Information for First Time Home Buyers

Qualifying

You should contact your banker to determine your qualification for a mortgage and the approximate price range for your home. Often, you can be Pre-Approved for a mortgage up to a certain amount before you go house hunting. In order to shop effectively for your new home, you need to know, in advance, the amount of mortgage you can manage. Many agencies provide online mortgage rates. Later, your realtor will also ask you many detailed questions to qualify you for the size, type, location and price range of your new home.

Your Realtor

You now know about the PTT, the amount of the mortgage you can get and the price range you can afford. Now it is time to choose your Realtor and begin your search for your new home. Your Realtor is a professional, with all the resources at his or her fingertips. They will be able to narrow down your search by first reviewing your needs and then your preferences. Once the type of and price range of the home is determined, the Realtor can call up a list of homes that fit your needs and show them to you. It is important to remember that your realtor works on a commission and that he or she can earn that commission on any home that you purchase. Your realtor can show you any home that has a sign in front of it, and many that don't have signs. It is natural for buyers to drive around neighbourhood just to see what's available. Many first time buyers think that they should call the realtor whose name is on the sign, when they see a home they like. While you certainly may do so, remember that the realtor who has spent the last three days showing you ten other houses will not earn any commission at all if you call the realtor whose name is on the sign. Plus, the new realtor will not have the benefit of knowing what you have already seen for comparisons. So if you like the realtor you are working with, let them show you any house that you might find on your own.

The Offer

Once you have found the home that suits your needs and budget, you are ready to make an offer. Your offer to purchase a property may be called many things: "Offer to Purchase", "Contract of Purchase and Sale", "Interim Agreement of Purchase an Sale", etc. Whatever it may be called, it is a legal document that carries legal consequences. You should never make an offer casually to see whether the vendor will accept a certain price, if you are not prepared to complete the purchase of the property. When you are fully serious and able to complete a purchase, you should ensure that you have included special clauses in the offer, which we call "Subject Clauses". These clauses provide that the offer will not become binding upon you until the condition in the clause is fulfilled, approved, waived or otherwise satisfied. The most common subject clause is a clause which states that your offer is "subject to you obtaining a conventional first mortgage at current bank rates on or before a certain date". Others have to do with appraisals, home inspections, surveys, zoning, or approval of the transaction by someone other than yourself, such as a lawyer or your spouse. It is also your obligation to diligently pursue the fulfilment of each subject clause. For example, you can be held liable if you fail to take reasonable steps to obtain the mortgage shown in your subject clause, and then try to use the lack of a mortgage to avoid the purchase. Moreover, it is not just your deposit that is at risk, since a purchaser who defaults in a transaction can be held responsible for consequential damages including the cost of a resale at a lower price than you offered.

Counter Offers

If the Vendor does not wish to accept your offer, he can reject it out of hand, or, if he chooses, he may make a counter offer, essentially saying, "I won't sell for the price or terms you offered, but I will sell if you agree to pay this price or agree to these terms." You have the right to accept or reject the counter offer, or to make a further counter offer. Your realtor is the best person to advise you on these matters as they are well experienced in negotiating the terms of an offer.

Removal of Subject Clauses

Once your offer has been accepted, you will need to go to your banker and confirm your mortgage details. Even if you were pre-qualified, your banker needs to know that you have in fact purchased a home and arrange for mortgage instructions to be sent to your lawyer. When you get your financing commitment from your banker, you will advise your realtor to remove the subject clause regarding financing. All other subject clauses will be removed in the same manner when they are satisfied, and, when the last subject clause is removed, you will have a firm and binding agreement of purchase and sale.

At the Law Office

If you have not already discussed each step above with your lawyer, it is now time to review all that you have done and instruct your lawyer to prepare the conveyancing documents. Your Lawyer fulfils the role of a "Trusted Advisor" and his job is to ensure that you get what you bargained for: the correct property, free and clear of all financial encumbrances, registered to you in the land registry system, subject only to your own mortgage. Your lawyer will search the title and confirm the nature of all encumbrances or charges registered against the property. Typically he or she will provide you with a copy of the search, a copy of the official plan of the subdivision, and copies of all non financial encumbrances. If there is more than one buyer, you will be asked whether you wish to be shown as "Joint Tenants" or as "Tenants in Common". The difference is that with Joint Tenants, the property is deemed, by law, to have been transferred to the surviving joint tenant the moment before death. It does not form part of the deceased's estate and cannot be dealt with by a Will. On the other hand, if the property is registered as "Tenants in Common", then each owner retains an individual undivided interest even in death, and the property will be dealt with in his or her estate.

Your Lawyer will prepare a "Statement of Adjustments" (see the Sample Transaction below) which will contain all of the financial arrangements on one page. It will show your purchase price, property purchase tax, (if any), your share of property taxes, water tolls, strata fees and any other adjustments. It will also show your deposit, your mortgage proceeds, the legal fees and the balance needed to close the transaction. You will be asked to pay this amount with a bank draft or certified cheque and to bring it with you when you attend to sign your closing documents.

Your Lawyer also typically prepares the mortgage for your bank with your consent along with other miscellaneous closing documents. He will discuss the issue of Conflict of Interest in handling your mortgage for the bank, and ask you to sign a consent letter.

Your appointment to sign the documents will usually be in the last week before closing. Be sure to tell your lawyer if you will be away from home at any time before the closing date so that they can make alternate arrangements.

Your lawyer will register all documents in the appropriate Land Registry Office and report to all parties. On the possession day, your realtor will present you with the keys to your new home.