• Vancouver: (604) 908-3959
    Penticton: (250) 486-2959
    Email: grant@grantpowell.ca

  • Being a first time home buyer should be an enjoyable experience, but if you are not prepared it can become a very costly and frustrating one.

    Five common mistakes First Time home buyers make;

    1. Don't get a proper mortgage pre-approval.

    Shopping for a home is an emotional experience especially if you are out looking at luxury properties you may fall in love with but later find out they are out of your budget.

    Get in touch with mortgage broker Grant Powell to start the pre-approval process; it should only take a couple of days to get the answers you need to move forward. This process will determine a few of the most important things which are; budget, credit and employment or savings you need to work on before you look to purchase a property. It is best to know all of this before you put your valuable time into shopping for a place with a Realtor. The last thing you want is to get an accepted offer to later find out that there is no way you can get the financing to purchase the property that you have already fallen in love with!

    2. Lease a new car before getting the mortgage.

    Once you are pre-approved, if you are thinking of making a major purchase like a new car discuss this with your mortgage broker before taking action. You will need to make sure that a major purchase will not decrease your home-buying power as pre-approval is only based on your expenses. If you go out and finance a major transaction this new transaction will be taken into account in your overall debt and how you will be able to pay for your expenses on a monthly basis.

    3. Don't incorporate government programs.

    There are excellent programs available to first time home buyers as residents in the province of British Columbia.

    A)   RSP’s (HBP): This a federal government program, you can take advantage of using up to $25,000 (as a single person) or $50,000 (as a couple) of your registered retirement savings plan (RRSPs) to

    purchase a home. There are a few rules to qualify; the complete information is listed on the Canada Revenue Agency site. Here are a few of the conditions as stated by Revenue Canada.

    You must be considered a first time home buyer. To qualify the RSP funds must be on deposit for 90 days before you wish to withdraw those funds to use for the down payment.  You must intend to occupy the qualifying home as your principal residence. You must be a resident of Canada at the time of the withdrawal. These funds are non-taxable as long as they are paid back into your RSP within a 15-year period.

    B)   Tax Credit (HBTC) In 2009 the federal government came up with another incentive to help first time home buyers with the expenses that occur when purchasing your first home. This credit provides $750.00 in federal tax relief within the calendar year you purchased the home. It’s simple to claim.  When it is time to file your taxes, make sure your accountant is aware of your home purchase and provide him or her with your Statement of Adjustments. The solicitor would have given you a copy of this document at the time you signed the final papers to purchase your home.

    C)   Property Tax Exemption: In the province of British Columbia, there’s a Property Transfer Tax, which was put into effect in 1987.  This tax is based on the purchase price of a home and it is calculated at one percent of the first two hundred thousand and two percent of the balance. So on a $400,000 purchase, the tax would be $6,000.00. As a first time home buyer you may qualify for a partial or full exemption if this tax. There are a few rules and regulation that you need to follow in order to make sure you qualify. For more information on this topic and other helpful home purchasing information, check out www2.gov.bc.ca

    4. Choose the wrong realtor.

    Since purchasing a home is a negotiation of price, dates and possibly other components, make sure you have your own Realtor when going into the offering stage of any property.  When searching for and purchasing a home, there are many things that need to be considered and occurrences that will take place during the process so having a trusting relationship with a Realtor will help make the process run smoothly. A good realtor is not only there to help you to find your perfect home, negotiate price and dates, they are also a source of information for neighborhood, schools, parks that would suit your family needs or best location for investment short term, long term, rental return etc.

     5. No budget for closing & moving expenses.

     To purchase a home, you need a minimum of 5% down payment. This can come from your savings, investments, RRSP, a non-refundable gift from immediate family or even borrowed funds.  You will also need closing costs of roughly 1.5% of the purchase price. This covers expenses such as; conveyance fees, Tax Adjustments, title insurance, property transfer tax if applicable, and any other fees that may be applicable upon your transaction. When it’s time to close and take procession of your property, you will need an appointment with your predetermined conveyance lawyer/notary approximately five to seven days before the procession of your property purchase. For this meeting the conveyance lawyer/notary will ask you to bring a few things such as a couple pieces of photo identification, the balance of the down payment and closing costs minus the deposit you had already given at Subject Removal. Also not to be forgotten the actual cost to set up all utilities, move your belonging and decorate your new home.

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