Making the decision to buy a new home can be exhilarating, but it may leave you with many questions. You know you want freedom and the chance to build equity but what can you afford? What type of home is best for you? How does buying a new home work?
Buying new instead of resale offers plenty of advantages for first-time buyers. This includes an extensive home warranty, the ability to customize your home, and depending on the style of home you choose (such as a condo), a maintenance-free lifestyle. Because you'll be working with a builder instead of an agent, the process is actually much easier. Here's what you should know about the new home buying process.
Financing Your New Home
Know Your Costs
The home buying journey begins with determining what you can afford. If this is your first home, make sure you consider more than the purchase price. You'll also need to factor in closing costs, monthly utilities, and home maintenance. If you're buying a condo, budget for condo fees and be sure you understand what they include. In most cases, these affordable fees cover everything from snow removal and lawn maintenance to exterior maintenance and some basic utilities.
Prepare Your Down Payment
You’ll also need a down payment of at least 5%, but the more you put down, the lower your payments will be. If you put down less than 20%, you will also need to pay for CMHC insurance or mortgage insurance. A mortgage insurance calculator will help you determine what you’ll pay based on how much you put down.
Determine Your Budget
Next, you’ll want to establish a household budget. This means having a good understanding of what expenses you can expect on a monthly basis and what you can realistically afford. This household budget calculator will help you compare your income with your planned expenses and help you determine a mortgage amount based on those numbers.
With a budget in mind, you can discuss your options with a mortgage specialist to further determine your mortgage limit based on your credit, income, and debt levels. You may also want to consider using your builder's preferred lender. A preferred lender generally offers an easier approval process due to familiarity with the development plus other perks like reduced fees, competitive rates, and special financing programs.
Choosing the Right Home for You
Once you know what you can afford, you're ready to choose a new home that meets your needs. Your first home is your stepping stone into the market and represents the freedom and opportunity you want at this stage of life - you’ll want to consider your options carefully. For example, single-family homes will provide freedom and equity, but can also be cost-prohibitive and require substantial upkeep. Condos and townhomes, on the other hand, offer all the benefits of a single-family home without the cost or maintenance.
Appealing Apartment Condos
An apartment style condo is a great choice if you want to minimize your housing costs and stay close to the amenities you love. With this type of unit, you have the opportunity to grow equity without worrying about time-consuming yard work or expensive home repairs. Apartment condos also come with a range of amenities, from nearby access to shopping and dining to state-of-the-art fitness centres, heated parking garages, and keyless entry.
Townhomes offer nearly all the benefits of an apartment condo as well as access to a yard. A townhome is the ultimate compromise between a house and a condo with fewer neighbours and less maintenance than a home. With a townhome, you can have your own smaller lawn and a single or double car garage.
Along with choosing the right housing style, you'll also need to decide if you want a home built to your precise specifications or a quick possession home. Quick possession or spec homes are built based on the most popular floor plans and design options and are typically available in every community in limited quantity.
With a quick possession home, you can move in very quickly, but design options and floor plans may be limited. A quick possession home offers minimal wait with all of the benefits of a new home so it may be a good option if you want to move quickly.
If you prefer to build your new home from start to finish, you’ll have much more say in the home’s features and finishes. A good builder will not only offer the complimentary services of a professional home designer, they will walk you through the entire selection process. At this time, you can let your creativity run wild by choosing your counter tops, flooring, light fixtures, and more. Working with the right builder means a wide range of selections will be available, suitable to any budget and style.
Once you have made your design and floor plan selections and signed the Agreement to Purchase (see below), it will be sent for approval so construction can begin. The process begins with pre-construction when the plans are finalized and approved by the city. From there, the excavation and foundation are completed, the framing stage begins to assemble the partitions, roof, and exterior walls. During the drywall stage, insulation, HVAC, and drywall are installed followed by the doors and interior finishes.
Your builder should be providing you with weekly updates throughout the construction process. You should also have the option of checking the progress with scheduled construction site visits.
The timeline when you buy a new home depends on many factors. In general, you can expect to move in within a few months with a quick possession home or up to a year with a new home build.
Your Agreement to Purchase
Once you make your decision and you're ready to buy (new or quick possession), you'll sit down with an Area Manager to write up an Agreement to Purchase. Every item should be explained line by line. With a firm agreement without conditions, you have an accepted offer to buy a home. If your agreement has any conditions, they must be met before the purchase agreement is binding.
Closing and Possession
About ten days before you take possession, you will complete a final walk through of your home to ensure everything meets your expectations. During closing, you'll sign the final documents and have the home title put into your name. With keys in hand, it's time to enjoy your new home and invite over your friends and family for a housewarming celebration!
Buying a new home can seem intimidating at first, but the process isn't as complicated as it may seem. A good builder will walk you through every step, from choosing the right home style for your needs to selecting your finishes and taking possession of your new home. For more helpful information on buying your first home, check out our post on the 5 Tips to Make Buying Your First Home a Reality - you’ll be glad you did!