Experts help property virgins get to third base
There are lots of firsts in a person’s life: first time riding a bike to the park by yourself, first date, first kiss, first job and first car. Then, there is the purchase of your first home. Like any leap of faith, diving into the unfamiliar terrain of real estate can be scary and intimidating. There are the teasing ads in the paper, the flirtatious links on the Internet and the come-hither For Sale signs on manicured lawns.
It is at this point, many realize deciding on your first condo is even more daunting than selecting the perfect ensemble for a blind date or how to delicately make the first move in the movie theatre. In fact, once you take that first-base step to condo ownership, all you really need is some good-old-fashioned advice to talk you through it.
From a realtor
Before you set off on your condo trek, make sure you get pre-approved for your mortgage, then you’ll know your limitations “so you’re not looking at something well beyond your means or below what you can afford,” says Marlene Swinton with Real Estate Professionals in Calgary.
As a first-time buyer, you need to distinguish your needs from your wants, she adds. Do you really need two bedrooms and two bathrooms, a fireplace and underground parking? Or are these features negotiable? Convey this information to your realtor who will then show you only units that fit and you won’t be wasting each other’s valuable time.
“The knowledge of neighbourhood is also very important,” she adds. Drive around areas you think you might like; familiarize yourself with the community, its assets and liabilities.
Next, hire a reputable realtor. The “open house” route is a great way to meet realtors. Ask questions about the realtor’s business history (how long has he been in practise and how many condos has he sold?) and request references. Or ask your friends for their recommendations. “Ninetynine per cent of my business is from referrals,” says Swinton.
Having a condo check will give you a review of the financial status of the condo development, plans for its future, what its by- laws are (the living rules for the building, such as if you can have a pet), minutes of meetings and what repairs have been done and are anticipated. Old buildings will have a reserve plan study and new ones will be in the process of creating one. “This will cost you $300, and it will be the best investment you’ll ever make,” says Swinton.
From a market
Are you aware that as of Jan. 27, you are able to claim up to $750 on next year’s tax return, says Lai Sing Louie with Canada Mortgage and Housing Corp. (CMHC) in Calgary? Due to these recent federal tax breaks, you can now also draw up to $25,000 from your RRSP plan to use as a down payment for your condo without penalty. “You’re basically borrowing from yourself,” he explains.
Louie says you should shop around for good interest rates. Interest represents the “hidden component” of purchasing a house, but is a large piece of the actual cost of home ownership, he says. Rates are at historical lows; these days you have access to rates as low as four per cent for five-year mortgages.
If you are putting down less than 20 per cent on your property, you will need mortgage insurance. Emili can help. This is the name of CMHC’s electronic underwriting processing system. It is used by lenders to help customers get quick pre-approvals for mortgage insurance (the insurance premium will be built into the loan that the bank gives you). If you are trying to get a home that is beyond what you can afford, you may not be approved for insurance. The more you put down — let’s say 15 per cent versus 10 per cent — the lower your premiums will be.
“You don’t want to make an offer then find out that you can’t get mortgage insurance; you’ll be in legal limbo because you can’t get financing,” adds Louie.
From a mortgage specialist
Know how much your condo fees are going to be, recommends Calgary’s Alex Wolder of the Royal Bank of Canada. First-time condo buyers tend to focus on what their monthly payments are versus what their equity position is, such as whether they’ll be able to eat something other than Kraft Dinner, he adds. But condo fees can range from $125 to $500 per month; your pre-approval amount will be based on an average condo fee rate. If you discover your rate is higher, your pre-approval may be compro- mised (a $400 increase in a condo fee rate can reduce your pre-approval value up to $100,000).
“It could completely kibosh the deal, especially for first-time buyers who are putting down a minimal amount,” says Wolder. “There is very little wiggle room.”
By getting an estoppel certificate, which is like a real property report when you are buying a house, the condo management company will verify all condo fees are paid and there are no levies or caveats on the unit. It ensures everything is in good standing with the condo management company. If you are doing a quick closing — and there are more of these given today’s market — you will need one of these to accompany your other condo-related financial documents.
Down payment verification is the current “flavour-of-themonth” in the condo-buying industry, says Wolder.
CMHC and lenders are abiding by stricter anti-money laundering rules and regulations than ever before.
As a result, down payment monies need to be on deposit for 90 days prior to applying for a mortgage. An audit goes along with every mortgage application.
From the Internet
Vancouver-based National Real Estate Institute Inc. (www.homebuyer.ca) offers these additional suggestions:
Examine the parking facility. Is it safe? How far do you have to walk to your unit? Is there space for a second vehicle and sufficient parking for your guests?
Look for storage. Is there enough for your bike, skis or golf clubs?
How many units are housed by renters versus owners and what percentage of tenants are allowed? The more owners that are present, the more likelihood there will be greater consideration and care of the complex. Be aware if the rental percentage is not capped at a certain amount or is over 25 per cent.
Is the condo managed by a professional group, a resident manager or is it self-managed? Consider visiting the complex on evenings and weekends to get a feel for what is happening (parties, noise levels) at various times of the day.