Lenders will analyze your income in relation to your projected cost of the home and outstanding debts. This will determine the size of mortgage you can borrow. Your housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your mortgage, property taxes and heating costs. The sum of these costs is referred to as your GDS(Gross Debt Servicing) ratio
Monthly condomium/townhouse association fees, if you're purchasing a condominium or townhouse, and private mortgage insurance are added to the GDS. Your housing income-to-expense ratio should not exceed 30% of your gross monthly income. Some lenders will go higher under certain circumstances. Another ratio the lenders use is the TDS(Total Debt Servicing) ratio. This consisits of the GDS expenses plus all other payments such as car loans and credit cards. This ratio should not exceed 42% of your gross income.
First and foremost it is strongly recommended that you hire a professional person to inspect the home. Many home inspectors belong to accredited associations. They attend seminars and stay abreast of the latest developments.
Secondly some provinces require sellers to complete a disclosure form revealing everything known about their property(Seller Property Information Satement). Home sellers are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachment of easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for settling, sliding or soil problems, flooding or drainage problems.
People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions, if the condomium corporation has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
There are always some sellers who for some reason must sell quickly, however in general, a very low offer in a normal market might be rejected immediately. In a strong buyer's market, the below-market offer will usually either be accepted or generate a counteroffer. If few offers are being made, an outright rejection of offers becomes unlikely. In a strong seller's market, offers are sometimes higher than full price. While it is true that offers at or above full price are more likely to be accepted by the seller, there are other considerations involved:
1. Is the offer conditional upon anything, such as the sale of the buyer's current house? If so, such an offer, even at full price, may not be as attractive as an offer without that condition.
2. Is the offer made on the house "as is," or does the buyer want the seller to make some repairs before the closing or make a price concession instead?
3. Is the offer all cash, meaning the buyer has waived the financing condition? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing condition.
Different sellers price houses very differently. Some deliberately overprice, others ask for pretty close to what they hope to get and a few (maybe the cleverest) underprice their houses in the hope that potential buyers will compete and overbid. A seller's advertised price should be treated only as a rough estimate of what they would like to receive.
If possible try to learn about the seller's motivation. For example, a lower price with a fast closing may be more acceptable to someone who must move quickly due to a job transfer. People going through a divorce or are eager to move into another home are frequently more receptive to lower offers.
Some buyers believe in making deliberate low-ball offers. While any offer can be presented to the seller, a low-ball offer often sours a prospective sale and discourages the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway.
Before making an offer, also investigate how much comparable homes have sold for in the area so that you can determine whether the home is priced right.
Various types of mortgage programs exist. Some require a minimum 5 percent down payment (High-Ratio) or a 25 percent down payment (Conventional). There are even 100% mortgages available.
First Time Buyers usually put down the minimum allowed, to have extra funds for making home improvments or to purchase furniture/appliances. It may be more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed thus saving interest costs. Once a buyer puts 25 percent or more as a down payment on their desired home, they will waive the requirement for mortgage insurance.
Mortgage insurance is a requirement on all high-ratio mortgages (less then 25% down payment). That means the premium for the insurance is either collected "up front" at the time closing or you can include the premium into your mortgage.
Title insurance is a form of insurance in favor of an owner, lessee, mortgage or other interest in real property. It indemnifies against loss up to the face amount of the policy, suffered by reason of title being vested otherwise than as stated, or because of defects in the title, liens and encumbrances not set forth or otherwise specifically excluded in the policy, whether or not in the public land records, and other matters included within the policy form, such as lack of access to the property, loss due to unmarketability of title, etc. The title policy form sets forth the specific risks insured against. Additional coverage of related risks may also be added by endorsements to the policy or by the inclusion of additional affirmation insurance to modify or supersede the impact of certain exceptions, exclusions or printed policy "conditions." The policy also protects the insured for liability on various warranties of title.
In addition, the policy provides protection in an unlimited amount against costs and expenses incurred in defending the insured estate or interest.
Before it issues a title policy, the title insurance company performs, or has performed for it, an extensive search, examination and interpretation of the legal effect of all relevant public records to determine the existence of possible rights, claims, liens or encumbrance that affect the property.
However, even the most comprehensive title examination, made by the most highly skilled attorney or lay expert, can not protect against all title defects and claims. These are commonly referred to as the "hidden risks." The most common examples of these hidden risks are fraud, forgery, alteration of documents, impersonation, secret marital status, incapacity of parties (whether they be individuals, corporations, trusts or any other type), and inadequate or lack of powers of REALTORS® or fiduciaries. Some other hidden risks include various laws and regulations that create or permit interests, claims and liens without requiring that they first be filed or recorded in some form so that the potential buyers and lenders can find them before parting with their money.
Since the cost for home owner's title insurance is very reasonable, the risk is one that a well informed buyer should not take. Many lawyers now recommend that you take title insurance to have that extra peace of mind.
It is strongly recommended that home buyers are prequalified or pre-approved for a mortgage as their first step in the process. By being prequalified, a buyer knows exactly how much house they can afford. They can make more informed decisions in the market place. This does not mean they will definitely get the mortgage because their credit reports, wages and bank statements still need to be verified before you can receive a commitment from the lender for the mortgage.
Almost all mortgage lenders prequalify people at no charge. Many of them will even do it on the internet. In order to be pre-approved, an application will be taken. Your credit report will be pulled, your employment and income will be verified, your checking and savings accounts will also be verified. In other words, all the necessary documentation will be completed in order for you to obtain a mortgage. The only things remaining will be for you to find a home, obtain an appraisal on it to prove its value to the bank and perform whatever inspections you may want on the property. This process considerably shortens the time frame to closing.
Compare the mortgage charts published in most newspapers.
On most occassions, lenders are willing to negotiate the interest rate. You should take note that there is a big trend now where many Buyers such as yourself are using mortgage brokers to arrange the financing for you. These brokers deal with many of the banks and trusts companies who in turn shop around for you to get the best rate and terms available for you. These companies are actually bidding to get for your business. This service is free to you, the broker actually gets paid by the lender for giving them your business.
Sales price increases in either type of housing are strongly tied to location, growth in the local housing market and the state of the overall economy.
Some people feel that buying into a new-home community is a bit riskier than purchasing a house in an established neighborhood. Future appreciation in value in either case depends upon many of the same factors. Others believe that a new home is less risky because things won't "wear out" and need replacement plus you have the new home warranty (Tarion).
Distressed properties or fixer-uppers can be found everywhere. These properties are poorly maintained and have a lower market value than other houses in the neighborhood. It is often recommended that buyers find the least desirable house in the best neighborhood. You must consider if the expenses needed to bring the value of that property to its full potential market value are within your budget. Most buyers should avoid run-down houses that need major structural repairs. Remember the movie " The Money Pit?" Those properties should be left to the builder or tradesman normally engaged in the repair business.
Remodeling a home improves its livability and enhances curb appeal, making it more salable to potential buyers. Some of the popular improvement projects are updated kitchens and baths, enlarged master bedroom suits, home-office additions and increased amenities in older homes.
The resale market is often difficult because you are competing with new construction. You need to give your home every competitive advantage you can if you are selling an older home.
Home offices are a relatively new remodeling trend. Adding one to a house often recoups 58 percent of the costs, according to a survey found in a report called "Cost vs. Value Report" in Remodeling Magazine.
The incidence of power of sales is cyclical, based on the national and regional economic conditions. When a house is taken back by a lender for non-payment, the lender usually has 2 appraisals done on the property to get an estimated current market value. The lender in turn will contact a local real estate company to arrange to list the property once the time frame for redemption has expired. The listing will be based on the appraisals they obtained earlier. When an offer to purchase is submitted to the lender, the lender will use these appraisals to negotiate the offer. As you can see, most of the time, you will be paying market value.
Be sure to find out who your real estate REALTOR® is representing before you tell them too much. The degree of trust you have in an REALTOR® may depend upon their legal obligation of representation. An agency working with a buyer has three possible choices of representation. The REALTOR® can represent the buyer exclusively, called buyer agency, or represent the seller exclusively, called seller agency, or represent both the buyer and seller in a dual agency situation. The Real Estate Association of Ontario(RECO) reguires all REALTORS® to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types:
1. In a traditional relationship, real estate REALTORS® and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub-broker, who brings the ready, willing and able buyer to the table.
2. Dual agency exists if two REALTORS® working for the same broker represent the buyer and seller in the same transaction. A potential conflict of interest is created if the listing REALTOR® has advance knowledge of another buyer's offer. Therefore, the law states that a dual REALTOR® shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, and the reason for the seller is selling without express written permission.
3. A buyer can hire an REALTOR® who will represent their interests exclusively. A buyer's REALTOR® can perform enhanced services for the buyer, such as preparing a market analysis on the home they are buying. All information provided to the buyer's REALTOR® shall remain confidential and will not be relayed to the Seller's REALTOR®.