Financial Fitness

4 Steps to Securing Your Dream Home

By Interior Savings
May 9, 2018

It finally happened! After all the searching and weighing the pros and cons, you’ve found a home that fits your criteria, and it’s within your budget. What happens next can be described as a roller coaster, but with your trusted team in place, the process can be more like a scenic boat ride. The key is to be prepared and be aware of what’s to come.

Remember to download The First-Time Home Buyer Checklist for everything you need to know about buying a home.

1) Draft the Offer to Purchase

Also known as the Agreement of Purchase and Sale, the Offer to Purchase is a legal document your realtor will help you prepare. It includes a laundry list of details that need to be checked, double-checked and triple-checked. Having your legal counsel review it before it goes to the seller will help ensure the documents are in order and nothing has been missed or misrepresented. Typically, it includes:

  • Legal names of yourself and the seller
  • Legal address of the property
  • The price you’re offering to pay
  • The things that you think the sale should include, such as appliances, window coverings or even the shiny John Deere mower used to cut the acres of green (that’s grass, not money!)
  • The amount of your deposit
  • The date that you want to take possession of the home, known as the closing date. Though it’s normally 30-60 days after the agreement date, it can extend to 90 days or longer
  • Request for current land survey of the property. You want to be sure you know exactly what you’re buying
  • Offer expiry date. After this date, the offer is no longer on the table and is void
  • Any conditions that you want to put on the offer. This may include a clear home inspection, property appraisal or even approval of mortgage financing. If at least one of the conditions isn’t met then the contract will not be finalized

2) Play the Tennis Match

Okay, it’s not really a tennis match but it can feel like it. There are three possible responses that you can expect once the Offer to Purchase has been reviewed by the seller. They are:

  1. Congratulations! The seller accepted your offer. The deal is done and you move on to the next step of securing financing.
  2. The seller makes a counter offer, perhaps asking for a higher price or different terms. You have a choice; you can accept the counter-offer as is, therefore completing the deal, or you can offer a price that’s lower than what’s been suggested by the seller and higher than your original offer.
  3. The seller makes a counter offer where the price is higher than your original offer but you reject the counter as the price is too high or you can’t agree on the conditions of the sale. In this case, the sale doesn’t go through and your deposit is returned.

3) Secure Financing

The next step after the Offer to Purchase has been accepted is securing a mortgage. Ideally, you’ll have gone through the process of applying for a pre-approved mortgage before you began your house-hunting.

Terms
Your mortgage specialist will verify your financial information and confirm your down payment and its source – whether gifted, borrowed or from your own resources. They’ll also help review the options you have in terms of types of mortgages, terms, interest rates, the length of time in which the debt will be repaid and payment schedules available, including monthly, bi-weekly, or weekly.

Open or Closed
Mortgages fall under two categories: open and closed. Open mortgages have the most flexibility in that you can pay off part of it or the entire amount at any time without penalty. As the name suggests, closed mortgages are not as flexible. You don’t have the option of paying more than the agreed payment or paying it off early.

Interest Rates
The other variable in mortgages is around interest rates. Here are two options:

  1. Fixed mortgage interest rate: A locked-in rate that won’t change for the term of your mortgage
  2. Variable mortgage interest rate: Though the mortgage payment will not change, the interest rate will fluctuate as the market does

There are pros and cons to both but that’s where a mortgage specialist comes in. They can help you explore what options will fit your situation best.

Amortization Period
The standard time frame of a mortgage is 25 years with renewals typically happening every five years – though this isn’t always the case. There are mortgages available that go beyond 25 years but the most important thing to keep in mind there is that, although your payments may be lower, you’ll end up paying more interest.

4) Pop the Bubbly!

Closing day: a cause for celebration because your chosen home is legally yours. A lot happens on this day, including:

  • The transfer of the mortgage money from the lender to your lawyer or notary
  • The down payment less your deposit is due to your lawyer or notary as well as any remaining closing costs
  • The lawyer or notary will pay the vendor, register the home in your name and give you the deed and keys to your new home

These are just a few of the steps involved in buying a home. For a full list of what you need to do before, during and after your purchase, download The First-Time Home Buyer Checklist