Buyer’s Checklist
n The first step in purchasing a home is to decide how much you are willing and able to spend.
n Funding
– Funding limits:
» By Lending Policy and Banking regulations, current mortgage funding is limited to 30% MDSR and 40% TDSR
n MDSR ~ “Mortgage Debt Service Ratio”, your monthly mortgage payment (estimated) plus prorated monthly property taxes as a portion of your GROSS family INCOME.
n TDSR ~ “Total Debt Service Ratio” ~ essentially, all your loan and tax payments as a portion of your GROSS family INCOME. So if there is a car loan or Visa debt… that’s in this calculation too.
* if you are Self Employed, or a large down payment buyer, consult your lender directly as special rules apply.
– Do you have pre-approved funds?
» How long is the approval good for?
» Do you have the approval in writing?
– Do you need CMHC/GE mortgage insurance?
– Do you wish to life insure the mortgage debt?
» One way – single dependant
» Two way – dual income household
n Down Payment
– Funds documented and available to cash account (liquid)?
– Early collapse fees / penalties on funds invested?
– Any portion gifted – get letter of confirmation from your donor.
– Do you qualify to use any RRSP monies?
» First time buyer program a viable option
n If you are a first time buyer with RRSP funds, you and your spouse can each withdraw (tax free) up to $25,000 (2009 budget) to apply towards the purchase of a home. You are considered a first time home buyer if you have not lived in a home owned by yourself or your spouse in the last five years. RRSP funds used in a home purchase transaction must be repayed to the fund over 15 years to avoid taxation as income.
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n Deposits
– Deposits on an offer to purchase are typically due upon acceptance of the offer.
– Deposits of 5-10% are the norm
» Higher deposits will strengthen your offer
– You must have the DEPOSIT funds available NOW.
» They cannot be pending a mortgage draw.
– The deposit is typically held by the listing Realty Brokerage or the Seller’s lawyer. It is a commitment to close the deal ~ or pay significant damages to the seller. Note: the BC Real Estate Act freezes the deposit until the deal closes and it forms part of the payment to vendor; or no claim is make to the courts and the vendor releases the monies “no contest” on a collapse. Your deposit funds do not instantly come back if the deal fails. It is a matter of the “cause” of failure that drives the final outcome.
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n Home Inspection / Inspectors
– Look for a qualified home inspector. There is no licensing or supervision of inspectors in B.C., so you need to choose carefully.
– Does your home inspector carry ERRORS and OMMISSIONS insurance. Your BC Realtor does – through the Real Estate Council, and so should any other professional involved in a project as big as YOUR NEW HOME.
– Always get an inspection. Hidden defects are a risk to buyers’. Most of the engineering in a house is not clearly visible on the outer surfaces and old homes are never re-inspected by city or provincial staff unless there is a blatant defect, such as collapse, or fire/police raid.
– No house is perfect. So one to five thousand in repairs as fairly typical. Even new housing will typically generate a few thousand in re-work snags most new owners will need to address.
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n New Homes ~ special issues
– Net GST will be payable on the deal during conveyancing. Get disclosure on how much this will be. It varies based on the price of the dwelling.
– Get written NEW HOME warranty information and a certificate upon completion. The current standard is 10/5/2 years.
– Know that project completion dates may be LATER than the close on your contract for purchase & sale. You may not have occupancy right away… check these details carefully and recognize the city will need to issue an “Occupancy Certificate” before you can actually move in.
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n Extra Costs
– Property Transfer Tax (BC)
– Lawyer’s charge – conveyance fees
– Adjustments on costs (city tax, utilities etc)
– Home insurance (upon deal completion)
– Land survey
– Title insurance (in lieu of survey)
– GST on services (realty, lawyer, inspectors etc)
» As your Realtor – I will provide you with a full roster of estimated costs.
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n Townhouse/Condo/Strata ~ special issues
– Money issues
» Verify your monthly “fee” to the Strata Corp
» Check their “Contingency Fund” position related to the age of the project and work outstanding/needed.
» Beware of pending “Special Assessments”. A Strata Corp can levy the owners for expensive needs “like a new roof” or “boiler system” on short notice and with the collection rights similar to your mortgage granter.
– Rules
» Standard rules apply by default since 2000. Most Strata corps limit PETS kept and RENTAL of your property. Just how specific these rules are needs to be “in print” and you should get a copy of the current regulations imposed upon the property. There may also be BBQ or smoking regulations.
– Documentation
» A form "B" needs to be provided to you as potential buyer (ie offer pending). It is a current financial statement for a given property/unit. It should never be more than 30 days old.
» If there is an Engineering Report on the building, and it is less than three years old, you should make getting a copy of it as a condition of your offer to buy.
» You must receive the last two years of Strata Council meeting minutes. You will need to vet them for problems with the building, it’s rules, it’s budget and any HOT issues dominating the council’s attention.