Have you ever been to IKEA? I love how the entire store is laid out in a systematic manner. You just have to follow the white arrows.
Buying a home is a lot like shopping at Ikea. If you follow the arrows – the eight steps outlined in this guide – you will be far less likely to make a costly error or omission, and the whole process will be less stressful.
Of course, there are always a few rebels who like to walk in the wrong direction at Ikea. If you are one of those people, hopefully I can convince you to follow the steps – just this once!
While walking the wrong way at IKEA might mean you miss out on buying some cleverly designed shelving (that you probably didn’t need), not following the correct steps when buying a home can lead to disastrous results.
We should know. We have been mortgage brokers for a combined 22 years and have helped close a lot of real estate transactions. We have also seen almost everything that can go wrong, go wrong.
If you have purchased a home before, think of this as a walk down memory lane. It will be familiar to you!
Step 1: Get Pre-Approved
This may seem like a no-brainer, but we have seen more people than I can remember skip this step. (Resist the urge to walk in the wrong direction!)
It is critical – BEFORE you go house hunting – to go through the pre-approval process.
Here is what we cover in your pre-approval:
- Application Review – How will the bank look at your application?
- Budget – How much can you afford? What are the hidden costs of buying?
- Mortgages- How do you select a mortgage? Programs, Terms & Rates
- Pre-approval Letter – How do you get one and how do they help?
- Rate Holds – How do they work and how they can reduce your borrowing costs?
This steps lays the groundwork for the rest of the home-buying process.
Step 2: Hire a Realtor
Pop Quiz: How much does a realtor cost you?
Answer: Nothing! For a buyer, they are free.
Because the seller pays for both realtors, you would be crazy not to have your own realtor.
A great way to find a realtor is through word of mouth. Ask a friend or your local mortgage agent! We would be happy to refer you to a proven realtor in your area.
The insight and knowledge that a realtor can provide you, is a large part of what will make finding your home successful!
Do not move onto Step 3 until you have found a realtor – one that you feel confident in!
Step 3: View Properties
This is where the fun begins! With your budget from Step 1 firmly in hand and your realtor by your side, you will begin to look at properties that fit your criteria.
It is a good idea to make a list of “must-haves” and “would-like-to-haves” to help you keep your focus. It is also important to think about the location. You are not just buying a property, you are choosing to live in a neighbourhood.
PRO TIP: Always use a local realtor as they will have insider knowledge of neighborhoods and the different areas of the town or city.
Step 4: Make an Offer
For most people, this is where it gets stressful. Typically, your first offer is not accepted, but your realtor – you hired one right? – will be invaluable at this point. They will help you negotiate with the sellers to get the best possible price and terms.
Your offer will always have conditions, often referred to as “subject-to’s.” Your realtor will typically add several “subject-to’s”, but there are always two that are critical to your mortgage application.
- Subject to financing – When you borrow money to buy a property, the bank considers you and the property as a package deal. Having this clause ensures that the lender has a chance to review the property.
- Subject to inspection – An inspection is critical. An inspector is professionally trained to find things that you or your contractor buddy cannot see. Your realtor or mortgage agent can point you in the direction of a great home inspector.
Pro Tip: If you are purchasing a strata unit, you must review the strata documents. They can alert you to any problems with the building or any upcoming special levies that could cost you more money.
Step 5: Get Approved
Once we receive your accepted offer, we will confirm the final details with you before submitting your application for approval.
Based on your pre-approval in Step 1, we will get you a mortgage that fits your needs. Until we have an approval on your application, our office will touch base with you and your realtor regularly.
Once approved, all documentation will be reviewed and the approval will be signed. We will be happy to answer any questions that you have. We will also review your closing costs so you are aware of the amount of money you will require for Step 7.
Step 6: Pay Your Deposit
Once all your conditions are met (the “subject-to’s” from Step 4 have been removed), you will write a non-refundable, certified cheque that will be held in trust until closing. This deposit forms part of your down payment and is given early as a commitment you are going to purchase the property.
Under most circumstances, the cheque is not written directly to the seller, but held in trust by a 3rd part such as the realtor or lawyer.
In most cases, this is the point of no return. Breaking the contract at this point can result in you losing your deposit, and possibly being sued.
As one of my friends puts it, “You legally have to purchase the home, but on the flip side, the sellers legally have to sell it to you.”
Step 7: Meet with your Lawyer
Your closing date was negotiated with your initial offer (in Step 4). Usually about seven to ten business days before closing, your lawyer will arrange to meet with you to sign the final documents. They will also let you know that exact amount of closing costs.
Here’s the minimum documentation your lawyer will ask for:
- Two pieces of ID
- A certified cheque or bank draft for the closing costs
- Proof of Home Insurance
Step 8: You are an Owner
Congratulations! Once your lawyer has registered everything correctly, your realtor will give you the keys to your new home. Whether this is your first home or your tenth, we are excited for you! We love helping people finance homes.
Our office will contact you for a follow up to make sure you are settled into your new place.
OKAY, IT’S A LITTLE DIFFERENT FROM A TRIP TO IKEA!
Of course, buying a home is a little more complication than a stroll through the aisles of IKEA.
This guide is meant to be like a store map on the wall at IKEA. It won’t show you everything on the shelves, but it will give you a general idea of where everything is and what is supposed to happen.
Use it to help you get the layout of the process.