (gas, electricity, and water), property insurance, property taxes, ongoing repairs and maintenance, and possibly other expenses.

Figure out what style of house you like and what features you prefer.
What’s stopping you from looking at model homes and open houses? This is a great way to see the type of layouts of different homes. Looking at magazines, on-line layouts of homes, and physically walking through homes is a great way to start your personal list of what you’d like to have in your home. Consider things such as how many bedrooms, how the home flows with respect to layout, your likes and tastes for certain features (i.e. front porch vs. balcony), and if there’s room for altering the home to make it ‘your own’. You will have to look into the future for this as well. For example, how many children do you plan on having? This will affect the number of bedrooms you’ll require and will more than likely affect some of the other preference you’d want in a home.

Consider the general location you’d like to live in or near.
Do you mind commuting to work/school? If so, how long of a commute are you willing to make? Do you like the area you currently live in or are you willing to look at different areas? Do you like the city or would you prefer the country lifestyle? Do you have time to devote to maintaining a large lot or would you prefer the condo life? These are some of the questions to ask yourselfwhen deciding on an area to live in.

Check out the neighbourhood.
It’s advisable to learn as much as you can about the community that you’re looking into becoming a part of. What cultures are present and what is the general culture of the area? What kinds of amenities are accessible for you? Is there a plan for development and/or replacement of major amenities such as community centers or schools? You may be interested in finding out about the crime rate in the neighbourhood. If the area has a homeowner’s association, it may be beneficial for you to contact them to gather information about the neighbourhood.

Analyze the specific site.
If you’ve narrowed down your search, you’ll need to look a bit deeper into the specific site. Check out the availably and proximity of recreational facilities, medical clinics and hospitals, schools and daycares, grocery and convenience stores, public transit, parking, and entertainment. Do you feel comfortable with the ambiance of the neighbourhood or do you get an uneasy feeling when you visit? You may even go to the extend of asking people what they like and dislike about their home. Other things to consider is how garbage and recycling is managed and the type of mail delivery.

Invest in a home inspector.
Once you’ve located a home in a desirable area that fits most, if not all, your desired characteristics, you will probably be eager to go about purchasing it. Most individuals work with a real estate agent, a service that is available for you at CANREIG™. You will be advised by the agent to get a proper home inspection done so that you know what you’re getting into. There is a cost to a home inspector, but finding out any faults in the home and the expected life of certain things (i.e. roof), will be a huge negotiating tool for you when offering a price for a home. Also, if there are considerable repairs and/or damage to the home, you may change your mind on the whole thing. Many people, when getting ready to sell their home, stage their home to get more offers. For example, a fresh coat of paint and an extremely clean environment give an impression of a well-kept home. A professional home inspector looks objectively and analyzes the home. They are trained to seek out problems and inform you of potential repairs that you may not even be aware of. Hiring a good home inspector is well worth it.