Buying your first home can be overwhelming. There is a lot to consider along every step of the way. Breaking it down into steps can make this exciting process more manageable. Here are eight steps to consider, from the decision to buy to moving day:
1. Money matters
Before you even begin looking at new homes, you must consider the finances—the long-term factor of what mortgage you can afford, and the many short-term surprise costs that come with buying a house.
Work out a monthly budget. Determine a savings target for your new home that factors in your current monthly expenses, income, and debt. The common wisdom is to keep housing costs below 30% of your monthly income.
It’s also important to remember the money that needs to be spent after your down payment and monthly mortgage payments, and before you get to pick up a paintbrush.
Necessary expenses like moving costs, home inspections, legal fees, surveys, insurance, and hook-up fees add up fast. Make a list of all the fees you can expect to pay in the market you’re shopping to make the inevitable unexpected costs a little less shocking.
2. Figure out what to prioritize, and consider the future
Once you know what budget you are working with, it’s time to consider what you’re looking for. Separate your needs from your wants. Remember that many features within a home are possible to add later, while others are not. You may be able to add a pool or change the layout of a house later, but the neighbourhood and future developments in the area are out of your control.
Make a list of essentials and a list of bonuses. Consider the future and resale value, and be sure to look for a home you can picture yourself living in for at least five years.
3. Hire a professional—realtor and lawyer
While it may be your future house, you will need to work with many people to buy it.
Word of mouth can be a great resource for finding someone trustworthy and qualified, but don’t hire someone just because they’re a friend or family. Hire people you trust immediately, who can answer your questions and work within your schedule and budget.
Consider hiring a professional realtor. A good realtor will help you look for the right house, quickly answer any questions you might have while shopping, and be able to recommend other professionals to help.
Buying a house is a complicated legal process. Hiring a notary or lawyer can be an important step to protecting your legal interests as you sign the paperwork, and down the line.
4. Shop for the right lender
There are many places to turn to for your mortgage, and all of them offer different terms and options. Shop around to determine what works for you, who you like working with, and who has your interests at heart.
It’s important to keep in mind who everyone you speak to is working for. A loan officer at a particular institution is a salesperson, selling that institution’s products. A mortgage broker, on the other hand, works for you by linking you to lending institutions.
5. Consider getting pre-approved
Getting a pre-approval can be a useful step in the home-buying process. It can help you avoid the heartache of falling in love with a home, only to be rejected for the mortgage.
With a mortgage pre-approval, you know exactly how much you qualify for, and your rate is secure, even if markets change. It can also help you prove that you are serious to sellers, and ensure that all your documents are ready and in order if the process moves forward.
However, not all pre-approvals are the same. Some lenders may not look at all your documents, and pre-approve a guaranteed rate that may not be based on your qualifications. A qualified mortgage professional can ensure that the pre-approval process works in your favour by reviewing your request with full knowledge of your financial situation.
6. Use a home inspector
Whether it’s an old house or a brand-new condo, a qualified home inspector can do a full assessment and give you a deeper knowledge of the property and any possible faults it may have.
Ontario has no mandatory requirements for home inspectors. Be sure to shop around to find someone with experience you can trust.
7. Offer the right amount
Finding a property in your budget that you can see yourself turning into your home is the most exciting part of the process. The many qualified people you have hired along the way should help you prepare the right paperwork to submit, and to strike the right amount. In a competitive market, the most attractive offer will win the deal, but it should still be the right amount for you.
8. Sign when you’re sure
Even though you may feel ready to move in immediately, make sure to ask your lawyer to look over the paperwork before you sign it. A lawyer will discharge your former mortgage if relevant, and make sure your final bill includes all of the details in the contract you are signing, from outstanding taxes to clean-up orders.
Signing your mortgage paperwork with confidence is easy when you have a mortgage professional on your side. Contact SafeBridge today to learn how we can help you buy your first home.