Getting preapproved for a mortgage is often the only thing home buyers will do before starting house shopping. Here are some other things, as lawyers, we wish our clients would do at the start.
8 Things To Do Before Buying Your Home
1. Hire the Right People
Your team will include professionals such as your lawyer, real estate agent, mortgage broker, and home inspector. Have you done your due diligence and looked these people up? How did you find them? How did you pick them? You will achieve the best results and the highest satisfaction if you assemble your team of professionals according to your own needs. Hire your professionals according to your own goals and with people who complement each other’s talents.
2. Review the Real Property Report Before you Sign
In most real estate purchase contracts, the seller must provide a Real Property Report showing compliance. Compliance is important because it comes from the municipality and it shows the structures on the land have been built lawfully according to the land-use bylaws.
Parties often sign real estate purchase contracts without first reviewing the real property report. Too often, the real property report is produced shortly before the possession date only to find the structures have been built without permits.
Issues or deficiencies associated with real property reports are a frequent source of delays, stress, and frustration for buyers. Reviewing the real property report before signing a contract helps ensure you know what you are buying and avoid surprises popping up on your possession date.
3. Review the Land Title Before you Sign
Once you buy a home, you are subject to the encumbrances on your title. These encumbrances could contain architectural guidelines, restrict how you can use your property, and could even cost you an annual fee. Unfortunately, if you learn about these restrictions after you have moved in, it’s too late – you cannot back out of the deal or get your deposit back.
4. Always Put it in Writing
Memories can fade after a contract is signed. Make sure your written contract contains everything in the deal that is important to you. Disputes (honest or otherwise) over verbal representations and understandings are often complex and costly to enforce after the fact. If you believe something is part of your deal, always write it down and have the seller sign it. Finally, be precise when drafting any written additions. Adding terms or clauses that are unclear or capable of more than one interpretation can delay your possession and lead to unnecessary and costly disputes.
Pro tip — have your lawyer work with your real estate agent to ensure any added written clauses protect you.
5. Don’t Be Blinded by Mortgage Interest Rates
There is more to choosing a mortgage than just the interest rate. A good mortgage broker will explain that to you. Sometimes mortgages with lower interest rates give you less repayment flexibility and come with pay-out penalties. These penalties can be costly if you need to sell your home before the end of your term.
6. Don’t Borrow More Money After Your Mortgage is Approved
So you have a mortgage lender who is prepared to loan you money to help pay for your house purchase. At the same time, you want to apply for additional loans before the closing day of your house purchase. Be careful. Taking on new loans can cause the cancellation of your mortgage approval leaving you scrambling to find a new lender to close your deal.
7. Contact your Law Firm and Lender ASAP
It is obvious to most people that their real estate lawyers will need a copy of the house purchase contract to begin the legal work. However, equally important but often underappreciated are the lender’s mortgage instructions to the lawyer. Most people are surprised to find out their lender requires them to sign documents before sending the mortgage instructions to their lawyer.
The sooner you send a copy of the real estate purchase contract, the sooner your lawyer can begin their work. Also, don’t forget to contact your lender to see if they need anything else from you. Doing both well before your deal closes will help avoid delays and keeps your legal costs down by avoiding rushed timelines.
8. Don’t Be Afraid to Ask Questions or Talk to a Lawyer
For most people, real estate transactions are huge life events and have significant legal and financial obligations. There is a lot of jargon (not to mention the piles of paperwork). Don’t be afraid to ask your professionals for explanations or clarifications on any information given to you or before you sign any paperwork. We think it is vital to have the ability to contact your lawyer early on in your home buying process and before you have a contract signed up.
Does your lawyer insist that you don’t contact them until your deal is signed? Have you been told that involving your lawyer to help review or write up an offer or contract is “unnecessary” or “complicates things”? If yes, your team members likely do not fully realize each other’s potential.
What do you think of our tips? Does this track with any previous experience you have had? Perhaps you disagree with us? Either way, we’d love to hear from you. Leave us a message — we promise we read everything sent our way!