# Help a First Time Home Buyer~ Putting in an offer this evening.



## NOOB (Apr 26, 2012)

Hello, 

Long time reader... First time poster. I have done a lot of research, and now the time has come. I am putting an offer in on a house this evening and could use some (financial/mortgage) advice. Here are the details:

Wife and I are long time renters, both 30 Years old. We have two children, a 4 y/o and a 1 y/o and are not planning for any more kids. We are putting in an offer on a $400,000, 2 story detached, 12 y/o house. We both work full time and plan to continue making $70-90K for the forseeable future. Our finances are as follows:

Absolutely ZERO DEBT 


ASSETS:
$155,000 Professionally managed mutual funds, Planning to liquidate for downpayment.
$150,000 Sunlife RRSP mutual funds, Planning to liquidate $20k (wife and I) for 40K additional downpayment by using first time home buyers plan, and pay back the $40k over 15 years.
$10,000 in savings
$15,000 RESP for the kids.
$26,000 line of credit, never been used.
2 Cars paid off
$15,000 expected from Grandparents estate in the next 6 months (plan to purchase furniture)


RANDOM
Our credit scores are 760.
We do not have a realtor and plan to use the listing agent for the transaction.
Home is listed at $400,000 and was recently assessed at $375,000, we plan to start at $355,000 based on a long list of deficiencies we have provided the agent with.
Selling will be contingent on a home inspection.
Seller has agreed to include a new roof for the $400,000 listing price, and produced a $9,600 quote. (Required as rood if sun-faded, no water damage seen)
I like the current ING website offer of 3.99% fixed 10 year ING mortgage.
I have been told to look into a Manulife one Mortgage.

QUESTION
1. How much down?
2. Mortgage suggetion?
3. Things to do
4. Things not to do.

I really appreciate any advice I'll receive wish to thank you guys in advance.
NOOB


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## Cal (Jun 17, 2009)

As you don't seem to have alot of RE experience and you haven't mentioned whether both of you work or have any other related RE/housing or structural engineering backgrounds, I would say things not to do. By without an agent representing you. The listing agent works for the seller, not the buyer.

Only use a home inspector that is insured.

Other than that....how much you put down is up to you. In your situation of being an inexperienced home buyer, I would suggest to put as much down on the home as possible.


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## the-royal-mail (Dec 11, 2009)

Sounds pretty good. Only thing I disagree with is raiding retirement savings for this. You have plenty of cash you can use for DP. Please leave your retirement funds alone. You'll need them later.


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## marina628 (Dec 14, 2010)

I HAVE MUCH EXPERIENCE with buying real estate and my one rule is NEVER use the listing agent.I have used same agent for 14 years and I know she looks out for me 100%.Where in Ontario is this property?


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## Butters (Apr 20, 2012)

Sometimes when you use the listing agent, he/she will try to sell your offer as she will make the full 6% commision, instead of just 3% and (your agent 3%) everyone just wants more money! also she could work out a deal with the seller going for say 5.5% commision instead of 6, knowing she's getting more in her pocket than just 3%

put as much down as you can, the more now, the less interest later, you obviously know how to save, and can earn cash back
10 year 3.99 sounds okay as we all know in 4 years the price is going to be up at least 1% anyways...
(that is a great rate)
some people like to accept only 1 year terms, fight for the best rate every year... you'll always be at the lowest rate.. but when it goes up, you gotta pay for it sooner than later


but, don't tap into your line of credit

30-155k (mutual funds)
+10k (savings)
+50k (home buyers)
although, if your mutual funds make more than the 3.99 rate you've decided on... maybe you can keep some?

you obiously need to get at least 20% (better rates, and no CMF insurance [savings of 5k])
so you should have at least 85k-90k (at least 5k-10 for extra fees)

i think i would put 135k mutual funds 50 home buyer 10 savings... 195k (nearly 50% 
you can also add abit extra on your 1 year anniversaries

i would highly recommend Home Buyers... do your works have pensions? it's not hard to put 1600 dollars back per year(each)... but you know you can't rush it, its seriously, the next 16 years you're paying that ammount(first year is grace), you can also decide not to pay it, and get taxed 500 dollars instead(each)!
if your work has pension, you're going to get taxed eventually taking out the RRSPs, why not do it slowly over 16 years  some people say RRSPs are aren't as good as that originally thought, when they go to retire...



things not to do, don't get emotionally attached, if there are multiple offers, its highly likely your agent will ask for more money, you can really pay for the house if you want it badly...


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## Young&Ambitious (Aug 11, 2010)

I wouldn't recommend using the listing agent; use someone independent of the seller. Surely you can get a referral from a friend. 

I also wouldn't touch the Homebuyers RRSP's. These funds are supposed to be your nest egg, you'll need them one day and if you take it out now, it will set you back. 

Shop around for a better rate, you may be able to get closer to a 3.5% 5 year fixed if you do. 

Also, plan on the unexpected. Eg. the roof will cost more, the plumbing will quit 4 months in etc. Don't use all of your mutual funds for the down payment. Keep some aside inside of a TFSA for emergencies.


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## Oldroe (Sep 18, 2009)

I wouldn't let them hire a roofer.


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## NOOB (Apr 26, 2012)

*Update*

Great! Thanks for the quick replies and good advice. 

@ marina628 Where in Ontario is this property? The property is located in Port Elgin, (280kms NW of Toronto).

@SheaButters Do your works have pensions? No real pension, but work does offer my wife and I a DPSP account at Sunlife where they give us a couple percent per cheque. Through work, we both voluntarily contribute $250 a week to our sunlife RRSP accounts.

@SheaButters If your mutual funds make more than the 3.99 rate you've decided on... I asked my adviser, he advised that I would require a 5.5% ROE to equal a 4% ,mortgage, then suggested I liquidate.

@ Cal We both work, no RE or structural background. Yes, I confirmed the home inspector is insured.


UPDATE:
We are moving ahead and geez is this ever exciting.

We offered $355k with roof, he countered $375k and no roof (basically came down 15k)
We countered $364k and to include all the master bedroom furniture.

Mortgage broker found us 3.99% 10 years fixed at ING and First National... leaning towards FN.

Anyone using FN?

NOOB


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## NOOB (Apr 26, 2012)

Great Advice Guys, Thank-you.

@ Cal I confirmed the home inspector is insured.

@ Sheabutter do your works have pensions? No real pension, we have a DPSP contribution our employer contributes to a Sunlife account. (locked till retirement) The RRSP funds I have are due to taking $500 off each cheque for the past 6 years. 

Also, about keeping some mutual funds... my financial planner claims the Mutual funds need to make 5.5% to equal a 4% mortgage, then again suggested liquidating.


@ marina628 The house is in Port Elgin, 280k NE of Toronto

Mortgage, broker suggested going with a "non-brick and mortar bank" (such as ING) 10 year fixed at 3.99%. 

UPDATE: We offered $255k plus roof. Counter came back today as $275k and no roof. We countered at $265, no roof and the master bedroom furniture. 

This is exciting stuff... I may be a home owner as soon as tomorrow!
NOOB


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## Oldroe (Sep 18, 2009)

FP get payed a 2nd time when you put the money back in. Think I would check those #'s.


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## marina628 (Dec 14, 2010)

Think you are too generous....


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## NOOB (Apr 26, 2012)

Got it for 468k. 7k below appraisal. He threw in a year of lawn care and the place is being left furnished. Home inspection is Saturday and then we close June 18.

Thanks for the help
NOOB


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## GOB (Feb 15, 2011)

Wow. I hope you mean $368k...


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## Four Pillars (Apr 5, 2009)

GOB said:


> Wow. I hope you mean $368k...


Hilarious - in his posts he talks about 3 different prices ranges (high 300s, high 200s and finally high 400s) for the same house. I hope he let his wife do the bidding.


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## Cal (Jun 17, 2009)

And no mention of gettting their own representation.


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## johndeniel (Apr 10, 2012)

If you are a beginner then it would be better that you should talk with home renovation company. Generally the charges would be up to 20% of the value of your home. Short term loan would be good option as according to your assets. It would be good that you should consult various moneylenders.


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## NOOB (Apr 26, 2012)

GOB said:


> Wow. I hope you mean $368k...


LOL, You are correct... it was $368k.



@ Cal, we took the advice on independent representation. 

@ Four Pillars, I will proof read my post a little better for next time.

Thanks for the advice... 
NOOB


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## dotnet_nerd (Jul 1, 2009)

marina628 said:


> I HAVE MUCH EXPERIENCE with buying real estate and my one rule is NEVER use the listing agent.


I'm the exact opposite. When buying I ALWAYS use the listing agent. You'll get a much better price because there is one less mouth to feed.

True, the listing agent works for the seller but so what? I have my lawyer looking out for me.

And I have MUCH EXPERIENCE too.


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## VoxPopuli (Mar 31, 2012)

dotnet_nerd said:


> I'm the exact opposite. When buying I ALWAYS use the listing agent. You'll get a much better price because there is one less mouth to feed.
> 
> True, the listing agent works for the seller but so what? *I have my lawyer looking out for me.*
> 
> And I have MUCH EXPERIENCE too.


What exactly are you expecting your lawyer to do on your behalf? I'm not the biggest fan of RE agents and the prices they charge, but what services they do offer are not really duplicated whatsoever by the lawyer.


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## marina628 (Dec 14, 2010)

There use to be an idea you saved money using one agent but IMO the buyer pays more using same agent.Also if you offer less than you are prepared to pay the agent usually picks up on that and then sellers goes for another bump.
I know a scenario when buyer put offer on house and was asking for specific inspector.The agent said no ,to use another one so they did.The property had a oil tank at one time which was removed by previous owners and the inspector was quick to figure this out on previous offer which fell through.Using a different inspector who was known to seller and agent meant this was not disclosed.
This is a situation which has potential to cost many thousands down the road and just one example of why you always should have your own agent to work for you.You may save 1-2% on house price but it may cost you more down the line.


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## dotnet_nerd (Jul 1, 2009)

VoxPopuli said:


> What exactly are you expecting your lawyer to do on your behalf? I'm not the biggest fan of RE agents and the prices they charge, but what services they do offer are not really duplicated whatsoever by the lawyer.


Nothing. I was countering the original argument that my own agent will "look out for my interests". My point is that I don't need a RE agent to hold my hand. That's the lawyer's job to protect my legal interests. 

@marina: you can unquestionably get a better price buying from the listing agent. You'll save because there is less commission money on the table. Again, you don't have that extra mouth to feed.

Here's an example. Suppose a seller lists for $400,000 but has a rock bottom price of $380,000 in mind. S/he'll expect to pay 5% commission. Therefore s/he needs to see 380000*.95= $361,000 in their pocket bare minimum. 

Buyer A with an agent presents an offer of 375,000. No dice.

Buyer B offers $375,000 with no agent. The listing agent can reduce their commission to say 3.5% which is still a full point better than they would otherwise make. The seller winds up with 375000*.965= $361,875. Success.


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## dotnet_nerd (Jul 1, 2009)

marina628 said:


> I know a scenario when buyer put offer on house and was asking for specific inspector.The agent said no ,to use another one so they did.The property had a oil tank at one time which was removed by previous owners and the inspector was quick to figure this out on previous offer which fell through.Using a different inspector who was known to seller and agent meant this was not disclosed.
> This is a situation which has potential to cost many thousands down the road and just one example of why you always should have your own agent to work for you.You may save 1-2% on house price but it may cost you more down the line.


I don't understand what this has to do with using an agent or not. A buyer is free to choose their own inspector whom they trust. Your example shows how conflicts can occur so one needs to do their own due diligence. 

If one is a noob, by all means use an agent. Myself I'd rather bargain for the best price possible.


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## marina628 (Dec 14, 2010)

If I am spending $400,000 I want an agent who is working for my best interest and I think there will always be a conflict if agent is representing both sides.But your basic math is right and IMO these days when an agent gets an offer they both don't want you to walk so they will split the commission drop to get the deal.


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## dotnet_nerd (Jul 1, 2009)

Yes that's right. 

But consider this too. If you have a buyer agent working with you he doesn't care if a particular deal falls through. He'll just sell you something else.


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## kcowan (Jul 1, 2010)

I find the notion that a buyer's agent adds no value to be ludicrous. I can see buying stocks through a discount broker but I would never plunk down $400k without all the expert advice I can get. With a stock purchaces, I can easily get out if I made a mistake but in real estate, the frictional costs are so high that the cost of any mistake is very high. 2.5% saved! Talk about pound foolish!


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## dotnet_nerd (Jul 1, 2009)

kcowan said:


> 2.5% saved! Talk about pound foolish!


$10,000+ saved is pound foolish???

By all means use an agent. Whatever floats your boat.


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## marina628 (Dec 14, 2010)

Well I am out of the buying now as I have 5 investment properties and two personal properties but My agent has been good for me for finding what we have been looking for ,Also I trust her enough to go view properties for us then we will go see the best.I have a disability so seeing 20 houses before I offer is out of question.I think it depends on your personal situation if you find the value or not .


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## homeowner (Jul 28, 2016)

marina628 said:


> Well I am out of the buying now as I have 5 investment properties and two personal properties but My agent has been good for me for finding what we have been looking for ,Also I trust her enough to go view properties for us then we will go see the best.I have a disability so seeing 20 houses before I offer is out of question.I think it depends on your personal situation if you find the value or not .


I find it surprising that everyone on this forum mentions having a good realtor but no one mentions having a good mortgage broker. A good broker can make your dream home affordable and offer you choices that your local bank branch can't.


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