Making the leap and buying your first home is exciting”if not a little terrifying! Besides spending a good chunk of change on your new pad, there are a lot of decisions and factors to weigh in on before signing on the dotted line. Licensed realtor Joanne Mota, a sales representative from Keller Williams Neighbourhood Realty, shares her top tips to successfully sealing a good deal. Before you start mentally redecorating, make sure you’ve thoroughly thought through your purchase.
Ask about your condo’s reserve fund
A reserve fund is like a savings account for your building, in case any major repairs need to be done to the building or for any unexpected costs that arise. Mota explains: Reserve fund money is not meant to run the building on a day-to-day basis. The amount of money that should be maintained in the condo reserve fund is dependant on the age of the building. A new building has a relatively small reserve fund, whereas an older building hopefully grows and is higher.” Part of the closing process will include your lawyer and realtor reviewing the building’s Status Certificate, which will include the reserve fund. If you’re looking into purchasing a unit in an older building and the reserve fund is low, get your realtor and lawyer to do some research on why that is, such as if there were recent repairs done. Another thing to consider is finding out if the building is planning on any upcoming repairs”if there isn’t enough in the reserve to cover the repairs, your maintenance fees could go up to compensate!
Don’t skip the home inspection
Even if you’re moving into a relatively new home, an inspection is definitely still important. Red flags can be identified at this stage and protect the purchaser from future problems, says Mota. The inspector spends a few hours combing through the house and gives you a report on all interior and exterior systems of the property. Is this a recent renovation? Ask to see work permits! Is there a musty smell? Do you smell fresh paint or see any recent patching? This could mean a leak or mould. How is the grading outside? There could be future leaks into the basement. Let a home inspection put your mind at ease, or give you a better idea of what you should be factoring into your budget.
Get your finances organized
Get your finances in order. Make sure that your down payment is ready to go, so you can get a certified cheque or money order at short notice, explains Mota. There’s no need to tell you that Toronto has a competitive housing market, so when you know you want to put a down payment on your dream place you need to be able to access your funds ASAP. The more you can get organized in advance, the quicker you can move once you make your decision.
Know where you stand financially
Make sure that you are pre-approved by your lending institution. Understand that there is a difference between a rate-hold and full pre-approval, explains Mota. According to Readies.co.uk, a rate hold is exactly as it sounds: the bank agreeing to hold an agreed upon rate for a specific period of time, whereas a pre-approval certificate details how much of a loan you are eligible for as well as a rate-hold. A pre-approval is much more involved, so there will be fewer surprises down the line.
Create an accurate budget
Do not forget about closing costs like legal fee and disbursements, land transfer tax, mortgage insurance, property tax and prepaid utilities adjustments, property appraisal and interest adjustment (IA), says Mota. Especially for first time buyers, it’s important to ask your realtor any questions that you’re unsure of you so understand where these costs come from. Hidden fees are never fun, and a realtor can definitely help paint the big picture for you. Remember to keep that reserve fund in mind; If your maintenance fees increase, will you still be able to afford your condo? If you’re unable to pay your fees, you could go into arrears, which can lead to legal issues with your building and no one wants that.