Steps to Purchasing a Home and Closing Process

Steps to Purchasing a Home and Closing Process

The Decision to Buy

Buying a home is a big decision. It is likely your biggest purchase and investment. Before you decide you are ready for home ownership, ask yourself the following:

  1. Are you financially stable?
  2. Do you have the financial management skills and discipline to handle a large purchase?
  3. Are you ready to take on the costs of being a homeowner?
  4. The pros and cons of homeownership vs. renting

Obtaining Financing

Now that you’ve considered the above, let’s explore what’s involved when purchasing a home. First, you will need to obtain financing. Most people don’t have the cash to purchase a home outright so they must obtain financing from a lender. Before you meet with a lender or a broker, consider the following:

  1. How much you can afford to spend on housing each month
  2. How much do you will need to pay for upfront costs related to purchasing a home. Upfront costs include:
  • The down payment
  • Home inspection and appraisal fees
  • Home insurance
  • Land registration fees
  • Lawyer closing fees
  • Moving costs
  1. Monthly home ownership expenses added to your current financial situation
  2. Your credit score which demonstrates your ability to pay bills and debts.

Lenders generally look to 2 affordability rules or ratios to determine whether you qualify for financing. As a new homeowner:

  • Your monthly housing expense should be at or below 32% of your gross monthly income
  • Your monthly debt load (including your mortgage) should be at or below 40% of your gross monthly income

It’s a good idea to obtain a mortgage pre-approval before you begin your home search. Getting a pre-approval tells you:

  • How much you can afford
  • What your interest rate will be
  • What your monthly mortgage payments will be

A pre-approval isn’t a guarantee or final approval, but it will help you plan and narrow down your home search.

Finding the Right Home

When searching for your home you should think long term and consider:

  • Location and neighborhood
  • Size of the property and home
  • Type of home – detached, duplex, townhome, or condominium
  • Type of home ownership – freehold (you own the building and the land), leasehold (you own the building and rent or lease the land), condominium (you own your unit and share common elements)
  • Lifestyle needs

Making an Offer

Once you have found the home you want to buy, the next step is to make an offer to the seller. The offer must include:

  • Your legal name, the seller’s name and the address of the property
  • The purchase price and amount of your deposit
  • Any extra items included in the purchase price (for example, appliances, window coverings, etc.)
  • The date you want to take possession (“closing day”)
  • Any other conditions that must be met before the contract is finalized (for example, condition on obtaining financing and satisfactory inspection are common conditions)

During this process, you should expect to negotiate with the seller. While this process can be stressful, it’s all about making the best deal for you.

Once your offer is accepted, return to your lender to complete the financing process and finalize your mortgage approval. It is also a good idea to get the home inspected to ensure it is fit for habitation and compliant with your standards.

Closing the Deal

After finalizing your mortgage and the inspection conditions of your offer, it is time to close the deal. You will need to hire an experienced real estate lawyer to review everything and complete the transaction. A real estate lawyer can help you understand the terms of your agreement and ensure you get what you agreed to. 

Prior to closing day, your real estate lawyer:

  • Performs a number of searches to ensure you are getting good marketable title to the property, with no liens or encumbrances
  • Obtains the mortgage instructions from your lender and prepares the mortgage in accordance with the lender instructions
  • Prepares the documents required to close the deal and meets with you to sign the closing documents

On closing day, you legally take possession of your new home. To complete the process, your lender sends your lawyer the mortgage funds and you give your lawyer the down payment. Your lawyer then: 

  • Meets with the seller’s lawyer to exchange documents and pay the seller. In exchange, the seller’s lawyer gives your lawyer the keys to your new home
  • Registers the mortgage and the home in your name
  • Gives you the deed and keys to your new home once the registration is complete

Why Choose Akram Law?

The process of purchasing or selling a home can be confusing and stressful. At Akram Law, we simplify the process for you and take the stress out of the equation. We can help you understand the terms of your agreement and ensure your interests are protected. We provide professional service at a reasonable fee. For reliable, trustworthy, knowledgeable and experienced service, contact us at (519) 252-3636 for more information about our services and to obtain a quote on closing your real estate deal.

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