When buying a home, the neighbourhood you select will not only play a pivotal role in your family’s life, but in the resale value of the property.

One person’s ideal neighbourhood however may vary greatly from another’s. But, regardless, there are some needs and wants that generally do not change. The distance from your new home to schools, churches and shopping, for example, will not only affect how you and your family settle into your new home, it will also draw or turn off a perspective buyer.

A good first step is to enlist the services of a REALTOR who works in the area you are thinking of moving. REALTORS are very familiar with the communities in which they work and can answer many of the questions you will develop during your search.

Check the lifestyle
A home is a part of a larger community. And some are more desirable than others. Some communities are geared more to young families, others to older adults and still others to singles or an eclectic mix of residents.

Never buy in an unfamiliar community or neighbourhood unless you have spent some time there both during the week and on weekends, day and night. Drive and walk around. Talk to store owners and people you meet on the street. Ask what they think of the neighbourhood.

If there are vacant tracts of land where you plan to buy, check with local authorities to see what the proposed land use might be. The last thing most homeowners want is the development of a mall or a high-rise office building across the road from their newly-purchased property.

Don’t let particular things in a home that appeal to you override its location and potential subsequent resale value. When analyzing a potential property, ask yourself if you can imagine living -- not just in this home -- but in this neighbourhood for quite a long time.

Remember that someday you may have to sell your home to someone else and things that may not be important to you -- such as distance to schools, shopping, doctors and work -- may be important to other buyers.

Location, location
In addition to finding the right neighbourhood, consider the immediate homes around the particular property you want to buy. Are they well maintained and worth the same or more than the home you are considering?

Is the location a quiet area or a major traffic thoroughfare? What kind of privacy does the backyard provide? Does it get the morning or afternoon sun? If there is no house behind you, who owns the property and how will it be developed?

Homes located further away from the centre of an urban area are generally cheaper. Are you prepared to invest the time and money it takes to commute and how long of a commute are you prepared to commit to? Is there public transit and good access to major highways nearby?

If you have kids in school, what kinds of schools and services are available? Will your kids have to be bused to their school? If a school is close by, will they have to cross any major intersections?

Being close to a school, on the other hand, may have some drawbacks -- few owners want the noise and disturbance of being located right next door.

Finding malls, grocery and specialty stores in urban, residential areas is rarely a problem. But in neighbourhoods further away from urban areas, you may need to drive to the nearest convenience store. And getting to the local grocery store, pharmacy and other support services may require an even longer trek.

It’s great to be located near parks and recreational facilities, but few homeowners appreciate the high cast of tennis court lights beaming into their back yard. If the home you are considering backs onto such property, drive around the area and see how often the baseball diamonds, soccer fields, swimming pools and skating rinks are being used and when.

More serious concerns are having such things as gas stations, airports, railway tracks, commercial developments, major highways and cemeteries very close by.

Finally, if your heart is set on finding that one-of-a-kind 150-year old Georgian home, you’re not going to find it in a newer development. If you want large bedrooms and bathrooms, narrowing your search to an older part of town where homes are generally smaller, may prove disappointing.

Before making any decisions, think of your lifestyle and how a particular location would enhance or detract from it.
  


  

If you're thinking of purchasing your first home, you probably have a lot of great ideas about what you'd like - such as several thousand square feet of living space, a two-car garage, large fenced-in lot, one or two fireplaces and a panoramic view. But it may be time for a reality check.  

Most first-time buyers want their dream home right away. However, that dream home likely sells for several hundred thousand dollars and the down payment is more than you earn in two years. Not to mention the mortgage payments - which are three times your monthly take-home salary!

The best way to deal with this reality is to match your financial capabilities with the home that meets as many of your needs as possible.

Many first-time buyers purchase what is commonly known as a "starter home." There's nothing wrong with this approach. In fact, it's good common sense to avoid buying a home that will stretch your budget to its breaking point. Remember, the starter home is just that - a way to get started in long-term real estate investment.

To see how much you can afford, you should take a close look at your financial situation. The vast majority of home buyers lack the funds required to buy a home without assistance from a bank or other financial institution (commonly called a "lender"). So, for most of us, buying our first home means combining our savings with money borrowed through a special type of borrowing arrangement called a "mortgage."

Borrowing to purchase is not only acceptable, it's desirable. Even people buying millions of dollars' worth of real estate borrow to make the purchase

There are two types of costs in buying a home:

the amount of money you'll need for the initial purchase; this consists mainly of the down payment and other costs such as legal fees and taxes; and
the ongoing costs of paying back your mortgage, along with monthly operating costs for utilities, maintenance, insurance and annual property taxes.


Costs of buying a home = * Down payment & * Mortgage
* Legal fees
* Utilities
* Inspection fees
* Maintenance
* Taxes
* Insurance
* Property taxes


When lenders assess your ability to buy, they look at your ability to pay both types of costs in determining how much money they will lend you.  Before you ever visit a lender, you can predetermine this amount, using the same formulas they do.

Lenders use several factors in judging your ability to handle a mortgage, including your income, employment record and credit worthiness.  However, one way you can estimate the price range you can afford is to look at the amount of money you have available for a down payment.

The most common mortgage is a "conventional mortgage." In this type of arrangement, lenders will loan up to 75 per cent of the "appraised" value (estimated market value) of the property or the purchase price - whichever is lower. The remaining 25 per cent is the amount you will contribute as down payment.

If you want to buy a home that has an appraised value of $200,000, a lender may loan you 75 per cent or $150,000 on a conventional mortgage when you contribute a down payment of $50,000.

If you plan to borrow funds through a conventional mortgage, multiply the money you have available for a down payment by four. For example, if you have access to $40,000, you may be able to purchase a home with an appraised value of $160,000 ($40,000 x 4 = $160,000).

This assumes, of course, that you have sufficient income to make the payments on a $120,000 mortgage (75 per cent of $160,000). Most lenders will not permit a borrower to take on a debt load the borrower can't carry. That's why reputable lenders "qualify" potential borrowers before issuing mortgages.

Most lenders say that your monthly housing expenses (mortgage payment and taxes), plus condominium maintenance fee, if applicable, would not exceed 30 per cent of your monthly gross family income.  

This is called your Gross Debt Service (GDS) ratio. Some lenders will go as high as 35 per cent, depending upon a number of variables.

Lenders also use a second calculation in qualifying you for a mortgage. It's called the Total Debt Service (TDS) ratio. Generally speaking, no more than 40 per cent of your gross family income may be used when calculating the amount you can afford to pay for mortgage payments and taxes plus other fixed monthly expenses.

These other fixed costs are your ongoing commitments and can include auto, student or personal loans, as well as revolving charge accounts.  Again, the 40 per cent calculation may vary slightly among lenders.

By knowing exactly what you can afford, you can make your home purchase with confidence.

  


  

Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.

Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.

When you require a mortgage for more than 75% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 2.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 25%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.

As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.

The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.