Once you have located that dream home, you need to make sure that you have everything in place. First, you need an experienced REALTOR® in your corner so they can help you make the right decisions and avoid mistakes and take the appropriate steps in the process. They will help you to create the offer and then present it to the seller of the home, or their agent. When multiple offers are submitted for a property, your agent can help your offer to stand out in a crowd.
Before an offer is made, you need to be sure all of the financial obligations are taken care of. This involves the process of being pre-qualified and pre-approved for your mortgage as well as a formal mortgage application. Your lender will require all of these documents and offer you advice on how much you are qualified to borrow.
Your agent can explain to you in detail all of the different types of offers that are out there. The preferred in most cases is the “firm offer to purchase.” This offer has no conditions that are attached to it. A condition is something that must be first fulfilled before a sale can be approved and carried out. These can range from various repairs made to the property or the buyer promising to sell an existing property before purchasing the new one. Putting a condition on a sale offer sheet gives the buyer the option to withdraw from a sale under stated conditions, and it is not usually seen as a favorable thing as compared to a condition free offer.
The seller or the home or their agent may or may not accept your offer. They can bide their time and wait for a better offer. Of course, in the best case scenario for you, the seller will accept your offer immediately. But it is also not uncommon for the seller to reject an offer outright and come back with a counter offer. You can then choose to accept that offer or send back a counter offer of your own. It is quite common for several offers and counteroffers to be exchanged before an agreement is made.
As a first time homebuyer, you may be overwhelmed with the number of rules, regulations, and paperwork. But there are a number of ways that you can simplify the process and even save some cash at the same time. The best way is to take advantage of tax credits and some of the benefits from RRSP.
If this is in fact your first home, you will be pleased to learn that you are entitled to a First Time Home Buyers Tax Credit. This means you are eligible for a $750 federal tax deduction that you may claim the year you purchase the house. In order to qualify for the deduction, you, your spouse, or a significant other may not have owned a home, going back four years from the time prior to the current home you are purchasing. You also are required to live in the home as rentals do not qualify. You must also move in within one year's time of closing on the home. You may take this tax credit, your spouse may take it, or you can share it on a joint return.
Another option you may want to explore is the RRSP Home Buyers Plan. This plan allows you to take out up to $25,000 from your RRSP account to put towards the purchase of your new home. Your spouse may also withdraw that amount from their account and put it toward the purchase price of the home.
If in the previous four year or more, you have not owned a home, you have the option of not paying taxes on this amount that you withdraw from RRSP. But the same restrictions apply as you must live in the home and move in within a year of closing. These withdrawals must be repaid within a 15 year time frame that starts one year from when the money was first withdrawn. So you must pay 1/15 annually but the good part of that is there is no interest.
Taking the jump from renter to home owner is one big step for anyone. If you are considering it, you will want to close look at several things.
Most rentals require a lease where the renter promises to live in a property for a set amount of time, most often a year. The lease can have a number of restrictions such as prohibiting pets, or making alterations to a property. A monthly rent payment is made to the owner of the property and that rental rate is often fixed for the length of the lease, and may be increased at lease renewal. The rent can also include payment for other things such as electricity, water, heat, and more as you will be responsible for other things such as cable TV and gas.
Buying a home is a much more complicated process and it also includes many more responsibilities. But with those also come many perks and benefits both financial and in your everyday life. But first, you'll need enough money for a down payment and you must have a good enough credit score to qualify for a mortgage. You will also need an experienced and professional REALTOR® to help you in your search as well as a lender who is willing to give you a reasonable rate.
When you become a homeowner, you will be responsible for property taxes, any maintenance costs, and utility bills such as gas and electricity. While you pay on those, your monthly mortgage payments are building up equity in your home. If you stay in your home for a long period of time, eventually your mortgage will be paid off and you will no longer have to worry about that monthly bill. Since property values are almost certain to increase over time, you should be able to sell your home if you wish at a profit, regardless of whether or not it is completely paid for. As a home owner, you may also qualify for a number of tax deductions and you will enjoy the feeling of owning your very own home.
Take the time to talk to a real estate agent or lender in order to find out whether renting or buying a home is the best option for you. If you are not ready to take that big step, they will help you to devise a plan that will prepare you for future home ownership while taking care of all of your needs in the here and now.