Updated: Nov 28, 2019
Tips on how to prepare for the long-term commitment of owning a home
Buying your first home is exciting but a huge undertaking. With that, comes a bit of stress and a lot of surprises (not always pleasant ones).
Having a good real estate agent by your side can definitely alleviate a lot of pressure and help you navigate the complex buying process and avoid common rookie mistakes. But nothing compares to being simply prepared and knowing what to expect when you are making one of the biggest investments of your life.
PRIORITIZE WHAT YOU WANT IN A PERFECT HOME
It’s natural to want your first home to be absolutely perfect in every way. Having an idea or a list of things that you want in a home is a great place to start. Think about everything: which area do you want to live in, what school district does this home belong to? Do you want a big kitchen with natural light and a laundry room on the second floor, size of the property, age of the home, number of bedrooms, etc?
Once you have your list, take a step back and prioritize your wants. Decide for yourself and your family, what are the things that you absolutely need and which things you can live without.
Chances are, you’ll find a great home in your budget, but it won’t have every single item from your list. Setting your expectations in the beginning, before house hunting, will help you make the right choice down the road and not miss out on time-sensitive opportunities if those present themselves.
SHOP FOR A MORTGAGE LENDER, AS OPPOSED TO SETTLING
If you are not a finance person, then anything to do with mortgages may be intimidating, let alone shopping and getting quotes from a few lenders. But mortgage lender shopping, contrary to what most people might think, is more than attempting to find a good rate. It's also about finding an expert who can help you navigate a complicated process, understand the type of mortgage that fits your needs best, assess your comfort level with monthly payments, and provide professional guidance in the process.
According to Forbes report, shopping around for a mortgage lender can save you money over the course of your loan. But it's also reported that more than half of today’s home buyers are not shopping around for rates when getting a mortgage or refinancing.
Most of them either wait too long until it's too late, they rely on their real estate agent's recommendation, or they are simply intimidated by the entire process.
If you are shopping for a mortgage lender, check out a list of the biggest mortgage rate-comparison sites that Global News posted on their site. Here you can review information on different lenders in Canada and this would be a good starting point:
GET PRE-APPROVED FOR MORTGAGE
Knowing exactly what you can afford in today’s market conditions can give you the proper direction to start your house hunt with confidence.
Getting pre-approved for a mortgage is an official written statement from a bank or a private lender that specifies your qualification for a mortgage loan based on your current income and credit history. While a pre-approval is usually time-sensitive, it’ll specify a term, interest rate and mortgage amount.
Getting this process completed in advance of house hunting means you know exactly where you stand in terms of what properties you can afford and which ones you can't. It saves a lot of time for both yourself and your real estate agent, as it provides a focused list of specific homes you’ll be seeing. And on top of it all, it'll give you a better idea of what your monthly payments will look like.
BE PREPARED FOR HIDDEN AND EXTRA EXPENSES
As a first time home-buyer, you pretty much know what expenses are ahead of you since you made the decision to buy with careful consideration. But the down payment is only one of the things to consider.
Things that people tend to forget are all other unexpected, hidden and extra costs that aren’t obvious from the start. A great real estate agent will keep you informed at every step of the process, eliminating and minimizing any surprises.
Here are some other closing and extra costs that buyers should be aware of when purchasing your first home:
● Provincial land transfer tax - average cost varies by property value
● Provincial land title transfer fee - average cost varies by province and property
● Legal fees – average cost $1,500 and up
● Moving expenses - average cost $1,500 to $5,000
● Home inspection fees - average cost $200 to $1000 per inspection
● Deposit for your offer - varies (but typically should be around 5% of the purchase price to stay competitive during the offer process)
● New home warranty - varies (only applies to brand new homes from developers)
● Mortgage insurance - average cost the premium on the total loan varies from 0.60% to 4.00% depending on how big your down payment is however Banks and other lending institutions typically cover this expense if you are coming up with 20% downpayment
● Home insurance - average cost $1,000 to $2,000 per year
● Renovation and repairs – depends on the extent of renovations required
● New furniture and appliances - varies (Onlywith.ca offers an exclusive 45% OFF on furniture for our home buyers from a sole distributor of Homelegance designs in Canada)
● Emergency expenses – vary
CHECK YOUR CREDIT SCORE BEFORE APPLYING FOR A MORTGAGE
Having a good financial history is critical and is often one of the key deciding factors for mortgage approval. A healthy credit score tells lenders that you are responsible and pay your bills on time, know your credit limits, and avoid financial penalties. Above all – it shows a credit institution the health of your finances and the level of risk that you present.
A single skipped payment, according to Nerdwallet, can knock more than 100 points off your score. So checking your score ahead of time and knowing where you stand will help level your expectations when it comes to getting approved.
A healthy credit score according to Credit Karma is 700 and higher. But keep in mind that different lenders have different standards for rating credit scores.
YOU CAN NEGOTIATE ANYTHING AS A HOME BUYER
When buying your first home, you have the power to negotiate and not only when it comes to the price of the property.
According to Forbes, if you happen to be in the buyer's market, and the seller is eager to sell, some of the things you can negotiate with the help of your real estate agent include partial coverage of closing costs, closing dates, coverage for various repairs that have been uncovered during the home inspection, cosmetic updates, and even certain furnishing items.
While the list of things to know and remember before buying your first home is a lengthy one, a great agent, who is also a true artist of persuasion and negotiation, will always have your interests at heart and prepare you diligently for what to be expected.