Home Buying 101 – The Basics
To streamline your home buying experience, there are a few items that should be considered before you even start the process. Welcome to Home Buying 101, where we give you a crash course on the basics of finding and buying your dream home.
Commit to a Location
Are you planning on staying in your new home for at least a few years? It will save you money in the long run if you do. The usual mortgage term runs for five years and you should give serious thought to staying in a location for at least that long. Sometimes there are penalties for opting out of that term. REALTORS® also charge commission on home sales, so if you are moving every couple of years, for work or whatever reason, is this really a wise financial move? Unexpected things happen, but if you can stay “rooted” for a while, you’ll save money and build equity at the same time.
Mind Your Credit Score
It is tougher now to be approved for a mortgage than before the 2008 housing collapse in the United States. Guidelines have been tightened and lenders are just not being as free with the cash as they once were. By keeping your credit score as high as you possibly can you stand a better chance of approval. Banks and mortgage firms will feel more comfortable closing the deal, knowing that you will be able to keep up with the payments and honor your commitment.
It is perfectly fine to dream about that big house in the perfect locale. It may even help you with your choice, but you must temper that dream with a dose of reality. Don’t buy more house than you can comfortably afford. It is most likely that what you can afford will be determined by the mortgage you qualify for. Putting no more than 35 percent of your take home income towards that mortgage payment assures that you can comfortably stay on budget and not end up “house poor.”
Work on That Down Payment
Try and come up with the largest down payment possible. Lenders often offer better lending rates and terms for those who put more money down upfront. If you don’t have at least 20 percent down, that means you will have an additional 2.5 percent tacked on to the home price to cover the mandatory mortgage insurance with CMHC. Zero down options are sometimes available.
Where Are the Schools?
Sometimes when people look for a home they forget about looking at the schools in the neighbourhood. It’s easy to do if you don’t yet have children, but since a house is an investment in the future, it pays to do a little research. Find out which neighbourhoods have the best schools so your children get the best education you can offer. Find out if there are any secondary schools or colleges nearby. Having a good school in your neighbourhood can also increase your property value. When and if it’s time to sell, you’ll have a more desirable home to offer.
Consult a Professional REALTOR®
The computer age has made it possible for anyone to go online, look up homes, and even buy and sell property. But, will you always get the best deal? Will all the legalities be looked after? Consulting a professional REALTOR® gives you an extra layer of security, someone to make sure all the “ducks” are in a row. Our firm can help you get the best deal on your home, at no cost to you. The seller pays the commission on the transaction.
Pre-Approve Your Financing
Getting your financing pre-approved before you start home shopping means you will already have a fairly accurate idea of what you can afford. It’s no fun to look at a property, decide it’s perfect, only to find out it is out of your price range. Pre-approval is just a preliminary stage where you talk to a mortgage professional and get an overview of your financial options. As long as you provide honest information about your financial situation, the pre-approval is an accurate and useful home shopping tool.
Expand Your Knowledge
By working with a professional REALTOR® you can take advantage of the knowledge gained by years of experience. Your consultant can look into pricing on homes in the area you’re looking into. Not just the list price, but the amount the homes actually sold for. This helps you when it’s time to make an offer. Bidding too high wastes money, while bidding far too low will usually relegate your offer to the circular file.
Get a Property Inspection
Before you make an offer on a property, opt for a pre-offer inspection. In a tight real estate market these are becoming more common. Standard home sales include an inspection as a condition of sale. This helps you avoid buying a home with hidden problems that could cost you thousands to make right. If problems are revealed you can make their repair a condition of sale, or request a reduction in the price.