Buying a home is a major decision. The process can be overwhelming, especially for first-time buyers.
This guide will walk you through the stages of buying a home.
Step 1: determine your budget
The first step in purchasing a home is to determine your budget. This will help you narrow your search and ensure that you're looking at homes within your price range.
Consider these factors:
- Your salary or earnings from investments serve as a baseline for gauging what you can afford.
- Your existing debts and the monthly payments you make toward them help determine the size of mortgage you can handle.
- Getting a clear understanding of your expenses lets you see how much you spend on the things in your life. This can help identify areas where you might be able to economize.
- Money in the bank that you can use for a down payment or mortgage payments goes a long way to determining affordability.
Use an online mortgage calculator to get an idea of what you can afford.
Step 2: get pre-approved for a mortgage
Once you have determined your budget, the next step is to get pre-approved for a mortgage. This will give you a better idea of what you can afford and will make the home-buying process smoother.
To secure a pre-approval:
- Gather financial information
- Collect all relevant financial documents. That means proof of income (pay stubs, employment letter, tax returns), information about existing debts (credit cards, loans), and your savings and investment statements.
- Check your credit score
- Get your credit report and credit score. A higher score may improve your chances of getting pre-approved at a favourable mortgage rate.
- Do your research
- Compare mortgage lenders to find the ones offering competitive rates. Then talk to them about a pre-approval. Many lenders allow you to apply online or over the phone.
- Mortgage pre-approval application
- Submit the required financial documents along with your application. These documents will establish your income, assets and credit history.
- Pre-approval decision
- The lender will review your application, credit score and financial documents to decide how much they will lend you for a mortgage.
- Pre-approval letter
- If your application is successful, you’ll get a pre-approval letter outlining the maximum loan amount and the conditions of the pre-approval.
- Understand the pre-approval terms:
- Read the letter carefully and make sure you understand any conditions or contingencies. If you have questions, ask them.
Keep in mind that a pre-approval is not a guarantee. The final mortgage approval process happens after you make an offer on a specific property. The lender then takes a closer look at that property and your financials.
Step 3: start your home search
Armed with your pre-approval letter, begin looking at homes that are within your budget and the maximum amount you can borrow.
Once you've identified potential communities, visit their new home sales centre (like the one in Seton). Representatives at these centres can provide potential buyers with lots of helpful information on available homes, designs, layouts and upgrades.
Step 4: choose your home model and features
Work with the community’s builders to select the home model and features that suit you best. Discuss customizations, upgrades and any additional costs associated with your choices.
Step 5: review purchase agreement
The builder will draft a purchase agreement that outlines the terms of the sale, including the purchase price, payment schedule, closing date and any conditions related to the purchase.
Step 6: obtain legal advice
Consider hiring a real estate lawyer to review the purchase agreement and to represent you during the purchase. The lawyer can help you understand the legal aspects of the contract and ensure your rights are protected.
Step 7: secure financing
Work with a mortgage lender to finalize your loan and ensure you have the money needed for the down payment and closing costs.
Step 8: sign the purchase agreement
Once you are satisfied with the purchase agreement and have secured financing, sign the agreement and pay the required deposit to secure the home.
Step 9: construction and building process
The builder will begin construction once the agreement is signed. You will have opportunities to visit the site and monitor the progress of your new home.
Step 10: pre-delivery inspection
Before the completion of the home, you will have a pre-delivery inspection (PDI) to assess the property's condition and ensure that all agreed-upon features and upgrades are in place.
Step 11: closing and possession
Once construction is complete, it’s time to pay the remaining balance and take possession of your new home.
Step 12: enjoy your new home
Congratulations! You are now the proud owner of a new home.