If you're a first-time Homebuyer in BC, don't be surprised if you feel like you don't know where to begin! You're not alone. From a consumer perspective, the process is still very fresh for me as I moved to Nanaimo myself in 2021. In this blog post, I'll be summarizing the process of home buying and the information I'll be providing is for British Columbia only.
To help, my brokerage McDonald Realty has a very handy infographic laying out the process.
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Money Money Money
The first question you might have already asked yourself is “Am I financially ready to own my own home?”. Your realtor will be asking you what your budget is and the best way to know this is to speak with your financial institution and get pre-approved for a mortgage amount. They'll do this by factoring in your income as well as your “Gross Debt Service Ratio”. I'm not a financial specialist and won't be elaborating too much on this process but the CMHC website has a Nifty little calculator which you can use to help get a better idea of where you stand:
https://www.cmhc-schl.gc.ca/en/consumers/home-buying/calculators/mortgage-calculator
Not only will you be looking at getting pre-approved, but you'll have to calculate how much to set aside for a deposit- typically 5% of the purchase price. If you're putting down 20% or more as a deposit you'll need to qualify for a “stress test”. This is the greater of the Bank of Canada's Benchmark rate or your bank's mortgage rate plus 2%. This is because your mortgage will be uninsured and they want to make sure you can cover your monthly payments.
You'll also need to factor in closing costs, which are typically between 2% - 4% of the property value. These closing fees include things like insurance, inspection and appraisals and legal fees. Your mortgage specialist will be able to go through all of this in detail, so make sure you understand the costs involved.
Finding your Realtor!
Now it’s time to find a Real Estate Agent! Lucky for you- I’ve created a handy document on questions to ask your REALTOR® when buying your first home. That's available for free on my website www.ritafraser.com. Finding the right Realtor is a very important step in your home buying Journey. Realtor compensation is typically covered by the seller’s side of the transaction, which is great news for you but it's still important to understand what your Real Estate Agent charges for commission, in case you encounter a home that's being represented by a discount brokerage for example.
Should he decide to work with the realtor you've interviewed, they'll go over certain disclosure documents with you- one of these documents is the brand new Home Buyer Rescission Period which I'll cover a little later!
Do Your Research!
Once it's game on and you found the Real Estate Agent that you like and trust, they'll set you up on whatever MLS search platform they're using. This involves search criteria- preset by you- so that you can have listings sent to you directly to your email inbox. Create a list of homes that match what you're looking for and set up a time with your Real Estate Agent to view them. It's best to have these appointments set up with 24 to 48 hours' notice minimum, as a courtesy. Your agent will give you valuable advice on areas that you'll be viewing and be able to get you any additional property information you’ll need to help you make the most informed decision!
Make An Offer!
So you found the home you love and it's time to make an offer! This part can be scary and exciting all at the same time. Your Real Estate Agent will be there to guide you every step of the way so that you feel like you're putting your best foot forward during the negotiation process. Besides price, other things can be written into your contract as “subjects”- which means should the seller accept your offer, there are additional items that need to be fulfilled before the offer is completed. These can include things like home inspection, appraisal and financing. When writing your contract it's also important for you and your Realtor to go over included and excluded items in the home such as appliances and window coverings.
BC’s new Home Buyer Recission Period
Beginning on January 3rd, 2023, a brand new “Cooling-off” period will come into effect. The Home Buyer Rescission Period is a period of three business days after your offer is accepted for you as the buyer (for residential properties only) to rescind your contract to purchase. This period cannot be waived and bear in mind that should you choose to exercise this right, there is a financial penalty of 0.25% of the purchase price.
There are some key dates that you'll be writing into your contract with your realtor that will become big days in your home-buying journey, once subjects are removed and the purchase of your new home is a go!
Completion Day
The completion date is the day that funds and the title of the home are transferred. This ideally occurs between Tuesday and Thursday so that there's a business day on either end and occurs before you move in. This is also the date that you'll have to have your home insurance begin as well.
Possession and Adjustment Day
Time to book your movers! Possession day - also known as key day! Typically, possession day occurs a few days after the completion date, in case something happens during the transfer of funds. Usually, the same day as the possession is also the adjustment date. This is the day that adjusts for prepaid financial payments, such as taxes (which cover the entire year) or strata monthly fees.
I've left some more helpful tips in my blog “Moving to Vancouver Island BC Checklist” which you should definitely read next!t I hope this has helped you figure out some of what you'll encounter when purchasing your first home!
