What is a Down Payment?
→ A down payment is the amount of money paid up-front as a lump-sum when you buy a home.
→ The amount of the down payment is deducted from the overall price of the home, the balance of which is covered by a mortgage/Cash.
Is a Down Payment the Same as a Deposit?
Some people confuse the deposit and the down payment. Think of the deposit as a down payment on your down payment. The amount is typically around 5%-10% but can vary depending on project to project. The deposit comes in the form of a cheque or manager’s cheque with the Offer to Purchase. This deposit will be deducted from your required down payment amount.
There is a lot to know about buying a home before you dive in. Lean on your team of real estate professionals to ensure you’re aware of all the requirements and the options available to you. Your financial advisor, lawyer and real estate agent know the ins and outs of the purchasing process, so you don’t have to navigate this road alone.
How is a Down Payment Calculated?
When you’re buying a home, the down payment is calculated as a percentage of the total purchase price.
Mortgage Buyers:
A mortgage pre-approval is an important first step in the home-buying process. Having a pre-approval in hand tells you how much you can spend on a home, and it locks in the current low interest rate for up to 120 days, so you can shop the market knowing you’re insulated from rate hikes in the near future. If the rate drops, your lender should honour the new lower mortgage rate when you’re ready to make your purchase.
The amount that a financial institution is willing to lend for a mortgage depends on a number of factors. Your lender will check your financial standing to determine how much you can borrow, how much you can afford, and which loans might be best-suited to your specific circumstances. Applying for a mortgage requires a written application and supporting documentation, and it can be a slightly intimidating process. Here are three things lenders will want to know before giving you a mortgage pre-approval.
Requirements for a Mortgage Pre-Approval
The Lender will check your credit score.
Knowing your credit score will give lenders an inside look at your credit habits and history, and will help them decide if you’re a good candidate for a loan. High scores are good news, and will typically secure a better mortgage rate, since you post a lower risk of defaulting on your mortgage payments.
The Lender will check your employment history.
Lenders will ask for a list of your past employers, how long you’ve been with your current employer, and what your annual salary or take-home pay is. They want to make sure you consistently earn money with no major gaps in income, and that you can make regular mortgage payments over the long-term.
The Lender will check your assets and debts.
Be prepared to show your past vat records if any, recent bank statements and current debt amounts, including credit card balances, car loan, student loan or line of credit. Lenders want to know your debt-to-income ratio to determine if you can make each loan payment based on the income you earn and your other financial obligations. The lender will also require proof of your down payment.
Many lenders offer a mortgage pre-approval online, so the process is simple. Find a mortgage lender that you’re comfortable with. If needed, your PVRE agent can provide a referral. Have more questions about the home-buying process, or ready to move forward with your purchase? Contact a PVRE today.
Hidden Costs of Home Ownership
Buying a home is one of the biggest purchases you will make in your lifetime. While the initial purchase of a home is a big cost, it is important to keep in mind the expected – and unexpected – costs of owning a home. From maintenance fixes and utilities, to insurance and emergency costs, it is important to be aware of the hidden costs of home ownership that might not always be obvious.
Take a look at these hidden costs of owning a home that you might not be aware of.
Property Taxes
Property taxes are based on the assessed value of your property. They are due at a certain time each year and can be added to your monthly Dewa Bill.
Maintenance Costs
A home requires constant upkeep and maintenance. Whether it be small projects or routine maintenance, it will all cost you time and money. Projects such as re-shingling or replacing windows and doors might not need to happen often, but it is important to keep track of the larger maintenance projects so you can avoid being surprised with a large cost when those things need to be repaired or replaced.
Utility Costs
Utility costs do not just include electricity , Water and gas – they can include other costs you have to pay locally, such as water and sewage, which might not be included in your property taxes.
Emergency Costs
Emergencies are bound to happen, so having some money set aside to help cover these costs should an emergency occur is smart. Keeping this in mind when searching for a home is also a good idea, as an older home may result in more repairs than a newer build.
Roof repairs, tree removal, fixing a bathroom sink or toilet, replacing appliances and HVAC repairs are just some of the emergency repairs you should be prepared for.
Parking
Take a close look at parking around your potential new home. Do you require a permit? How many parkings do you have? Do you have to pay for parking? If parking isn’t included with your home, it may be an additional expense you need to consider.
How Do You Buy a Home?
Steps
1. Choose a real estate agent that’s right for you. A home is a huge investment, so work with a realtor that’s knowledgeable, professional and responsive. Treat your search for the right agent like have meeting with agent, ask lots of questions and check references.
2. Know your budget. As you already know, buying a home is going to be expensive. Knowing exactly how much it will cost and how much you can spend is a crucial step in making a wise investment. Consider your lifestyle, your income and any current debts you’re carrying. Are you secure in your employment? Are you planning any major life changes in the near future, such as a job change or growing your family? Be mindful of the financial impacts this could have.
3. Explore mortgage options and get pre-approved. A mortgage pre-approval informs you of how much your lender is willing to lend you based on a number of factors, such as your credit rating, income and debts. The lender also guarantees the current interest rate, giving you the freedom to house hunt, knowing that you’re safe from interest rate increases. If rates drop, so too should your guaranteed rate. In addition to the interest rate, be sure to also take into account the terms of the mortgage.
4. Start home hunting. Admittedly, this step that has many sub-steps, but let’s narrow it down a bit. While the old adage of “location, location, location” still stands when it comes to good real estate investments, the recent trend of remote workplaces has given people greater flexibility when it comes to answering that all-important question of “where?” Then comes the what: what type of home do you need to accommodate how you and your family live? Apartment, townhomes, leasehold and freehold homes each offer distinct benefits, so ensure you’re choosing something that will work for you. Create a pvreuae.com account and register to receive listings that meet your criteria when they hit the market.
5. Schedule showings. Did you know your agent can show homes in-person or virtually? Virtual showings have been around for some time, often used for purchases by buyers from overseas, however it has picked-up speed with local buyers too, due to the Coronavirus pandemic.
6. Make an offer. You’ve found the home you want, in a location you like. Now, to make an offer to purchase for a price and terms that are agreeable to both you and the seller. Here’s where working with an experienced realtor can give you the upper hand. Different market conditions require a different approach – a seller’s market might mean lots of competition, requiring you to come in at or over asking price with few to no conditions, while a buyer’s market means you have choice and time is on your side. Lean on your agent on how to best handle the situation.
7. Get a home inspection. Regardless of the market, this is one condition that we recommend you keep as part of your offer. The home inspection is intended to identify any existing or potential underlying problems in a home, alerting the buyer of risks and giving them leverage in negotiating a reduced selling price. Your home inspector will examine systems that are visible without opening walls or floors, including heating, plumbing, electrical, roofing and foundation.
8. Close the deal. The closing period for your transaction is typically 30 days, however it can range depending on the agreed upon terms in the Agreement of Purchase and Sale. The homebuyer has some important obligations during this waiting period. Once the offer has been accepted, there’s a window during which you must take all the necessary steps with regard to your offer conditions, such as financing, home inspection and anything else that needs to happen before you officially seal the deal. Your mortgage lender will need a copy of the offer to ensure it’s in-line with your pre-approved level of financing. After any adjustments or repairs have been done to your satisfaction, your realtor will finalize the deal and process the paperwork, including the mortgage documents with your lender. All of this will point to a final date of actual legal possession: the real closing day.
