Vancouver Ethiopian Blog

Ethiopian life in Vancouver, BC, Canada

To Buy a House or Not to Buy – Part 1

Buying a house is everyone’s dream. It should not be any different among the Ethiopian community in Vancouver, BC, Canada. There are many Ethiopians who have bought a house or two in and around the city, and there are some who are presently looking to buy a house or a condo. In this article, I will try to explain the steps involved in buying a house in and around Vancouver.

Advantages of Owning a House

It is true that renting a house makes it easier to move out when you need to, and demands no or little responsibility for maintenance. However, renting brings with it the possibility of eviction, and you are on the mercy of the landlord when it comes to rent increases.

On the other hand, buying a house is a good investment and comes with several advantages over renting. Ownership pride aside, some of the advantages include:

  • Property builds equity
  • No landlord asking you to move out
  • Potential profit in the future
  • Sense of community, stability and security
  • Free to change decor and landscaping

In addition, if you build an equity on your house investment and run into a financial problem, your bank could lend you money for emergency needs. Remember, no one would lend money to you if you don’t have a house in your name. Also, some government positions in Canada have a requirement that you must own a house in a certain postal code address.

Buying a house is different from buying a stock in the stock market. The house is real, you can see it, touch it, smell it – it is real – above all it will be used as your refuge, shelter – that is why it is appropriately called Real Estate.

Credit History and Pre-Qualification

Before you go out and start looking for a house, check your own credit history. Knowing your credit standing will help you avoid disappointments later. Checking your credit history is very simple. Make an appointment with a banker and inform them your intention to buy a house, and they will pre-qualify you for a certain amount of mortgage based on their criteria, like income amount, service debt ratio, your credit history and so on. If you pre-qualify, that means you are a credit worth person and have a good credit standing.

Location, Location and Location

Deciding where to buy is a stressful decision for many. You must first decide where you want to buy your house, at least the city (Vancouver, Burnaby, North Vancouver, Coquitlam,Port Coquitlam, Surrey, Richmond, Delta, or etc.).

To make your decision right, talk to people who live in the city you are interested in. Deciding the city ahead of your searches will help you focus on that city and you won’t miss opportunities as they become available. Even better will be if you already have made your decision as to which neighbourhood of that city you will be buying in.  For instance, Surrey is a huge city with many sub-cities; so decide which part of Surrey you will be moving to before you start looking for a house.

I hate commuting to work everyday and if you are like me, your first priority should be the proximity to your workplace (if you intend to stay at your current workplace for several years). Also, you should think about your friends and relatives – where they live, and how often you visit them. Also, do you have baby sitting needs? If so, make sure that you move to an area you could get help.

Realtor or Not

Some times, you might find a good deal if you avoid realtors and buy directly from the seller. Sellers would have the motivation to sell without realtors as they will save on commission. But, be 100% sure that the seller actually owns the house. When buying from the seller directly, with out a realtor, I suggest that you hire a lawyer, not a notary public.

Speaking of lawyers, ask your lawyer if they represent your banker or not. Unless you ask, lawyers don’t tell you that they are double dipping and could very well represent you and the bank – which I believe is unethical, but not illegal. If you are buying a condo, then hiring a notary public could suffice, as the condo strata would provide you with 2 years history of the unit you are considering buying.

Interest Rate Shopping

Interest rates make a huge difference in one’s mortgage payments. A person with 4.00 % interest rate pays significantly less than the one with 6%. So, you must spend a great deal of time looking for the lowest rates possible. Also, when it comes to the terms of interest rates, my personal preference is Variable rates. Variable rates fluctuate with the prime rate (currently set at 2.25% in Canada) and the research shows that 85% of the time, people with variable rates end up winning over fixed rates. However, if you want to sleep at night, have a peace of mind, then it is better to go with a fixed rate. Mortgage rate specialist could help you secure the best rates.

Some mortgage brokers might quote you a low monthly payment. But, ask for more details why it is that low. Be careful not to get sucked into a mortgage that will last for many years. Ask what the amortization period of the mortgage is. The conventional amortization in Canada is 25 years, where as in the USA, it is 30 years. Don’t get a mortgage that would be passed onto your children.

Down Payment

Until about 10 years ago, the minimum requirement to buy a house was 25% down payment. Then Canadian Housing and Mortgage Corporation (CHMC) started allowing as low as 5%, even in some cases, as low as 0%. A lot of people took advantage of the low or no down payment and bought houses, but I am not sure how many of those people still own their homes.

At present, 0% down payment is not allowed anymore; the minimum is 5%. The conventional downpayment amount is now lowered to 20% from 25%. But, if you can afford you can pay more, even 100%. However, if you would like to take advantage of some of the tax benefits available to home owners, I suggest that you don’t make more than 30% down payment as you might not qualify for some tax credits above this treshold.

If you are short on down payment, remeber that you are allowed to withdraw up to $20,000 from your RRSP under the Home Buyers Plan (HBP). The amount withdrawn must be paid back, interest free, back to your account in 15 years.

If you still don’t have the money to buy a house or a condo on your own, consider buying with a family member or perhaps a group investment with people you trust in the community. If 10 people invest $25,000 each, you are looking at a $250,000 towards a downpayment – which is close to 50% downpayment for a house around Surrey, BC. You could rent this house for a few years and sell it in a few years if it appreciates.

Where to Look for Houses

Have a look at some of the real estate listings:

http://www.mls.ca

http://www.realtylink.org

Look for homes for sale by owners in the Vancouver area here

You could find great deals in Craig’s list, too: http://vancouver.en.craigslist.ca/rea/

Also, remember that there is a lag between a house put up for sale and the time it gets published in real estate websites. In order to see listings as they become available, I recommend that you read your local Real Estate paper.

Do you have anything to say regarding this post or share with all of my readers your experience in buying or looking for a house? Please comment below.

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Next week, in my Part 2 article, I will introduce you to some mortgage tools, discuss buy vs. rent, talk about mortgage insurance, and write about questions you need to consider before you make the jump and buy a house.

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September 17, 2009 - Posted by | Ethiopian Businesses, Ethiopian Careers, Ethiopian Culture, Ethiopian Education, Ethiopian Investments, Ethiopian Parenting, Ethiopian Proverbs, Ethiopian Relationships, Ethiopian Socials, Ethiopians Back Home, Ethiopians in Vancouver | , , , , , , , , , , , , , , , , , , ,

6 Comments »

  1. […] Comments (RSS) « To Buy a House or Not to Buy – Part 1 […]

    Pingback by To Buy a House or Not to Buy – Part 2 « Vancouver Ethiopian Blog | September 24, 2009 | Reply

  2. […] “Happy Ethiopian New Year to All!”. I published a few more posts after that – To Buy a House or Not to Buy (Parts 1), To Buy a House or Not to Buy (Parts 2), To Buy a House or Not to Buy (Parts 3),  Thanksgiving […]

    Pingback by Just How Big is the Internet? Let us Print the Entire Internet, Honey! « Vancouver Ethiopian Blog | October 22, 2009 | Reply

  3. […] Sept 17:  To Buy a House or Not to Buy – Part 1 […]

    Pingback by Ethiopian Vancouver Blog: Looking at My 2009 Posts « Vancouver Ethiopian Blog | January 6, 2010 | Reply

  4. Great article thank you! I am a notary, I became one through http://www.getsmartnotary.com, and I agree with everything you say here. I do love being a notary though, through get smart notary I learned everything I needed to know, including all of the real estate information etc. It’s great to know! Check it out if you are interested in becoming a notary!!

    Comment by Online Notary Class | February 4, 2010 | Reply

  5. Just stumbled across your blog. Great article!

    Just though I would drop a quick update on new mortgage rules that came into effect last month.

    Home buyers are now required to qualify for a 5-year Fixed Rate before they can obtain a mortgage, regardless of which term they go for.
    The other rule is that rental property buyers now need to put 20% downpayment in order to get insured financing.

    Cheers!

    Comment by Mengedegna | May 2, 2010 | Reply

    • Thanks Mengedegna for the updates.

      Comment by vancouverethiopian | May 14, 2010 | Reply


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