The journey to homeownership is an exciting and significant milestone, but it requires careful planning. Whether you are a first-time homebuyer or a seasoned investor, understanding the home purchase closing process is crucial for a smooth transaction. In this guide, we will break down the essential steps to help you navigate the path to acquiring your dream home.
WHAT ARE YOU TRYING TO ACHIVE?
The considerations will be extremely different for those who are looking to purchase their first (or next) family home OR an investment property. In this post, I will cover the former scenario.
WHAT IS YOUR BUDGET?
Before delving into the home-buying process, it’s essential to assess your financial situation and establish a realistic budget. First, ask yourself the following questions*:
- What type of property are you looking for? Detached, semi-detached or a condominium, perhaps?
- How much square footage do you need now and how fast will your family grow?
- What would be present in your ideal neighbourhood?
- What is the longest that you are prepared to spend on your commute to and from work?
*These are some of the preliminary questions you may consider while doing the initial market analysis by yourself without any help from a real estate professional.
Now that you know what kind of houses and neighbourhoods you like, you can start perusing property listings on reputable platforms such as Realtor.ca and Housesigma.ca. These platforms have useful filters which allow you to narrow down your search parameters.
Once you have an idea of your dream home’s price, it is time to contact your bank or a reputable mortgage broker to see if you can afford it. This order may be controversial as many sources would tell you to contact your mortgage provider before you start looking for the house. Nonetheless, I think it is important to create an image of what you want your homeownership to look like and then determine what you need to get there. You might not be able to purchase your dream home right away, and that’s ok. Sometimes it takes a few years and resales of a few homes to settle on your final family dwelling.
After speaking with your mortgage provider, you should have a better idea of what you can afford. The best case scenario is for your “want” and your buying power match and you can go directly to employing the services of a realtor to start viewing available inventory. However, as it often happens, that is not the case. Here, you have a few options available: (1) you can source additional funds to increase your down payment, or (2) you can lower your price point. Remember, there will be a lot of noise around telling you not to wait and enter the market as soon as possible, however, remember that it is only right for you to enter the market when you are ready. Never put unnecessary financial burden on your shoulders.
Keep in mind that purchasing a property comes with more expenses than you may expect. Read this blog post to estimate how much you need to set aside for closing costs.
WORKING WITH A REALTOR
With a mortgage pre-approval in hand, it is time to engage a knowledgeable and trustworthy realtor to find the right property. I highly recommend interviewing a few professionals to ensure that you find the one who will be a perfect fit. I would divide the questions to ask potential realtors into 2 categories, factual questions, and questions to determine whether their personality is a fit for you. At the end of the day, it all comes down to your expectations of the process. Communicate your goals and expectations to the realtor and you should be able to tell if they are the realtor for you. Feel free to use some sample questions below as a starting point:
- Factual Questions
- How long have you been working as a real estate professional?
- Do you specialize in any neighbourhood?
- Do you have access to any exclusive listings?
- What is your negotiation style?
- Personality Fit
- How responsive is the realtor? Do you want an immediate text back or a call back the next day during their business hours?
- Do you integrate technology into your work?
- How many languages do you speak? Can you speak my native language?
- What do you enjoy outside of real estate?
VIEWING THE PROPERTY
When viewing a potential property, consider paying close attention to its condition. It is best to order a home inspection, to have a professional look at the property. If you opt out of a home inspection, remember that it may be problematic to receive any reimbursement from the vendor for issues that you uncover post-closing. On the other hand, if you order a home inspection before making an offer (or during the conditional period), your title insurance provider may not insure some of the issues that the inspection reveals. Whether you end up ordering a home inspection, other than the obvious considerations of overall space size and layout, it is prudent to pay attention to the following:
- Exterior
- Roof – when was it installed? Which materials were used?
- Eavestrough – are they in good condition? Is the vendor regularly cleaning them?
- Gutters – is there a proper system in place which ensures no water damage to the property?
- Basement waterproofing – are there signs of water damage? Was a proper waterproofing system installed at the property?
- Wall/foundation cracking – ensure that no visible foundation or wall cracking are present on the exterior of the property.
- Interior foundation
- Materials used during construction.
- Proper insulation can make heating the property so much more efficient and therefore improve your monthly cash flow.
- With older houses, it is important to inquire if any UFFI or asbestos were used when insulating the property.
- Utilities – always check the condition and age of the equipment servicing the property.
- Plumbing
- Electrical
- HVAC
- Kitchen
- Do any appliances require replacement?
- Is there enough storage space?
- Bathrooms
- Check for signs of water damage.
- Check the water pressure and drainage to ensure no clogged pipes.
- Flooring
- Check for signs of damage and uneven flooring. If the property has uneven flooring, this might be a sign of a deteriorating or settling foundation.
- Safety Features
- Check that the property complies with the safety requirements of the building code. These include, but are not limited to:
- Railings on stairs,
- Certain depth and height of the steps on stairs,
- Fire exit in the basement (if a legal secondary apartment is present in the basement).
- Regulatory Compliance
- Does the property comply with the existing by-laws and provincial regulations? Are you planning on changing the current use of the property? Remember, it is the buyer’s job to ensure that the property meets their requirements and complies with the local regulations for when they become the legal owners.
- Assessment of Renovation Possibilities
- It is prudent to consider if the property requires any renovations and to ensure that the municipality will allow for those changes to be completed. In addition, you must remember that the building approvals alone take time and additional funds to complete.
- Check that the property complies with the safety requirements of the building code. These include, but are not limited to:
SUBMITTING AN OFFER
Read more about writing and submitting an offer here. The current market is such that the offer is often signed by the parties without having been reviewed by the lawyer. Although more often than not the offer is drafted based on the standardized form agreement, it is the clauses in the schedules which cause most problems when it comes to conflicts and disputes. Therefore, I always recommend having the offer reviewed by your lawyer before submitting it to the seller for acceptance.
When your offer is accepted, don’t forget to notify your mortgage lender that you need to update your pre-approval for an approval for a specific property.
LEGAL WORK
Your lawyer is the last person you will be dealing with during the home purchasing process. They will complete the final title search and prepare all the documents to be registered in the land registry for you to become the owner. Your lawyer is also responsible for transferring the funds to the seller on the closing date and paying your land transfer tax.
POST-CLOSING STEPS
Read this article to ensure that you understand the steps involved in owning real estate in Ontario.
Do not forget to transfer your utilities and follow up with the tax department of the municipality where you purchased the home to ensure a smooth transition into your new house.
The home purchase closing process involves a series of well-defined steps, each requiring careful attention and consideration. By diligently planning your finances, working with reputable professionals, and staying informed, you can navigate this journey with confidence and successfully secure your new home.
