Buyers Guide 2013

1. Everything you wanted to know about buying a home... ...but didn’t know who to ask. John Kwong 403.714.5583 2. Whether you find a home by... Seeing an Ad in the…
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  • 1. Everything you wanted to know about buying a home... ...but didn’t know who to ask. John Kwong 403.714.5583
  • 2. Whether you find a home by... Seeing an Ad in the paper Or Driving by a For Sale sign Or Visiting an Open House Or Hearing about a home For Sale Or Visiting a showhome I CAN ASSIST YOU WITH ALL OF THESE John Kwong 403.714.5583
  • 3. The Purchase Process 1. Select your Realtor. (John is a great choice) ;-) 2. Get prequalified. (I can help you with this) 3. Find a house. (That’s my job) 4. Make the offer to purchase. (I’ll explain everything) 5. Resolve any conditions written in the offer to purchase. (I’m on top of that!) 6. Select your lawyer. (I have a list of references) 7. Arrange household insurance approximately two weeks before possession. 8. Meet with the lawyer within 10 days before possession to sign all papers and transfer all remaining down-payment funds. 9. Take possession and enjoy your new home! 10. Please tell your friends and family how John helped you.
  • 4. Why dedicate to one Realtor? Many properties that are considered the best value on the market, are sold before they are advertised or the sign gets put up. The reason for this is due to the M.L.S. system and Realtor networking. If you wish to be exposed to these properties, you must work with a Realtor. Giving your commitment to John Kwong will ensure you get exposed to all the homes that come on the market. John works for your best interests as opposed to trying to sell you a house before someone else does. Giving your loyalty to John will guarantee you have someone working in your best interests. This will result in you purchasing a home that is right for you at the price and terms that are comfortable for you. Buying a home should be a fun-filled, exciting adventure, knowing you have a knowledgeable professional guiding and advising you. However, all too often, buying on your own is filled with anxiety, despair, confusion and finally disappointment. Giving your commitment involves telling all Realtors that you come in contact with, that you are already working with John. If possible, give them John’s card. This is especially important if you should happen to tour an Open House without John, or if you see a new sign go up. Phone John first. John will make your appointments for you. John belongs to the Multiple Listing Service (MLS). This system will get you exposed to the entire Calgary and Area real estate market, and ensure that you get the best possible home for your money. Remember, if you are not satisfied with the service John is giving you, let him know, he will do his utmost to solve any problem you may have.
  • 5. Financing Your New Home There are many common methods of financing the purchase of a property, for example: • Cash • Cash plus assumption of an existing mortgage • Cash plus a new conventional mortgage • Cash plus a Vendor Take Back mortgage (VTB mortgage) • Cash plus a combination of a conventional mortgage and VTB mortgage • Cash plus a Hi-Ratio mortgage (usually CMHC) Whenever a mortgage is involved in the Financing Process, several steps are required: The lending institution will require: 1. A completed loan application (an application fee may be required) 2. A credit report on the borrower obtained by the lender 3. Verification of down-payment 4. Verification of Income of the borrower 5. An appraisal of the home being purchased The lender processes and reviews the application based on the above information. If a high ratio mortgage is required (less than 20% down-payment) the Bank will submit their approved application and appraisal to CMHC (Canada Mortgage and Housing Corporation) for approval of Mortgage Insurance. Once the loan is approved, a Mortgage Commitment is issued. On closing, the lender sends funds to the lawyer for distribution. The loan documents will be registered on title by the lawyer.
  • 6. Introduction to mortgages What is a mortgage? A Mortgage is an interest in property provided by the borrower as security for a loan. • The borrower (mortgagor) receives mortgage funds. • The lender (Mortgagee) has an interest in the property until the loan is repaid. Sources of Mortgage funding: Chartered banks Trust Companies Life Insurance Companies Credit Unions Loan Companies Finance Companies Mortgage Brokers Private Placements Types of Mortgages Conventional Mortgages • Loan cannot exceed 80% of the appraised value of the property High Ratio Mortgages (NHA Mortgages granted under National Housing Act 1954) • Lender can lend up to 95% of the sale price and must be insured against loss by The Canada Mortgage and Housing Corporation • Insurance premium is charged to the borrower, but can be added to the amount borrowed.
  • 7. Amortization Tables Instructions: Find the mortgage amount in the left most column and match it with the corresponding rate of interest to calculate your monthly mortgage payment. Rate Of Interest Mortgage Amount 2.75% 3.00% 3.50% 3.75% 4.00% $200,000 $921 $946 $999 $1,025 $1,052 $250,000 $1,151 $1,183 $1,248 $1,281 $1,315 $275,000 $1,266 $1,301 $1,373 $1,410 $1,447 $300,000 $1,382 $1,420 $1,498 $1,538 $1,578 $325,000 $1,497 $1,538 $1,623 $1,666 $1,710 $350,000 $1,612 $1,656 $1,747 $1,794 $1,841 $375,000 $1,727 $1,775 $1,872 $1,922 $1,973 $400,000 $1,842 $1,893 $1,997 $2,050 $2,104 $425,000 $1,957 $2,011 $2,122 $2,178 $2,236 $450,000 $2,072 $2,130 $2,247 $2,306 $2,367 $475,000 $2,187 $2,248 $2,372 $2,435 $2,499 $500,000 $2,303 $2,366 $2,496 $2,563 $2,630 $525,000 $2,418 $2,485 $2,621 $2,691 $2,762 $550,000 $2,533 $2,603 $2,476 $2,819 $2,893 John Kwong 403.714.5583
  • 8. Those Hidden Costs Estimated 1. Mortgage Application and Appraisal (often waived) $175* 2. Home Inspection (Recommended but Optional - See Next Page) $525 3. Real Property Report (Survey): (Generally excluding Condominiums) (The Vendor is required to provide you with an acceptable real property report in the Agreement of Purchase, a new survey will cost approximately.) $550** 4. Stamp of Compliance (City of Calgary approval that the property complies with all bylaws) $95** 5. Legal Fees: (Legal fees vary according to the lawyer. Make sure you ask what the fee includes. Approximate on purchase with new Mortgage financing.) $600 6. Disbursements: (There will be other costs which the lawyer will have to pay on your behalf, ie. registration fees, photocopies, etc. Cost shown is approximate and up.) $400 7. Statement of Adjustments: (Purchaser and Vendor are each responsible for their share of taxes, fuel and utilities, amount may vary. Estimate.) $200 8. Home Insurance: (Home insurance varies from one insurance company to another. Contact your broker for rates. Rate shown is approximate.) $1,200 9. GST: (Most residential re-sale homes are exempt from the GST, however most services involved with the transaction will be subject to GST ie: LawyerÕs fees, Appraisals, Processing fees, Home inspections, Insurance, Moving costs - etc. New or sub-stantially renovated houses are subject to GST if purchased from the Builder/renovator. Based on above - GST would be: $150 10. Moving Costs: (May vary widely due to distance and size of move) $500 Be sure to budget for this. 11. Total Estimated Costs $3,600 Example above is based on a $500,000 residential purchase. Total estimated costs are generally about 1% of the purchase price. * The cost of an appraisal is usually waived by the financial institution ** These are costs covered by the Seller of the property
  • 9. A Professional Inspection When purchasing a pre-owned home, particularly one that is older, it is wise to consider making the offer conditional on or subject to having the home inspected by a professional home inspection company. The fee (usually between $$375 - $450) is a small price to pay for the peace of mind that you will have knowing the home is structurally sound, that the mechanical and electrical components are in proper working order. The inspector will let you know what items may need replacing in the long and short term. This will provide you with the vital information needed to make a sound purchasing decision, and will assist you in budgeting and planning for future maintenance. Home inspectors are generally expected to follow the Standards of Practice established by the Canadian Association of Home Inspectors (CAHI), widely recognized as the leading authority in the field. To be sure that a home inspector is ethical and professional, consumers should ascertain before the inspection that he or she will NOT offer to do any repairs on the inspected property, and that the firm has no financial interest in the transaction, or in the real estate agent’s commission. Home inspectors are generalists, much like medical General Practitioners. They know how the home’s many systems and components work, independently and together, and they understand how and why they fail. Consumers should expect the written report to describe the actual condition of the home at the time of the inspection based on visual observation, and to provide an indication of the need for major repairs. Home inspectors do not do any destructive testing, nor can they see through walls, so consumers should not expect their reports to include the condition of every nail, wire or pipe. In addition, inspectors are primarily concerned with pointing out large expenses and/or safety-related concerns, rather than small or cosmetic items, which are considered readily apparent to the buyer’s themselves. Finally, home buyer’s should not expect the report to serve as a guarantee that the home’s components won’t ever fail or need repair in the future. No house is perfect, and they all need regular maintenance. If the selection of a home inspector is made carefully and ahead of time, home-buyers have one less detail to worry about during the chaos and excitement of finding a new home. For your convenience, the following are inspection companies who have given our past clients good service: Home-Alyze (Calgary) Limited (403) 295-3000 Homecheck Inspections Ltd (403) 278-6912 Home Certification Inspections Inc. (403) 241-2868 Home Facts Ltd. (403) 286-4878 Pillar to Post (403) 660-7678 As your Realtor, the last thing I want is for you to buy a house with problems. I would rather have you buy something else. I am interested in your long-term business and ensuring that you are happy and satisfied with your purchase.
  • 10. General Terms Appraisal: An estimate or opinion of property value. Assessed Value: A valuation placed upon property for the purpose of taxation. Assumption A legal document signed by a home buyer which requires the buyer to Agreement: assume responsibility for the obligations of a mortgage made by a former owner. Balance Due The amount of money the purchaser will be required to pay to the Seller to complete the Closing: purchase. Chattel: Personal property which is tangible and movable. Debt Service Ratio:The percentage of the borrower’s gross income that will be used for monthly payments of principal, interest, taxes, space heating costs and condominium fees. Deposit: Payment of money as a pledge for fulfillment of a contract paid by the purchaser when making an offer to purchase on a property. Easement: A right enjoyed by one landowner over the land of another. Encroachment: A fixture, such as a fence, which illegally intrudes on private property. Encumbrance: Outstanding claim or lien recorded against property or any legal right to the use of the property by another person who is not the owner. Equity: The interest of the owner in a property over and above all claims to the property, it is usually the difference between the mortgage(s) and the market value of the property. Foreclosure: A legal procedure whereby the lender (bank) obtains ownership of the property following default by the borrower. Statement of A statement prepared by the Seller’s lawyer for the Seller setting Adjustments: out in balance sheet form, the credits to the Seller and the balance due on closing, so that both the Purchaser and the Seller will have a record at the date of closing of the financial breakdown of the transaction. Title: The means by which the owner of land has lawful ownership. Payout Penalty: A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.
  • 11. Mortgage and Legal Terms These are some of the more common terms that will come up during your real estate transaction. If there is anything that is still not clear do not hesitate to ask me. Amortization: The number of fixed payments or years it takes to repay the entire amount of the mortgage loan. Blended Payments: Equal payments consisting of both a principal and an interest component, paid each month during the term of the mortgage. The principle portion increases each month, while the interest portion decreases, but the total monthly payment does not change. Caveat Emptor: Let the purchaser beware: the Buyer is duty-bound to examine the property they are purchasing. CMHC: Canada Mortgage and Housing Corporation, a Crown Corporation which administers the National Housing Act. Closed Mortgage: A first mortgage, which does not allow pre-payment, without penalty interest during the term. During the term the rate is fixed and calculated semi- annually. Payments may be made monthly, semi-monthly, bi- weekly or weekly, depending on the lender. These mortgages may allow up to 15% of the principal to be repaid with penalty. Conditional Offer: An offer to purchase subject to specified conditions. These conditions could be the arranging of a mortgage, the selling of a present home. Usually a time limit in which the specified conditions must be met is stipulated. Mortgage Commitment: A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds. Conventional Mortgage: A first mortgage, outside the conditions of the NHA, granted by an institutional lender wherein the amount of the loan does not exceed 80% of the appraised value of the property. Discharge of the Mortgage: A document executed by the lender and given to the borrower when a mortgage loan has been repaid in full.
  • 12. High Ratio Mortgage: A mortgage loan that exceeds the normal limit of a conventional first mortgage - greater than 80% of the appraised value. Maturity Date: The final day in a term of a mortgage. Mortgage: A conveyance of property to a creditor as security for payment of debt. Mortgagee: The lender or creditor. Mortgagor: The borrower or debtor. Mortgage Insurance Premium: A premium which is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in case of default on the part of the borrower. Open Mortgage: A mortgage which can be prepaid at any time, without penalty. Term: The length of time during which the agreements exist. A mortgage may be amortized over a long period (usually 25 years) with a shorter term (6 months to 5 years or more). After the term expires, you can either repay the balance of the principal then owing or renegotiate the mortgage at current rates and conditions.
  • 13. Buyer Questions Type of Home Preferred area(s) Schools Downpayment Monthly payment # of bedrooms # of bathrooms Square feet Move in by Price Range Special Concerns & Other “Please tell me the 3 features a home absolutely must have, to even consider living in it.” 1.______________________________________________________________ 2.______________________________________________________________ 3.______________________________________________________________ “Please tell me the 3 features that you absolutely do not want in a home.” 1.______________________________________________________________ 2.______________________________________________________________ 3.______________________________________________________________ Name___________________________________________________________ Address_________________________________________________________ Home Phone Fax Number Work Phone John Kwong 403.714.5583
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