by Jeannie Armstrong, Postmedia Content Works
Photos: Getty Images
Are you among the 25 per cent of Canadians who will purchase a new home this year? According to the Canadian Home Builders’ Association, one in four homes purchased each year in Canada are new builds.
There are numerous advantages to selecting a newly constructed home over an existing property. Today’s new homes are better-built and more comfortable, thanks to modern building practices and smart technologies. With enhanced energy efficiencies, a newly built home also means lower operating costs, now and in the future.
With a new home, it’s easy to check off all the items on your must-have list: an open concept layout, high ceilings, ensuite bathroom, walk-in closet, kitchen island, laundry room and more.
A new home also brings peace of mind. Your home is not only protected by the builder’s own warranty and after-sales service for the first year, your home receives additional protection for the first five years through third party warranty coverage.
Dollars and sense
Now that you’ve decided new is for you, it’s time to determine your budget. How much can you afford to spend on that new dream home?
Tammy Wandzura, an Accredited Mortgage Professional (AMP) with TMG The Mortgage Group in Saskatoon, recommends that prospective buyers apply for mortgage pre-approval before they begin house shopping.
With a pre-approved mortgage, you will know exactly how much of a mortgage you can afford and qualify for. The process is quick and easy, says Wandzura. “We can generally have the information to the client within 24 hours.”
Mortgage pre-approval has become even more important now that the federal government has instituted new stress test rules. Effective October 17, 2016, all home buyers applying for a mortgage with less than a 20 per cent down payment will now have to qualify at the Bank of Canada’s posted benchmark or “stress test” rate, currently at 4.64 per cent. “A five-year fixed rate mortgage rate is currently ranging between 2.29 and 2.49 per cent. Even if the home buyer will be paying that lower rate, they will still have to qualify at the higher benchmark rate,” says Wandzura.
“Prior to the new stress test rules, to qualify for a mortgage for a $350,000 home, the home buyer would need to have a minimum income level of $57,000 per year, assuming they have no other debt. Under the new stress test rate, to purchase that same $350,000 home, the person needs to earn at least $70,000 a year.”
When applying for mortgage pre-approval, be prepared to provide the lender with documentation verifying your income, such as T4 slips, pay stubs, bank account and income tax statements.
Financing the construction of a new home isn’t quite the same as obtaining a mortgage for an existing property. Buyers of newly constructed homes have two options: a completion mortgage or a progress advance (builder’s) mortgage.
“With a completion mortgage, you give the builder a down payment. Then when the house is done, the rest of the money is forwarded to the builder by the lender and you take possession,” says Wandzura.
“Larger builders will generally do completion mortgages because they have the finances to bankroll the project during construction. Generally, it’s the smaller builders who require the progress advance mortgages.”
With a progress advance mortgage, the mortgage funds are released to the builder in up to four intervals, or “draws.” Applying for a progress advance mortgage can be more complicated, says Wandzura. “It doesn’t work for everybody, depending on their cash flow ability.”
“During the pre-approval process, we will let the home buyer know what they can afford to do, so if the builder says, ‘We only do ‘progress advances,’ and the home buyer already knows that isn’t going to work for them, then perhaps they can go on to another builder who will do a completion mortgage.”
Location, location, location
Now that you know how much you can spend, where do you want to live? “It’s important to be really clear on what your budget is, what your preferred location is and what your family’s needs are,” says Jilaire Wagner. She and husband Andrew Wagner are the co-owners of Maison Design + Build, an award-winning residential construction firm in Saskatoon.
“Start by deciding on a couple of different locations. The neighbourhood you choose will likely determine the size of lots that are available. If the lots are 40-feet wide, then only certain floor plans will work with those lots,” says Wagner.
When narrowing down your choice of neighbourhoods, carefully consider your family’s lifestyle. Is living close to schools, recreation facilities and parks a priority? How long will your commute to work take? Walk around and drive through the community on different days and at different times to see if you feel at home with the neighbourhood’s vibe and ambiance.
In many new communities, architectural controls dictate the style of homes that can be built. Check out show homes in the neighbourhood to see if these design elements are in line with the dream home you’ve imagined.
Design for life
Now that you’ve narrowed down your lot choices, it’s time to think about the design of your home. “We suggest looking at what life will be like for your family about five to 10 years out. Most people who go through the effort of building a home are usually not going to move sooner than three to five years,” says Wagner.
As the busy parents of two growing children, the Wagners have applied many of their own life lessons to the homes they design. “We learned a lot from building our own houses. The first house we built was before we had children. The second was built when our kids were babies. Now our oldest is 11. We’ve found that our family’s needs have changed a lot just over the past decade – from our kids’ activities, where we hang out as a family ‒ even our storage needs,” says Wagner.
For the Wagners, the design process begins by asking home buyers a series of questions, such as:
- How many children do you have?
- Do those children require separate bedrooms and bathrooms or will they be sharing?
- Is it important to have a master bedroom with an ensuite? If so, do you prefer to shower or bathe?
- How do you use your kitchen? Are you always on the go, or do you have large family gatherings around the dinner table? What appliances need to be accommodated in the kitchen design?
- What kind of grocery shopper are you? Do you like to buy in bulk or do you shop several times a week?
- How much storage space will be required? Is a mudroom on your wish list?
- Are you planning on developing a family room in your basement or would you prefer a bonus space on the second floor?
“The questions can get pretty personal, but it’s important to really identify what the home owners’ preferences and ideals are. Throughout the process, there will likely be compromises you have to make, but understanding what you want in the first place will help you make the right choices,” says Wagner.
Another consideration is the functionality of the floor plan, she advises. “Think about how the space in that floor plan can be used. Think about your furniture and scale in the pieces you want to use in different rooms. For example, there needs to be 36 to 42 inches of clearance space around a dining room table. Is the floor plan you’re considering going to work?”'
Pay particular attention to the kitchen when you’re comparing floor plans, says Wagner. “Your kitchen and dining area is probably the most important space in the house, and the most expensive to develop. It’s the space you spend the most time in and the space you’re least likely to change after moving in. It’s very difficult to change the functionality of a kitchen.”
Exploring a variety of show homes is sure to provide inspiration, but Wagner says you always need to keep your family’s individual needs in mind. “Many people look at a show home and fall in love with the “feeling” of a home and its décor. If you haven’t done that homework, and asked the important questions, sometimes you just buy the feeling and then end up realizing it’s not the home you actually needed.”
Choosing a contractor
As important as the home plan you decide on is your choice of builder. Buying a home is likely the biggest investment of your life; choosing the right builder or contractor is crucial.
A great place to begin researching professional builders or contractors is the directory of your local home builders’ association. Membership in the association indicates that the builder is a certified professional, committed to customer satisfaction and in business for the long term.
“A builder or contractor who belongs to the home builders’ association is demonstrating an attitude of continual improvement, of holding to industry standards. Awards are also something to look at in terms of customer satisfaction, innovative floor plans and environmental leadership,” says Wagner.
When you’ve narrowed your selection down to a few builders or contractors, check out their previous builds. “To ask a contractor to do something different than what they regularly do is very difficult. If you don’t like the style, quality or details you see in their past builds, you’re probably going to end up disappointed,” says Wagner.
She also advises asking for references from past clients. “Make sure these are clients who have been in their homes for several years, not just newly moved in. I think that really speaks to the long-term quality of the home, as well as the after-service the contractor provides.”
While interviewing your builder or contractor, consider how well your personalities mesh. “Building a home is a very personal relationship. The design and build phase can take as long as a year or more. You want to make sure you have a really good rapport with them and that they’re listening to you. Having a sense of trust is very important,” says Wagner.
For more information on building your new home or to find a list of certified builders in your area, visit the Canadian Home Builders’ Association website at www.chba.ca.
Jeannie Armstrong is a writer for Postmedia Content Works, a custom content studio that creates, deploys and measures programs for brands.
