The Hidden Elements of Buying a New Build Home; The 7 things you need to know
In the Calgary real estate market to buy a new home? Unsure if you should buy a resale home or a new build? Often times the decision isn’t simple because it’s a choice between lifestyles, but it goes much deeper than that. There are a few material factors to consider when thinking about buying in a new suburb community. To help with your decision, here are the 7 things you need to know.
- Rate – We know where rates are today, but not in the future. Although a stress test (above and beyond today’s rates) should be done with each application for new builds, rates could go beyond that test. If it does then the borrower will need a bigger down payment or a cosigner
- Employment – A borrower cannot qualify without income, in transition of employment, or is in their probation period. If any of these situations occur, a strong cosigner would be needed with good income and little debt
- Mortgage Rule Changes – OSFI (Office of the Superintendent of Financial Institutions) is continually introducing changes that makes it more difficult to qualify for mortgage financing. A borrower may qualify today, however there is a risk they may not qualify in the future due to changing rules
- Down market – Lenders lend on the lower of the purchase price or appraised value. If the appraisal comes in lower than the purchase price before possession, the borrower will have to make up the difference between the purchase price and the appraised value
- Damages – If the buyer is not able to close upon possession, they will lose their deposit and the builder has the right to sue for damages
- Changes – All developers in their purchase contracts exercise the right to adjust elements of the project (including the buyer’s unit) in order to maintain the standards of the development or if unforeseen circumstances arise
- Possession Date – It’s not uncommon for builders to extend their possession dates several times and by many months. This is more common with condo’s and townhome’s than with single family homes
Real estate can be easy, and by understanding these hidden elements you can plan properly, mitigate your risk, and potentially save yourself from an expensive and stressful lesson. If you’re interested in knowing how I’m helping buyers navigate through these pieces, give me a call.