People love looking at houses...And Why not? I love looking at houses too. That's one of the many reasons I'm a Realtor®. But if you're serious... that is, if you're really considering buying a home or an investment property, it pays to know where you stand financially. Where is your Net?
Every day hopeful buyers looking to take advantage of today's market ask me to show them homes. So, as a professional service, I send them the latest listings for the type of home they're thinking about. Sometimes, people tell me that they're not ready right now, but perhaps in a few months they will be. Then, a week later, they call needing to see a home right away, because it looks perfect and it's a great deal! Fantastic! But what happens when we go to view the home and it IS Perfect, and it IS a Great Deal? Are they actually ready to make an offer?
The perfect house in a great neighbourhood at a good price usually isn't on the market for long, and there's usually more than one buyer ready to make an offer. If you were to walk in to the perfect home today, would you be ready to make an offer?
Here are some questions to ask yourself, your Realtor® and your Mortgage Professional before you even step inside the house that just may be your next home:
How much can I afford? How much of a down payment do I have? These questions you can answer with the help of your Mortgage Professional. That's why one of the first questions I ask hopeful buyers is whether or not they have spoken with their lender or a Mortgage Broker. Your Mortgage Professional can help you determine how much home you can afford, as well as your best options for managing your down payment.
How much of a down payment do I need for this particular house? The minimum down payment required for a specific home, is generally 5% of the purchase price. It is important to note however, that in Canada, a purchase with just 5% down, will require that you obtain Mortgage Default Insurance. The insurance premium will be in addition to your total loan amount.
When will I have access to the money for my down payment? If you currently own your home, and your down payment will be coming from the sale of your home, then you generally won't have access to your down payment funds until the sale of your existing home closes. If you plan to take possession of your next home before the closing date, then you'll want to make arrangements with your Mortgage Professional for interim financing.
How much of a deposit do I need to put down? Do I have access to funds today to make that deposit? The Deposit is a factor that can sometimes be misunderstood, and often is not even taken into consideration by many home buyers. It's customary to present your offer to purchase a home with a deposit. This means you handing over a cheque together with the offer. The deposit may be any amount you want, even zero, but it is meant to show your good faith in making the deal. In effect, it's the amount of money that will keep either party from walking away from the deal without an extremely good reason. Upon closing, the deposit goes toward the purchase of your home.