Buying your first home can be a very exciting time, however, it can also be a very stressful and action packed process. From saving your down payment to a mortgage approval, all the way to finding the perfect home – It all takes time and effort. While it’s a bit of an adventure for a first time buyer, there are some major factors you should consider throughout the process. To help you out I’ve put together the following list so that these important items to think about don’t get overlooked along the way.
Weigh The Costs
Not everyone is in a financial position to buy a home, and that’s totally okay. In the red hot real estate market of 2017, more and more people are finding the cost of buying a home is beyond their financial means. For example, the average price for a detached home in the GTA has reached over 1-million dollars. So, what we’re left with as a plan B is to rent or buy on the outskirts of the GTA. While plenty of families find renting to be the more preferred option, even as a short-term plan or due to their financial standing, it’s important for you to weigh the costs of buying a home. How much can you afford? Can you afford as much as your family needs? Will you have to make major financial cutbacks in your lifestyle to obtain the home you want? These are all things to consider to ensure you’re ready to buy a home before you jump into the process.
Determine Your Rates & Costs
I always suggest that you shouldn’t begin looking for homes until you’ve been pre-approved for your mortgage loan. So often people fall in love with a house, only to learn they either didn’t get approved for the amount they need or they got approved for less than they had hoped. To avoid disappointment, or being stuck in the middle of an unwanted financial liability, speak to your mortgage broker about how much you qualify for, how much you can afford and what your rates will be well ahead of touring homes for sale. Only after you have an idea of your price range should you start your search for a home.
Save The Down Payment Ahead Of The Hunt
Like most home purchases, a down payment is required. Typically, 20% down is the national average for the down payment. While there are loopholes and exceptions to pay less up front, they can come back to bite you in the derriere later on. Saving your initial 20% down can not only save you money in the long run, but it can also help you get a better grasp on the financial responsibility that comes with a mortgage loan. While often 20% of a home price can be an alarming amount to save, consider cutting back on take-out, Starbucks coffee each morning or even Friday nights at the movie theatre, and you’ll be surprised at how quickly you can save towards your down payment for your first home.
Work On Your Credit
While you’re saving towards your down payment, give your credit a little TLC in the meantime. Try to avoid opening any new lines of credit or making major purchases such as a car, and make it a habit to pay your monthly bills on time. While whittling down your debt and fixing your credit score may result in a little more time needed to save your down payment, it will help you immensely in the long run. Less debt, a good credit rating and a clean financial record can help you to not only get approved for a mortgage, but it can also help your monthly mortgage payments seem like less of a financial stress.
Take Your Time
So many homes, so many options! In today’s hot market, homes are being snapped up faster than they are going on the market. However, that shouldn’t pressure you to make a rash decision on buying a home. Be sure you have a good idea of what you’d like and the location you’d prefer. While some homes you like may get swept up by other people, rest assured that another will come along. Be sure to hold out until you’re absolutely sure, and don’t just agree to a home because you feel pressured to choose quickly.
Know Your Own Deal Breakers
Looking for a home to buy can be time-consuming and fun, but you also must keep in mind what your own personal deal breakers are. Things such as a roof replacement being needed, a lengthy commute or even a home’s proximity to schools are the types of things you should make sure you’re okay with. While you may love a home, be sure that all the additional aspects of it and its location fit into your budget and lifestyle, to avoid buyer’s remorse down the line.
In the same breath, try to avoid a fixer upper. While often young buyers, especially first time buyers, think that buying a cheaper home that needs work may be the better option, though that’s not always the case. Unless you’re capable of doing a large portion of professional grade renovations, and have a big buffer in your budget for repairs, buying a house that needs a great deal of work can often have you sinking into financial blunder faster than you can say “SOLD”!
Buy Less Than You can Afford
It’s hard not to buy the nicest home your money can get you, but it’s also important to allow a little wiggle room in your financial standing. Stretching your money as far as it can go on the cost of a home can leave you in hot water should anything change with your income, job stability or even unforeseen costs related to your new home. I suggest you buy a home for slightly less than you can afford, allowing yourself a little buffer for extra money to put towards mortgage payments, home renovations or even to get a jump start on repaying your loan. Also, remember to always try to keep a little money stashed away for a rainy day, or for unexpected expenses around the home!
Understand The Process & Paperwork
While you may go into the home buyers market thinking you know it all, that is rarely the case. In fact, potential buyers are often shocked to discover there is much about the mortgage and buying process that they don’t understand or they have overlooked. It is important to thoroughly read through all paperwork, and consult a professional such as a lawyer if there is anything you are unsure of. Be sure you have a full grasp of each step before you start signing on the dotted lines because the details in that paperwork is legally binding.
Buying a home can be such a gratifying experience, but it doesn’t come without some trials, tribulations and time spent throughout the process. If you have any questions about buying your first or next home and are wondering how much you can afford, don’t hesitate to give me a call at 705-315-0516. I am always happy to help you better understand the process, and to help you to make sound financial choices throughout your life as a homeowner.