So you have finally decided to make the big step and buy a home! This will be one of the most exciting moments of your life! But before you make one of the biggest financial decisions of your life, make sure you consider the following:
Get a pre-approved mortgage!
Talk to a mortgage specialist to see how much you qualify for! This depends on how much you have for a down payment and what current interest rates are.
A general rule is your monthly payments towards your home (which include mortgage, property taxes and utilities) should not exceed 32% of your monthly gross income. Your total monthly debt should also not be more than 40% of your monthly gross income.
There are many people out there who are quite financially savvy and want to purchase their first time as an investment property. Keep in mind that with investment properties, you must have at least 20% for a down payment and that you will not be eligible for land transfer tax rebates if you are a first time buyer.
- Find a Realtor that suits your personality!
This is the single largest purchase you have made to date, so make sure you find a knowledgeable Realtor that you also trust and get along with. This is the biggest financial decisions of your life, so make sure it is a rational and well informed one! (hint hint…ME!)
Home buying is an extremely complicated process with many different parties involved. Your Realtor is your first contact point to get you in touch with other experienced industry experts such as lenders, lawyers, home inspectors and movers.
- Make a list of ‘must haves’, ‘wants’, and ‘do not wants’
Sit down and think of what you must have, want and do not want in a home. This list may change as you look as different properties but it is a good start in terms of where to begin! A couple of things to consider include:
What you think your lifestyle will be like in a few years’ time? Will you be starting a family? Will you need to move for work?
Are there upgrades to the home you can make yourself?
It is important to remember that your home will probably not encompass everything on your list and that many things can be done to your home to make it your dream home!
- Home buying process
Make sure you sign a Buyer Representation Agreement (BRA). This document outlines the duties the brokerage owes to the buyer. Included in those duties includes full disclosure of all property information known to the brokerage. It protects homebuyers to ensure that your best interests will be protected and reassures you are making the right decision.
Acceptable / unacceptable problems. A qualified home inspector will be able to gain an objective view of the property. Limitations include problems beyond the walls of the property. Sometimes properties listed way below market value require extensive repairs. With the help of your Realtor’s knowledge, you can gauge a good idea of what are quick fixes or costly repairs.
Consider your future needs. What will your needs and lifestyle be like in the future? Will you be requiring extra space to start a family or create a home office? Thinking about this now will help with your decision for what type of mortgage you will be looking for. It may also be easier and less costly to take these changes into account now than to adjust for them in a couple of years time.
Proceed quickly! Good properties sell fast. Realtors have the latest technology to track down the latest listings within hours which allows you to save time and effort! A great agent makes sure you have all the information you need and that your finances are in order so that you can make act fast when you find your dream home!
Isn’t my only cost my mortgage? Don’t forget about closing costs! These costs are typically between 1.5%-4% of the purchase price. You will be responsible for items including mortgage insurance, appraisal fees, legal fees, inspection fees, transfer taxes, title insurance, inspections, property tax, fire insurance, increased bills, etc. A couple of days before closing, your lawyer will send you a list of adjustments that will outline the final costs.
Happily Ever After? It is so easy to get caught up in the excitement of home buying that other factors may not be considered until after your property is purchased. For example – how is your credit now? What are some ongoing costs you will be expecting? Do you have savings to ensure that any unplanned repairs can be taken care of? If you live in a condo, are you taking into account that maintenance fees may rise? A good Realtor and a proper home inspection can help you prepare for a future without many surprises.
For more information on home buying, please visit the CMHC website: http://www.cmhc-schl.gc.ca/en/co/buho/