Ashley Donald – February 2017
- First and foremost, you need a first-time home buying squad (think T-Swift level). Be sure to assemble your squad with care: mortgage broker, real estate agent, property lawyer, shoulder to cry on. Ask friends and family who they have worked with and who they liked. You need to rely on these people quite a bit, so trusting and liking the members of your squad is a must. The better your squad, the less you will need a shoulder to cry on.
- Getting a mortgage means lots of paperwork to fill out and hand over. If you are buying a home with your partner, make sure you both have your stuff together before putting in an offer. Get bank statements, employment letters, income tax returns for the last couple of years and any big debt (like that “student loan”) statements you can. Having these things prepped in advance allows you to offer a quick condition period, which sellers like. It shows you mean business.
- Putting an offer in, negotiating and then meeting conditions is so exciting – and stressful. Be prepared for an emotional rollercoaster that could rival any Disney theme park ride.
- Inspections cost money, but are well worth the peace of mind. If you are purchasing in Nova Scotia, get a radon test. Radon is a naturally-occurring gas that is released when uranium in the ground breaks down. It can have negative effects on your health if the levels get too high and remain undiluted. Check out this Government of Nova Scotia map to determine if your future home is in a high-risk area. A professional test costs about $250. If your test comes back in the unsafe range, you can negotiate with the sellers to input a radon mitigation system.
- Be prepared to take some time off work to get the deal done. You will need to sign documents, meet with your lawyer, attend your inspections and do some running around to get your bank and tax documents. You also need to pack and move. These things take time. To budget time for packing – write down how long you think it will take. Triple this number and you probably have an accurate depiction of reality. Extra tip: the more you purge before you move, the less you have to pack, carry and fit into your Honda Civic.
- Don’t plan to move into your home on closing day. Similarly, don’t schedule repairs, deliveries or improvements for closing day. Most closings don’t actually happen until late afternoon, as documents, money and house keys are being shipped around the city, province and sometimes the country. As anxious as you may be to get into your new home, hold off for a day before scheduling movers and perhaps a couple of days if you are planning for renovations.
- Furnishing a house is expensive. Going from a one bedroom apartment to a three bedroom home means you need lots of furniture to fill those spaces. Kijiji will become your new best friend. Schmooze mom and dad into buying a new set and giving you their old one, or call up Aunt Susan to see if there is anything she is looking to donate to your worthy new-home cause. “Shabby Chic” and “Modern Vintage” are both acceptable interior decorating themes. You should also think twice before purchasing furniture on credit before your closing day. Any debt you accumulate before the closing day can affect your ability to obtain the mortgage.
- Continuing on the topic of money, there are a few “hidden” fees and costs you need to pay upon closing, aside from the down payment and all your new-to-you furniture. Things like the deed transfer tax, interim or final property tax, oil or propane top-up, recording your documents, CMHC fees, and title insurance can add to your closing day out-put. Talk to your MDW lawyer about these things in advance of your closing date so you have a true understanding of what these costs will look like.
- Being “house poor” is a real thing. Just because you have been preapproved for a $750,000 mortgage because you worked out west for the last three months does not mean you can afford it. Be aware of the monthly mortgage payment you can maintain without being shackled to your home eating ramen noodle packets for dinner every night. You need to be able to live and maintain the home. Water, power, oil, propane, insurance and the HBO package during Game of Thrones season are likely necessities for your home, and tack on a hefty amount month to month. Your mortgage broker should explain debt ratios to you. If not, ask about it. Look at your current expenses and create a meaningful budget at different mortgage points to see what will work with your income.
- Home ownership is a lot of work, especially if you are transitioning from an apartment, condo or flat where you didn’t have responsibilities outside of dishes, vacuuming and your laundry. When White Juan 2.0 comes traipsing through your neighbourhood and your shovel-muscles are rippling with effort, apartment-envy is real. Shoveling, mowing, gardening, and holiday decorating are necessary if you don’t want to be “that house” on the block. House upkeep is also expensive. You can google how much to budget per year depending on the age of your home, how big it is, etc.
- Think twice before buying a first-home that requires extensive renovations. You will spend more than you budgeted, and you will live in a construction zone longer than you intended. Many also don’t realize that a mortgage plus improvements doesn’t mean to you get a big mortgage up front and have the extra money to renovate the upstairs linen closet into the library from Beauty and the Beast – you have to pay for those renovations upfront, then the mortgage company will take a look at your renovations and determine if they are 100% complete. If they are complete, then and only then will they release the extra money. You still pay the full monthly mortgage from the time of closing, even though you haven’t received the added benefit. You should also talk to your real estate agent about the renovations you plan to make, to determine if they will add to your resale value in time.
You can read more about first time homebuying in Anne McFarlane’s “To Do” Before Closing blog from November, 2015.
MDW Law property lawyers can help you through this process and would be more than happy to be part of your home-buying squad.