Now that you’ve read my 10 helpful tips and learned what types of questions to ask during your open-house walk-throughs, it seems that you are very serious about buying your first home and are ready to jump right in! You have all of this information at your fingertips but do you actually know how to get the process started? Follow me and buckle-up as I guide you through the home-buying process – one step at a time.
ONE: HOW HEALTHY ARE YOUR FINANCES?
You’ve heard the people around you asking you repeatedly (like a broken-record): “Do you have enough money?” “Are you sure you’re ready?” “Have you really thought this through?” These people are most likely your parents, in-laws, siblings, close friends… You’ve been talking about this long enough that you’ve convinced yourself and everyone around you that your finances are in good health and you’ll be just fine. If this is true, congratulations! Let’s just double check to be sure. So, you’ve heard that a 20% down payment is sufficient and you feel like you’ve saved up enough to cover it in the price range you’re looking for, and if you have that then you’re all set, right? This is not exactly the case. It is recommended that you have at least 3-6 months emergency savings in-hand, on top of the amount you aim to put as a down payment. You will need to find out exactly how much you currently spend on living expenses and figure out how much you can afford to spend on your mortgage payment (minus entertainment, transportation, grocery, etc.).
TWO: DOES YOUR PROVINCE OFFER BENEFITS? ONTARIO DOES
Before you start meeting with lenders, it’s good to know what constitutes a good deal. That includes looking into special programs that might make it easier for you to find a property you can afford. As of this year (2017), Ontario decided to double the first-time home buyers’ maximum Land Transfer Tax refund to $4,000, which means that eligible home buyers in Ontario would pay no Land Transfer Tax (LTT) on the first $368,000 of their home’s purchase price. This was put in place because of the increased costs in the hot GTA housing market.
THREE: MEET WITH THE LENDERS
As a realtor, it is definitely appreciated when clients know how much they can actually afford so that we can find properties that are best suited for them and that are within their price range. Unless the client has all cash (which would be somewhat unusual for first-time buyers), it is just as important for a buyer to approach the seller with a pre-approval for the property. Speaking to a lender or broker will deeply benefit you as they will asses your credit score, by evaluating your assets, savings, and debt. This would be your opportunity to mention any local/provincial assistance programs for first-time buyers, as we learned in step two.
FOUR: GO SHOPPING
No, not for your new home… yet. Once you’ve met with one lender, great – you did it! Now that you have experience with speaking to lenders, talk to another one, and another one. This is all about finding you the best rate because this is probably going to be the biggest investment of your life. Take your time and do it right. Depending on where you live and where you go, fees are known to vary between local banks, credit unions, mortgage bankers, larger banks or mortgage brokers. When you’ve gotten the best deal you can, get a mortgage pre-approval so you know the amount you have to work with. Make sure you are pre-approved, not just pre-qualified, and get a copy.
FIVE: YOUR SECOND-BEST RATE
So now that you’ve officially been pre-approved and found the best rate possible, go back to the person you were going to choose but dropped (for one reason or another). Why? Even though you’ve been pre-approved by one lender, it is not guaranteed that your loan will be funded as the market can alter and you may be at an increased risk. As a new home buyer, you will learn to always have a backup plan – better start now!
SIX: FIND A REALTOR
This is the easiest step in the home-buying process, with little-to-no research involved. How? Because you are here, contact us now.
I have said it before and I’ll say it again – location, location, location! You probably have an idea of the neighbourhood you see yourself living in but there are a few things to keep in mind. Buying a home within a reputable school district will work wonders for your property resale value, even if you don’t have kids (or plan to have kids), have a look. It will also be extremely helpful to evaluate the foreseeable commute costs to each of your prospective neighbourhoods and add that into your calculated expenses for the month. Keeping in mind, while a shorter commute to work seems beneficial in the short-term, living further away from metropolitan areas will likely lower your property tax and house costs = more for your money. Weigh your options and ask your realtor questions if you’re not totally familiar with the neighbourhoods you’re interested in.
EIGHT: ARE YOUR FINANCES STILL HEALTHY?
Once we’ve found you a property that you can’t imagine yourself without, have a look at your expenses again but this time, factor in closing costs, moving expenses, home inspection, home insurance, property taxes, homeowner’s association fees, any immediate repairs and appliances you may need before you can move into the home and make sure you still have that 3-6 months worth of savings.
At the end of the day, I am here to help make this process as seamless for you as possible and want you to be the happiest you can be. This is truly one of the best moments in your life. Don’t forget to enjoy the ride. I’m just here to make sure you have a safe ride and to remind you to wear your seat belt!