Questions about Mortgage

[MistyEyez]

Help!! First time homebuyer here and my hubby and I have so many questions! We have a down payment and have an appointment with the bank later in the week to get a pre-approval on a mortgage. But now we are wondering how we go about actually purchasing a place. We've been looking online and have found a few places that we are interested in but are wondering if we need our own realtor or do we just contact the realtor of the home(s) that we like so that we can view the place? Then, once we actually find a place how much do we offer? I am wondering what a good offer would be? We don't want to low-ball the sellers but we also don't want to screw ourselves out of a good deal either.

Thanks in advance!!

[Shwa Girl]

hopefully mortgagequeen can give some good advice

[Shwa Girl]

Canada Mortgage and Housing
Home Buying Step by Step

hope this helps

http://www.cmhc-schl.gc.ca/en/co/buho/hostst/

[tjthemanto]

Help!! First time homebuyer here and my hubby and I have so many questions! We have a down payment and have an appointment with the bank later in the week to get a pre-approval on a mortgage. But now we are wondering how we go about actually purchasing a place. We've been looking online and have found a few places that we are interested in but are wondering if we need our own realtor or do we just contact the realtor of the home(s) that we like so that we can view the place? Then, once we actually find a place how much do we offer? I am wondering what a good offer would be? We don't want to low-ball the sellers but we also don't want to screw ourselves out of a good deal either.

Thanks in advance!!

Hire a real estate agent . As a buyer you don't pay any commission only the seller of the house has to pay commission ..not you.

Usually there is 5 % commission which is paid by the seller ( in case 2 agents are present - both buyer's agent & seller's agent ) , when he sells the house..ofcourse there are exceptions..this is the rule of the thumb.

2.5 % commission goes to the sellers agent & 2.5 % commission goes to the buyers agent ..both paid by the seller.

In case the same agent is representing both parties ( a conflict of ineterest takes place ) , but it happens in some cases. You can tell the seller I don't have an agent & I am repesenting myself , so you can negotiate a better deal since the seller can potentially save 2.5 % commission which he otherwise would have had to pay your agent. ( buyers agent )

Ask your agent or the sellers agent to give you a list of all the similar houses sold in that area in the last year or so and the final selling price of each, to give you a rough idea of how much houses in that area go for ..and place your offer based on that. They have access to that database..where the final sold prices are listed.

Also check mls.ca aka realtor.ca to see the prices of similar houses in that area.

Generally most houses in my area are selling at 95 % to 97 % of the ASKING PRICE , ofcourse this depends upon whether the asking price is reasonable & the correct market price to begin with . If its some ridiculous asking price , no one buys it and moves on & it just sits on the market Unsold !..bcoz the seller is too greedy.

Also don't just blindly believe your real estate agent ..do your due deligence also ..don't get into some stupid bidding war & don't believe him when he says this is a hot property with mutiple offers/bids on it etc.

Have a budget , stick to it & don't get emotionally attached to the house..if its not the right price, house , budget .. be prepared to walk away & don't feel guilty about it.

[themortgageguy]

Hire a real estate agent . As a buyer you don't pay any commission only the seller of the house has to pay commission ..not you.

Usually there is 5 % commission which is paid by the seller ( in case 2 agents are present - both buyer's agent & seller's agent ) , when he sells the house..ofcourse there are exceptions..this is the rule of the thumb.

2.5 % commission goes to the sellers agent & 2.5 % commission goes to the buyers agent ..both paid by the seller.

In case the same agent is representing both parties ( a conflict of ineterest takes place ) , but it happens in some cases. You can tell the seller I don't have an agent & I am repesenting myself , so you can negotiate a better deal since the seller can potentially save 2.5 % commission which he otherwise would have had to pay your agent. ( buyers agent )

Ask your agent or the sellers agent to give you a list of all the similar houses sold in that area in the last year or so and the final selling price of each, to give you a rough idea of how much houses in that area go for ..and place your offer based on that. They have access to that database..where the final sold prices are listed.

Also check mls.ca aka realtor.ca to see the prices of similar houses in that area.

Generally most houses in my area are selling at 95 % to 97 % of the ASKING PRICE , ofcourse this depends upon whether the asking price is reasonable & the correct market price to begin with . If its some ridiculous asking price , no one buys it and moves on & it just sits on the market Unsold !..bcoz the seller is too greedy.

Also don't just blindly believe your real estate agent ..do your due deligence also ..don't get into some stupid bidding war & don't believe him when he says this is a hot property with mutiple offers/bids on it etc.

Have a budget , stick to it & don't get emotionally attached to the house..if its not the right price, house , budget .. be prepared to walk away & don't feel guilty about it.

Just to add to the topic...

Definitely use your own realtor. The home owners and their realtor want to maximize the selling price. While the selling realtor may be unbiased, there is no reason to even put yourself in that position. Getting a realtor to represent you is critical. The questions you're asking on your original post pretty much confirms why you need your own realtor.

Also make no mistake - there are definitely bidding wars taking place. However I think it is highly dependent on where you are looking to buy. But definitely stick to a budget - there is nothing more effective at causing stress in a relationship than being house poor.

Don't forget a home inspection either.

As you go to the lender for your pre-approval, keep these items in mind:

1) a pre-approval is not guarantee of mortgage financing. The application will be underwritten after you find a home and submit the offer. Make sure that the information in your application is correct and accurately reflects your situation. Make sure the home you buy complies with what the lender will finance. Keep your credit rating in mind as well. Don't make any major purchases , don't apply for new credit lines etc.

2) make sure your agent includes a condition of finance clause in the purchase offer.

3) Check the rate you're being offered to be sure its competitive with what else is out there as an option to you

4) ask what the prepayments for the mortgage are. Most banks will offer between 10% and 15%. many mortgages are available with 20% allowances

5) Be aware that if you do get your mortgage at a bank, your rate will likely be considered a discount off the posted rate. Essentially that means that should you break your mortgage, the penalty calculation will likely be calculated using the posted rate at the time your mortgage was financed not the rate you were given. It can increase your penalty significantly. There are many lenders out there that have better options than this. Check the mortgage documentation to confirm the above.

6) You will likely be offered life and disability insurance as part of the financing. The insurance offered is known as post-underwritten or group insurance. It's usually better to get term insurance for a number of reasons. Google the question as the explanation can be pretty long.

7) Get a pre-approval for as long as possible; inventory is low and it may take you awhile to find a home and it would be very beneficial to hold today's low rates as long as possible. Bear in mind that the pre-approval does not require you to take the mortgage. Most lenders offer 90 days. There are 120 day and even 180 pre-approvals available.

8) Make sure you shop for another mortgage 30 - 60 days before close. This is whats known as the "quick close" period and it is where the lowest rates are available. Most lenders have specials rate for this time period as well.

9) I don't know who you do your banking with but make sure you ask this question: is my mortgage a standard charge or a collateral charge mortgage? If it is the latter, ask them what that means for you.

10) Ask your lender to provide you the mortgage documentation well before you sign the documents. You can then review them and be prepared. And by all means don't leave the meeting with your lawyer for the last minute. He is there to review your contract and explain it to you. If your lawyer finds something in the contract you don't like, you need time to address it.

Good luck with your purchase

[tinambulance]

Or if you like dealing directly with the seller of the house and want to do your own haggling, you can avoid realtors altogether and go to a lawyer and have an Offer to Purchase drawn up. You put in all the conditions you want, price, possession date, fixtures, and appliances, mortgage approval, etc. and then take the Offer to the seller. Your lawyer should be able to give you guidance.

[MistyEyez]

Thanks everyone for all the responses Definitely some very beneficial info!

[MortgageQueen]

Everyone gave good advice Misty. I would avoid a collateral mortgage like the plague. A bank will tell you it's good for you so you can borrow more money later, but they don't tell you you have to get it from THEM only and that your legal fees will be higher. Also, they can "choose" NOT to give you extra money but still lock up all your equity.
You should use a mortgage broker as it's highly likely completely free and they look out for your best interests.
Also, I heartily agree about a house inspection too. Make sure you use a QUALIFIED inspector.

[brunt]

I have a number of points, but let me get this one out first: do not sign the Buyer Representation Agreement offered by your realtor. While the agent may insist that the agreement is for your protection, it protects the agent, and the agent alone. These are a hugely bad deal for the buyer. If pressed, insist that before offering on a house, you will sign an Buyer's Rep Agreement for that particular house (specifying the exact address of the house in offer), and nothing more. If the agent won't agree to this, find yourself another agent.

Without ragging on about these agreements, you can find yourself with some huge unpleasantly large fees if you end up buying a house through a different agent later if you sign one of these agreements. Just don't sign it - at least the blanket one. Period. End of story. There are plenty of agents around who won't make you sign it, so find one of them instead.

In general, the concept of having your own realtor is sound, particularly if it is your first time around. We just bought a house in December after a lengthy search. We burned through three agents over four years - same story each time. We interviewed, outlining our parameters - we wanted to offer aggressive offers on houses. The agents agreed, yet when push came to shove, always resisted offering less than about 98% of asking. One went so far as to state that the best strategy was to offer 100% of asking - best for whom? Certainly not me.

In the end, we bought from the listing agent. We were 100% forthcoming with him up front, and since he was receiving both ends of the commission, had some additional flexibility. Just make sure that you tell the listing agent nothing more than you absolutely have to. The listing agent is professionally and legally obligated to give all pertinent information to the seller, and nothing to you. So don't tell them anything that you don't want the seller to hear. For instance, don't tell the agent your maximum price - because this information can and will go to the seller, and you have now cost yourself money.

Do not enter a bidding war. Just walk away. While there actually exist houses with multiple offers, this is also one of the oldest tricks in the agent's play book. You express interest in a house, and shortly thereafter your agent tells you that there is an offer on the place, and that you had better get one in soon. In my experience way under 25% of the time does anything actually happen. In fact once, we told our agent to relay to the listing agent that we had no interest in entering a bidding war, and would wait until the dust settled before even looking at the house again. Within 30 minutes, we received a panicked email from the listing agent indicating that the offer had just fallen apart, and please, please, pleeeeeeeease consider an offer. Riiiiiiight. Don't submit to the pressure of making an offer before you are ready. Don't get yourself into a situation where the pressure can ratchet up, making you offer more and more money. Just don't even think of getting into a bidding war, real or made up.

Don't fall for the "sign back the offer to keep it alive" line. If your offer is signed back at a different price, your original offer is already dead. There is nothing to "keep alive". You keep no special privileges by counter offering within a certain time limit, so let the deal expire, have another look around, and make another offer on your own schedule. This eventually worked well for us. We made an aggressive offer, and the sellers knocked a trivial amount off asking on the sign back. We said literally nothing back. We let it go for about two months. Then we heard back from the agent that the sellers were interested in just a little more than our offer, well below their sign back price.

Don't fall in love with a house. This is where the real money is made by the sellers in real estate. The buyer just keeps on having to increase their offer until the sellers agrees. It's just shelter. If it gets too expensive, walk away. Don't let the "it's not a house, it's a home" garbage cloud your judgement.

Get yourself a house inspection as a condition on your offer. If the seller won't allow it, run, don't walk, away. This is another pressure tactic used in bidding wars. Agents will tell prospective sellers to make their offers as clean as possible - meaning no conditions. This should be a deal breaker. If you can't have an independent, professional set of eyes to assess the house, then there is likely something to hide.

Don't buy a house because somebody else tells you it is a good idea. Sometimes it is, sometimes it is not. Despite the conventional "wisdom" on the matter, renting is very frequently a better financial deal than buying. Do your own analysis. Make sure that you include all of the costs of owning, such as insurance, maintenance, property taxes, land transfer taxes (twice as much if you are in Toronto), mortgage interest, realtor commission when you sell, and so on. Don't rely on the analysis of others which often conveniently excludes a lot of the above costs.

Finally, remember one crucial point. Everybody, and I mean everybody else in the deal makes more money the more money you spend - the real estate agents, the bank/mortgage broker, the government, your lawyer, CMHC, everyone else. This is not to say that they are crooked, and are trying to rook you. It is just that you, and only you, that has your bottom line as the main concern. Don't spend more than you should.

[Shwa Girl]

Congrats on buying your home.
Wow - 3 years of fighting -- At least you got a good deal. Pays to be persistent.

Don't fall in love with a house. This is where the real money is made by the sellers in real estate. The buyer just keeps on having to increase their offer until the sellers agrees. It's just shelter. If it gets too expensive, walk away. Don't let the "it's not a house, it's a home" garbage cloud your judgement.

Get yourself a house inspection as a condition on your offer. If the seller won't allow it, run, don't walk, away. This is another pressure tactic used in bidding wars. Agents will tell prospective sellers to make their offers as clean as possible - meaning no conditions. This should be a deal breaker. If you can't have an independent, professional set of eyes to assess the house, then there is likely something to hide.

Don't buy a house because somebody else tells you it is a good idea. Sometimes it is, sometimes it is not. Despite the conventional "wisdom" on the matter, renting is very frequently a better financial deal than buying. Do your own analysis. Make sure that you include all of the costs of owning, such as insurance, maintenance, property taxes, land transfer taxes (twice as much if you are in Toronto), mortgage interest, realtor commission when you sell, and so on. Don't rely on the analysis of others which often conveniently excludes a lot of the above costs.

Good advice especially about not falling in love with the house and getting a home inspection.
We got a home inspection. The home inspector suggested we start a repair budget for things that would need replacing - roof, furnace, windows. We have done the roof and furnace already.

[brunt]

Congrats on buying your home.
Wow - 3 years of fighting -- At least you got a good deal. Pays to be persistent.

Thanks. That's another mistake that people make is to buy too quickly. Four years was a bit excessive, but it was definitely worth it as far as location and price was concerned.

Good advice especially about not falling in love with the house and getting a home inspection.
We got a home inspection. The home inspector suggested we start a repair budget for things that would need replacing - roof, furnace, windows. We have done the roof and furnace already.

Another point that I neglected about the inspection. Have a clause in your contract stating something like that you have the right to a house inspection that is satisfactory to your sole discretion.

What this means, is that after your offer is accepted, you are not obligated to buy yet. You get to have an inspection made, and if there are some serious problems that you overlooked, you can back out of the deal with no penalties whatsoever. Furthermore, it allows you to back out even if the inspection is perfect, but you just say that you were not satisfied, but that's a grey area morally speaking (even though it is perfectly legal), so I would leave it up to individuals as to whether or not they are comfortable with using it just as an extra "escape hatch".

Furthermore, if there are some serious issues, this inspection can be used to back you up in case you believe that the problems are serious enough to warrant a reduction in price if the deal is still to go forward. You are not obligated with the offer price if "issues" are discovered later. This is not to say that the seller is obligated to lower their price.

We had two previous accepted offers where problems came up in the inspection - serious problems. When we approached the listing agent and sellers about price abatement, we were met with shock at the mere idea. Their stand was "pay full price, problems and all, or nothing". Well, in the end they both go nothing from us. Both houses sold later at significant reductions to our offer price due to the problems found - in fact, both sellers would have been better served by lowering their prices for us to buy the house.

Bottom line, until you take possession of the house, the problems with the house are the owners' problem, not yours. If an unnoticed problem pops up in the inspection, they fix it, not you. You may wish (and I think that it is wise) to accept certain problems as just being par for the course in purchasing a house. But big problems change the deal entirely.

[tjthemanto]

I have a number of points, but let me get this one out first: do not sign the Buyer Representation Agreement offered by your realtor. While the agent may insist that the agreement is for your protection, it protects the agent, and the agent alone. These are a hugely bad deal for the buyer. If pressed, insist that before offering on a house, you will sign an Buyer's Rep Agreement for that particular house (specifying the exact address of the house in offer), and nothing more. If the agent won't agree to this, find yourself another agent.

Without ragging on about these agreements, you can find yourself with some huge unpleasantly large fees if you end up buying a house through a different agent later if you sign one of these agreements. Just don't sign it - at least the blanket one. Period. End of story. There are plenty of agents around who won't make you sign it, so find one of them instead.
.....

Doesn't that only apply to the houses or house shown to you by the agent ? ( I.e Buyer's agent ) ..or does it apply to any house you buy while the Buyer Representation Agreement is in effect , even if that house was never shown to you by your agent and you found that house on your own and bought it from them ?

Do you still owe your agent a commission, even though he had absolutely nothing to so with that property or its showing, just bcoz you signed the Buyer Representation Agreement ??

I think maybe you can sign it , but reduce the number of days to just 30 on that agreement , usually they make you sign it for 90 days or more..and every 30 days maybe you can re-sign it if you still haven't found your house.

Buyer Beware – Of the Buyer Representation Agreement


http://nickandhilary.com/beware-buye...to-real-estate

Buyer Representation Agreement ( Explained in Plain Language )

http://www.torontorealestateboard.co...00_2011_PL.pdf

[brunt]

Doesn't that only apply to the houses or house shown to you by the agent ? ( I.e Buyer's agent ) ..or does it apply to any house you buy while the Buyer Representation Agreement is in effect , even if that house was never shown to you by your agent and you found that house on your own and bought it from them ?

Do you still owe your agent a commission, even though he had absolutely nothing to so with that property or its showing, just bcoz you signed the Buyer Representation Agreement ??

I think maybe you can sign it , but reduce the number of days to just 30 on that agreement , usually they make you sign it for 90 days or more..and every 30 days maybe you can re-sign it if you still haven't found your house.

Buyer Beware – Of the Buyer Representation Agreement


http://nickandhilary.com/beware-buye...to-real-estate

Buyer Representation Agreement ( Explained in Plain Language )

http://www.torontorealestateboard.co...00_2011_PL.pdf

It applies to any house similar to as described in the agreement, whether shown by the agent or not. Thus, if the agreement states "single family dwelling", you will owe if you buy any single family dwelling in the duration of the agreement, regardless of who shows the house.

Just don't sign it. I have no problem with the agent being paid, but I have a large problem with paying them if they had absolutely nothing to do with the sale.

Read this for a more thorough description of the agreements: http://www.greaterfool.ca/2011/11/13...ble-with-bras/

Buyer Representation Agreements - not even once.

[tobiwobi]

So why don't people just approach a listing agent and ask for 2.5% off the price of the house??? Because that way both the seller and listing agent get what they were asking for, and buyer gets a discount. so it's a win win.

[tobiwobi]

re the representation agreement: established agents with a huge professional network won't work with you if you don't show pre approval and sign a representation agreement. Rookie agents that finished their course a couple of months ago and are out there knocking on doors will be happy you're talking to them, never mind representation agreement. you can put an expiry date on it, or terminate it in writing if the relationship is not working for you or getting the results you want.

I do see it from agents' perspective too - they can be strung along and waste their time looking and driving people around and presenting houses for nothing. Particularly after renting out my condo on my own and making countless appointments and showings - it's time consuming and takes more effort than I thought and some people do come just to look, others to check out the competition, and there you are making plans around appointments with people who are just wasting your time - I am sympathizing more and am more likely to sign that representation agreement. But if the working relationship was not working for me, I'd cancel it.