FIRST TIME HOME BUYER'S - very long

**Ntense_SpecV** · 03-30-2006, 12:52 PM

Well I just got through buying my first home here in Calgary and like others that are 20-30 and are looking to buy a first home/condo (Not Build) its a scary market right now. With building, the builder is looking for 10% down -

This example is for buying an existing dwelling.

Asking for advice in this market is way different then most of our parents have ever experienced (multiple offers, paying more then asking price, not putting conditions on a house) but I will try to break it all down for you.

1. This is a sellers market so be prepared to offer more then the asking price. If you know your cap is $250,000 be looking at houses around $225,000-245,000 depending on condition of the house as multiple offers drive the price up considerably.

2. You used to be able to put down $500-2000 as a deposit but sellers are now looking at $5000-10,000. Note: this is liquid cash - I.E. check, cash, money order...SERIOUSLY...if you don't have this much in a savings account but you have it in an RSP I will explain how to use this money next.

3. As first time home buyer you are able to use RSP's as a 5% down payment on a house - but you cannot start this process until you have a contract with the seller. Obviously if you don't have a big enough deposit the seller will never select your offer anyways so it's a big run around. With multiple offers in front of a seller the one with the most liquid cash up front and the biggest offer will win every time - Most $$$$ wins - at least in this market.

4. What you can do is go talk to your bank and explain to them that you have money in RSP's and need to put down a much bigger deposit then your savings account can afford. What the bank can do for you is give you a temporary line of credit large enough to cover what you need for a deposit. You will have to repay this line of credit off once you transfer money from your RSP's into your account to cover the rest of your 5% down payment.

EX. Purchase price is 250,000
Your initial deposit is 10,000
You only need another 2500 to make up the rest of the 5% down payment.

The bank gave you the 10,000 so you need to take out 12,500 from your RSP's to cover the line of credit and the rest of the 5%.

**Ntense_SpecV** · 03-30-2006, 12:53 PM

5. Now you go and talk to a Realtor (hopefully you have already picked one and started looking as houses are selling in under hours not days anymore). MLS.com is not fast enough anymore - internet is about 5 days behind.

6. Once you have viewed a place - you like it - start to put together your offer to purchase.

7. You put down what ever you can afford as an initial deposit and your offer on the house and hope they accept your offer. If the home is nice and priced competitively there will be bidding war. This is where people start to offer more then the asking price (basically how badly do you want it - bad enough to offer more then the asking price?) You have to determine that for yourself.

8. If the seller accepts your offer you are now into a contract with the seller. This is where you get your home inspection, review the condo documents (if you are buying a condo), talk to your bank or whoever will be handling your mortgage. The money you put down as an initial deposit does go towards the 5% down. What ever more money you need to come up with that deposit didn't cover you can get from your RSP's. Talk to your broker (Bank, Investment company) to start the paper work on a Home Buyers Plan. The money that will transfer from you RSP is a one time deal for a first time buyer and has to be repaid back (I don't have a specific time frame but I believe it's about 8 years). It takes about 1-2 weeks for the government to contact your bank, confirm that you are using this money for a down payment on a house and move it to your savings/checking account.

9. You have the home inspected (must be licensed), review the condo documents (You can do it yourself or hire a condo consulting person), and speak to your financial institution to finalize exactly how much you need to borrow. If you put these conditions in the offer to purchase and something comes up that you don't like (for instance the roof leaks, the foundation is cracked and you decide you don't want to buy it - you can walk away from the deal and get your initial deposit back.

NOTE: THE ABOVE ARE CALLED CONDITIONS - They are outs for you as a buyer to walk away from the deal - if you put NO conditions on a house and the seller accepts your offer and you decide that you want to bail on the deal you lose your deposit. One more time to make sure you understand this....it's important.

I.E. - a better house came on the market, banking problems, you spot that there is a big f'n crack in the foundation and you want out of the deal and you didn't put any conditions in your offer and you want out....you LOSE your initial deposit.

10. Once everything is settled - home inspected, condo doc's are reviewed, the bank gave you financing on the place - you are basically done.

The last thing is to talk to your lawyer - This is all the adivse that I can provide at this time as we haven't spoken to our lawer yet....

Hope this helps someone thinking about buying a house sometime soon....

The sooner you can buy a house the better off you can be - but don't make yourself house poor.

Good luck everyone.

**Fivewayradio** · 03-30-2006, 01:12 PM

I believe you have to repay the RSP back within 15 years.

**HRD2PLZ** · 03-30-2006, 01:22 PM

Originally posted by Fivewayradio
I believe you have to repay the RSP back within 15 years.

Correct. You can also withdraw up to $20,000 from your RRSP for a first time home buyer. You are not limited to 5%.

**Thaco** · 03-30-2006, 01:50 PM

Originally posted by HRD2PLZ

Correct. You can also withdraw up to $20,000 from your RRSP for a first time home buyer. You are not limited to 5%.

$20,000 for each person on the mortgage, so for a couple you can do $20,000 each.

**Xtrema** · 03-30-2006, 01:54 PM

Good write up. If you're not confident to do this yourself, you should get a realtor to represent you. Less headache.

**AndrewMZ3** · 03-30-2006, 02:41 PM

You'd probably want to make a down payment of 25%...

**Thaco** · 03-30-2006, 02:43 PM

Originally posted by AndrewMZ3
You'd probably want to make a down payment of 25%...

yeah, then you can avoid the BS (and fees) of CMHC

**Ntense_SpecV** · 03-30-2006, 02:45 PM

Originally posted by AndrewMZ3
You'd probably want to make a down payment of 25%...

Not everyone has a spare $62,500 to kick around.

**afrotl** · 03-30-2006, 03:32 PM

Nice write thanks

**Xtrema** · 03-30-2006, 04:18 PM

Originally posted by Ntense_SpecV
Not everyone has a spare $62,500 to kick around.

What? You don't? haehehe just joking....

Law gotta change to get more than $20K out of RRSP for house. Owning your house is crucial part of retirement or being able to retire at all.

**googe** · 03-30-2006, 04:29 PM

Not only do you lose your deposit, but Im pretty sure you owe them the balance as well, should they wish to pursue you. Your offer is a binding contract, you cant just swallow your deposit and go buy another house.

**benyl** · 03-30-2006, 04:32 PM

Originally posted by AndrewMZ3
You'd probably want to make a down payment of 25%...

Not everyone can afford that. That is why there are so many people renting.

**Ntense_SpecV** · 03-30-2006, 04:33 PM

Originally posted by googe
Not only do you lose your deposit, but Im pretty sure you owe them the balance as well, should they wish to pursue you. Your offer is a binding contract, you cant just swallow your deposit and go buy another house.

Balance of what? Yeah you can lose your deposit and bail - we are doing that with a homebuilder....we lost $1000.

**benyl** · 03-30-2006, 05:12 PM

A homebuilder won't keep your $1000. They just take a check, they never cash it. That was for a lot hold right?

They only cash your check when you write up an offer. Usually that is 5% of the house with a mortgage approval. Some places take 5% of the total or 20% of the land, which ever is greater. Even when you do that, there are still out clauses.

If your builder keeps your $1K, they are very shady.

**Ntense_SpecV** · 03-30-2006, 05:28 PM

Originally posted by benyl
A homebuilder won't keep your $1000. They just take a check, they never cash it. That was for a lot hold right?

They only cash your check when you write up an offer. Usually that is 5% of the house with a mortgage approval. Some places take 5% of the total or 20% of the land, which ever is greater. Even when you do that, there are still out clauses.

If your builder keeps your $1K, they are very shady.

Yeah that was for a lot fee. We weren't even going to get a lot until June and we were subject to all price increases until June - I don't know if I'd call *cough*Homes By Avi*cough* shady but they did tell us that this was a non-refundable lot hold deposit. They wouldn't put our name on the list without it in the first place - they wouldn't guarantee the house price either....we were subject to all price increases up until we signed a contract (approx. $8000/month - Their exact words).

**benyl** · 03-30-2006, 05:42 PM

yep, my house has gone up $40K since I put a deposit down and cosolidated on the house.

They shouldn't be holding your lot hold deposit. There are hundreds of people waiting for a lot. They can get that $1K from someone else. I would read the fine print, $1K is a lot to just walk away from.

**D. Dub** · 03-30-2006, 05:43 PM

Originally posted by Xtrema
Good write up. If you're not confident to do this yourself, you should get a realtor to represent you. Less headache.

Thats really good advice.

HRD2PLZ is a really good realtor right here on Beyond!!

and to blow my own horn \

....and use a mortgage broker/agent for mortgage advice to make the process easier - help you get the best mortgage financing and the best rates ... without having to grovel at the bank

**D. Dub** · 03-30-2006, 05:47 PM

Originally posted by AndrewMZ3
You'd probably want to make a down payment of 25%...

in a perfect world everyone would have 25% down...but not everyone does.

The most important thing is to get into the market and stop paying rent...even with a low down payment or even zero down payment!!

**Ntense_SpecV** · 03-30-2006, 07:39 PM

Originally posted by benyl
yep, my house has gone up $40K since I put a deposit down and cosolidated on the house.

They shouldn't be holding your lot hold deposit. There are hundreds of people waiting for a lot. They can get that $1K from someone else. I would read the fine print, $1K is a lot to just walk away from.

Yes there are hundreds of people waiting for a lot. That's why they want a non-refundable lot fee so that tire kickers in the real estate game don't come signing up for a lot then walk away before it becomes available. If you could get into a house in a different community (same/similar area) different builder and faster, wouldn't you walk away from the current deal? They basically want solid people to buy from them, for them to have tons of cash up front and basically bend the home owner over with no lube.
I did read the fine print...when my fiance and I talked about it, waiting 3 more months to get a house and watching my price increase before my eyes was really stupid to me. I couldn't watch the 'current' price continue to go up and just wait idly by. If you don't believe me call ANY home builder right now and ask them when they are projecting to get the current lots and when you could possibly get one....bet you won't be able to get into one before August...at least in Evergreen.

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