Search for Your Perfect Home

In this article, we will explore the second stage, ‘Search for Your Perfect Home’, in detail. Don’t forget that a real estate agent will want you to get a mortgage pre-approval before finalizing your home-buying budget.

Get pre-approved for a mortgage.

Have your mortgage broker pre-approve you for a mortgage.

A pre-approval or pre-qualification is not a firm commitment from the bank. It is a written conditional confirmation that they would like to approve you after reviewing all your savings and income documentation. It also gives you an upper limit for the interest rate they offer.

Once the seller accepts your offer to purchase a home, they will need to provide a firm approval, but even this is conditional.

To find out why mortgage pre-approvals and approvals are conditional, visit our guide to Mortgage Basics.

Provide the Mortgage Broker with documentation.

Typically, once you are approved, the bank will require a confirmation of the information provided in your application. We recommend you give as much documentation as possible to your mortgage broker upfront to avoid potential issues with mortgage funding. Typical documents required are:

   Income

• This is an employment letter confirming the date you started, your salary/wage, and whether you are a full-time or part-time employee.

   Down payment

• Bank statements showing the savings used for your down payment have been in the account for at least three months.

   Home to You Plan to Buy

• Copy of Purchase and Sale Agreement

• Copy of Seller’s Disclosure

• Copy of Condo Unit Form B (Strata Only)

• Copy of Strata Building Depreciation Report (Strata Only)

Come up with a buying strategy.

By reviewing your home-buying budget, you may gain an idea of what you are qualified to buy. That may mean your monthly spending on housing will be significantly more than you are used to. Just because the bank will lend you a lot of money doesn't always mean you should take it. At Mortgage Sandbox, we see four common strategies, and each has its benefits and drawbacks. They are:

• Big Bang: Beg, borrow, and steal to get the largest and nicest home possible because it will be out of reach in a few years. Target the highest affordable price point.

• Baby Steps: Get a comfortable starter home with the smallest mortgage possible, and then upgrade to a nicer home every 5 to 10 years. Target the smallest possible mortgage amount for a home that meets your requirements.

• Lifestyle Protection: Get the nicest home possible while maintaining a comfortable lifestyle. Target a specific monthly financial commitment that allows you to maintain your preferred lifestyle.

• Strategic Leverage: Get a comfortable home with the smallest possible down payment possible. Target the largest possible mortgage amount for a home that meets your requirements.

Work with your Financial Advisor to determine the best strategy for you and your family. Your advisor is in the best position to understand your risk appetite, your financial commitments and what you can stand to earn on investments that aren’t cashed in to help pay for a home.

Discuss each home with your real estate agent and estimate the home’s market value before making an offer. Just because someone is willing to pay more for a home that you want, doesn’t mean the home is valued at that price. For your mortgage, the lender will value the home at the lower of the purchase price or appraised value. If you offer too much more than similar homes in the area, the lender may not give you as large a mortgage as you need to complete the purchase.

Visit open houses.

When you visit an open house, bring along your “Home Requirements” and “Neighbourhood Requirements”. Before you step in the door have a plan.

We recommend that you visit at least 5 homes before you begin thinking about making an offer. It is possible the perfect house will slip through your fingers, but you won't know it’s perfect until you’ve seen a few. Remember, this isn’t a real estate television show where you must choose from only three homes the realtor has shown you, you should take your time.

It may take a few months of looking at homes before you feel confident you have a good deal. You should have an idea of the value of a home before you walk in the door. Remember, the list price is only a reference point and sometimes agents will list at a low price in order to generate interest and fuel a bidding war. Here are some tips:

• Ask your agent for the prices of 3 similar properties that have sold in that area.

• Check how long the home has been listed for sale – if it’s been on the market a long time then there may be room to make an offer below the list price.

• Research properties you want to see and plan a route so that you move from North to South or East to West, rather than crisscrossing the town.

• Wear a comfortable casual but work appropriate outfit. Think business casual or jeans day. You want the sellers’ realtor to take you seriously and you want the seller to feel comfortable trusting you with their home. Remember the seller often has fond memories in the home they are selling, and they want to entrust “their home” to someone who will care for it like they did.

• Hold the criticism until after you leave. The sellers still call this place home and you want to be in their good books if there are multiple offers.

Plan offer subject to conditions

Your offer should always include the following:

• A satisfactory building inspection

• The arrangement of financing

• Access to the home at least 4 times before closing (3 of these will be used up for the building inspection, the property appraisal, and a final walk-through)

• If the home is a strata lot, include a condition that the buyer must be satisfied with the operation of the strata corporation (i.e., after reviewing strata meeting minutes, engineer’s reports, depreciation reports, financial statements, etc.)

• A listing of major appliances and fixtures that you want the seller to leave in the home (if you don’t list it, they’re welcome to take them out).

Select a Home Inspector.

Select an inspector before you shop for a home. If you wait until after your offer is made, then you will feel rushed to choose an inspector and may feel pressured to pick the first inspector you meet who may not be a perfect fit for the job.

A home inspection can reveal problems with the home you aren’t trained to notice. There are really 3 outcomes from an unsatisfactory inspection:

1.      You may require the seller to fix something as a condition of buying the home.

2.      You can ask to renegotiate your offer by the estimated cost to fix an issue.

3.      You may decide not to buy if the issues are more serious than you would like to deal with.

A typical home inspection covers all major mechanical systems, structural integrity, cosmetic features and other aspects of the house.

Read about “Closing the Deal” the next stage in the home buying process.

If there  is anything unclear in the explanations above. Please let us know so we can improve our advice for the next reader.