When it comes to purchasing a home, there are so many factors to consider. Especially if you are a first-time homebuyer. Why such a struggle if you have never purchased a home before? Sadly, it’s due to financial inexperience in this area. You may not be 19 and trying to purchase a home, but regardless of age, it can still be tricky to purchase a home for the first time. Mostly because the down payment needs to be in the range of 10-20 percent of the total asking price. Additionally, there can be hiccups in the way of purchasing depending on the area you want to live in. Today we will discuss a few things that people may not know about purchasing in the Toronto area.
1. Overpriced Homes
This is something to watch out for with any market. If you are finding that a home has been on the market a little longer than others, it could very well be that it has been over-priced. Having said that, other reasons for a home staying on the market too long are:
- Might be in an undesirable location.
- The home may be in a state of disrepair.
- Have owners with unreasonable expectations.
- Find themselves stuck with exceptional circumstances.
2. Relisting Can Put You At A Disadvantage
Some real estate agents and observers of the market state that the practice of relisting a home actually puts a buyer at a massive disadvantage. Mostly when it comes to bidding on a home. If a realtor hasn’t taken the time to do some homework on a listing, and discover if any listing has been canceled, then the homeowner will pay the price – literally.
3. Selling a Tenanted Condo or House
This comes into play if a buyer is looking at a home that is currently a rental property. It is important to note what the fine print says. If there is a current and valid lease in place, the buyer must keep the current tenant on until the lease has run its course. One should also note that they will not only be taking on the tenant but the lease as well. Which means the new buyer cannot increase the rent when possession is taken, nor can they kick the current occupant out.
This may seem like an obvious thing to check for when purchasing a home, but since Toronto is a rather animal-friendly city, it is always important to take note of whether the current owners have a pet, how they cleaned up after the animal, and how many animals were in the home. Regardless of how well the home was kept up, animals can do a lot of wear and tear on a house.
5. Damage Deposits
If you are looking at renting rather than purchasing a home, it is important to note that landlords cannot ask for a damage deposit, nor can they use last month’s rent to cover said deposit. However, refundable deposits for keys are permissible.
6. Rent Prepayment
Also in the realm of renting a property, landlords are not permitted to ask a renter to pre-pay a year’s worth of rent, regardless of the employment or credit status the renter may hold. However, it should be noted that a landlord does have the legal right to refuse to rent, but not for any reason that is protected under the Ontario Human Rights Code.
7. No Notice of Entry Required
If a tenant/renter is provided with a notice of a termination of a lease, the landlord may be allowed to show the unit to other prospective tenants while the current one still occupies the space. However, this can only be done during a certain time, and only during “daylight hours.”
8. Know What You Can Afford
Back in the world of purchasing a home, it is of utmost importance to know how much you can afford. Most lenders have a formula they work with in order to determine your debt to income ratio how much you can afford to “spend” on a home. There are also countless calculators available online which can provide you with the ability to see what your monthly budget could look like. Though your dream home might be located in an established neighborhood, you might only be working with a budget for a condo. However, in this day and age, condo’s are increasing in popularity. Mostly because you can get a rather large living space, for a fraction of the cost. For example, this new condo at 260 King St W called Mirvish + Gehry.
9. Closing Costs
This is one of the most important things to remember when purchasing a home. If they aren’t planned for, they can come as quite a shock when you’re getting ready to close on your new home! Closing costs can range from 1.5 to 3.5 percent of the total cost of your home. Additionally, you may be expected to cover the following costs:
- Home inspection fee
- Legal fees
- Property transfer tax
- Appraisal fee
- Land transfer tax
- Title insurance
- Interest adjustment
- Property and fire insurance
Last, and certainly one of the more important things on the this is getting pre-approved for a particular mortgage amount. By going through the pre-approval process, you are more likely to find and close on a home and do so faster. This will also help you decide on what kind of a down payment you can afford. If you have saved up a certain sum of money it is easy to go from there to find what total mortgage amount works for you. Or, if you start the pre-approval phase of your home buying adventure before you save, it can give you an idea of how much you would need to set aside per month in order to attain your dream home.
Home buying can be such a great adventure, but the best thing to do when starting a process such as this, is to go through the steps listed above so you won’t be caught off-guard, or find yourself in a situation where you are paying rent to a landlord that doesn’t have your best interests in mind.