You have started thinking about buying a home and likely have many questions about the process. Being informed is so important when making a big financial decision, and there are few financial decisions bigger than buying a home. Take the time to educate yourself about what you are getting into before buying a property. The more you know the more money, time and hassle you will save. Below I outline 9 things you should know before buying a home:
1. Get pre-approved for a mortgage- Getting pre-qualified by a mortgage broker is a great starting point to know how much you can afford to buy. A pre-qualification is just an estimate of what a lender thinks you can afford, based on basic financial information you provide. Once you get a little more serious and would like to start looking at properties, you will need to take it a step further. It is at this point that you will want to get pre-approved for a mortgage. The difference here is that the lender actually pulls your credit report and requires you to submit documentation that verifies your income and financial history. Once this has been confirmed, you will receive a pre-approval letter that assures prospective sellers and their agents that you can obtain a mortgage and close the deal.
2. Shop around for the best mortgage rate- You will probably be paying the mortgage for a while, so getting the lowest mortgage rate should be one of your top considerations.
3. Know your closing costs- Closing costs are one-time fees that you must pay on closing when you purchase a home. These costs include, but are not limited to: land transfer taxes, lawyer fees and any adjustments i.e. propane for tanks that were refilled prior to closing, any property taxes that the seller paid in advance, etc. . In most cases, they have to be paid upfront and cannot be rolled into your mortgage. It is a good idea to budget between 3% and 4% of the purchase price of a resale home to cover the closing costs.
4. Know what you want and don't necessarily buy for the life you have today- Do you want a condo, townhouse, semi-detached or detached home? Do you want a bit of a yard, finished basement? Write down your non negotiables in a home as well as the "would be nice to haves". These will help you when you start looking at homes. Before you purchase a home, ensure that you think about your long term plans. Do you plan on getting married, having kids, changing jobs? Depending on the market and the terms of your mortgage, you may not actually pay down any real equity for between five and seven years: if you aren't sure that your house will be the house for you in a few years, you may want to keep looking.
5. Work with a skilled Realtor that knows your area and exactly what you are looking for-Work With a FULL-TIME Real Estate Agent. Every neighbourhood has its unique qualities that you want to be aware of before you buy. An agent that is well-informed about the area will also know what homes there are worth, which will help you avoid overpaying. They can also help you make decisions about the re-sale value and ensure that you get in to see homes before they sell in this hot Seller's market.
6. Look beyond the paint, floors and cabinets- These are things that can be changed down the road if you love the layout and location.
7. Become educated on the type of market that you are buying in- Is it a Seller's market? Buyer's market? In a hot Seller's market like we are in today, you sometimes need to move quickly if you find your dream home so that you don't miss out. You may also have to fulfill any conditions that you would like prior to submitting your offer. It is also important to know if the home is under priced to get multiple offers or if it is priced at market value. Oftentimes in a Seller's market, homes are priced below market value to generate a bidding war so you will want to keep that in mind when looking at the listing prices as they may not actually be in your price range. In a Buyer's market, you have a little more time to make a decision and there will be more homes on the market to choose from. You will also likely be able to negotiate with terms and the price.
8. Buy the house that you know you can afford- This can be different than the number that you were pre-approved for by your mortgage broker. Sometimes your maximum approved amount will not leave a whole lot of extra cash for travel, eating out or whatever other activities that you like to do.
9. If you are a first time buyer, know about all of the first time buyer incentives that can save you money- There is the Home Buyers' Plan which allows first-time homebuyers to withdraw up to $35,000 from their RRSP to finance a down payment. Other incentives include the $5,000 Home Buyers' Amount, the GST/HST New Housing Rebate and the Land Transfer Tax Refund.
These are just a few of the things to know before purchasing a home. If you are thinking of buying, I would be happy to answer any of your questions. You can book in for a call with me in the link below:
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