Ten Tips For First Time Buyers
1) Decide what type of home fits your lifestyle – Make a list of what you want, need and do not want in a home. Rate your desired home attributes on a scale of 1 to 10 (10 being an absolute “must have” and 1 being a “nice to have but not a necessity”). This checklist will allow you to objectively assess different homes according to your needs and will save you invaluable time when you go out to see various building developments.
2) Pick your neighbourhood – Buyers should check out the neighbourhood and become a home value expert. Investigate the areas and price ranges for the type of home you are looking for. If you find yourself becoming interested in a particular neighbourhood, familiarize yourself with the local amenities, schools, property taxes, crime rates and other neighbourhood features. Talk with different people in the area and visit different times during the day. The characteristics of the area may change dramatically during different hours of the day.
3) Use the resources available to you – Try to be as informed as possible when you buy your first home. One place you may want to start is by going to the website of Canada Mortgage and Housing Corporation.
4) Know your credit history – Once you have chosen the type of home you want, you must find out what you can afford. Knowing your credit history is an important first step. First time buyers should access their personal credit bureau’s score, including their Fico (Beacon) score and then, with record in hand, ask a mortgage broker to explain the many options open for a mortgage given their specific credit worthiness. A credit check will also point out to you if the stored information is correct. Contact any creditors who have not updated your record in terms of cancelled cards or balances that have been paid off. Paying off high interest credit cards as soon as possible will help make it easier for mortgage approval.
5) Know how much you can afford – Buying a house essentially comes down to two key questions: how much down payment you can afford; and what type of mortgage payments can you comfortably carry? The general rule of calculating how much of your household income should go household expenses, including mortgage payments, is that household expenses should not exceed 32% of your gross income. First time home buyers should talk to a mortgage professional about how much they can afford and get pre-approved before they start looking.
6) Be a pre-approved buyer – Becoming pre-approved is easy. Contact your mortgage professional to arrange a mortgage consultation and they will work with you to complete your mortgage application with a credit check prior to beginning your search for a home. Pre-approval means that you have actually been approved for the purchase by a lender, which gives you the edge in home purchasing negotiating. The pre-approval guarantees (up to a period of 120 days) that if the rate increases during that time, you will still get the original rate. Also it should be pointed out that a pre-approved mortgage will let you know how much home you can afford and how much your payments will be. As a result you won’t waste time looking at homes that are out of your reach.
7) Assemble your team – Now you have decided where you want to live, determined how much you can afford and been pre-approved for a mortgage. Since buying a home is a time consuming, expensive and legally complex process, this is the time to seek out knowledgeable professionals. The first person you want on your team is a qualified mortgage broker to guide you through the home buying process. A full time knowledgeable real estate agent should be your second pick for your team. Your real estate agent will research available properties that suit your needs and budget, arrange visits to the properties you want to view, negotiate on your behalf with the seller/or seller’s agent, present your offer and counter-offers, and advise you on your legal and financial responsibilities. Another person you should have on your team is a lawyer. The role of your lawyer is to represent your interests, explain any warranty provided on your home (if new), limit any risks to you by ensuring contracts are clearly and understandably written, review the property survey to ensure no encroachments or easements exist, and research any restriction on the property title. They will also arrange the property title transfer, manage and account for all disbursements, and arrange for title insurance, which protects you against challenges to the ownership of your home or from problems related to the title to your home.
8) Take the time for a home inspection – If you make an offer based on the completion of a home inspection, you need to arrange a property inspection. A good home inspector will perform a comprehensive visual inspection, examine the home’s foundation and roof, examine all the main mechanisms and systems in a house (such as heating, electrical, plumbing, ventilation, etc.) and check the condition of the windows and doors. The inspector should also identify areas that need replacement or repair, areas that have been repaired in the past, should estimate the remaining lifespan of specific components in the home and provide a written report of the inspection findings.
9) Uncover hidden costs – On top of the cost of your home, there are several other fees, charges, taxes and sums that are required to complete the purchase. These closing costs add up and there is no getting around them, so make sure you get an itemized list of the costs well in advance of your closing date. These can include a deposit on the purchase price, property purchase tax, appraisal fees, legal fees, land survey or title insurance. Don’t forget to also consider general expenses such as moving, upgrades and home decorating costs.
10) Keep your cool – The home buying process is full of challenges and the best way to deal with them is to be prepared.