10 Tips For The First Time Home Buyer
Are you looking to buy your very first home? Or perhaps you are planning to resell after many years in your home and move to another?
In both cases you should take the following things into consideration, as they can save you from a costly – and unpleasant – experience.
(You can read more detailed explanations of each item below, or just contact us for quick and personal answers.)
1. Get pre-approved for a mortgage
2. Check your credit report and score
3. Create a budget – or review it
4. Be prepared for the extra costs
5. Use professional help when dealing in real estate
6. Don’t pick your real estate agent or lender blindly
7. Recognize that your “wish list” is just that
8. Hire a home inspector
9. Research the neighborhood
10. Consider the resale value
We’d love to help you find your perfect home in Ottawa, and to answer any questions you may have. Contact us by phone or email and we’ll get started.
Here are some more details about the 10 Tips
1. Get pre-approved for a mortgage
It is very important to get preapproval from a mortgage professional. A good mortgage broker can review your specific financial situation and suggest alternative lenders & options. (Resellers should take advantage of this free service as well.)
You’ll learn the most expensive house that you will be allowed to mortgage, and the maximum mortgage payment that you are allowed under the mortgage rules. (Many people want to buy as much house as possible, but if you spend less it will give you more to spend on other things.)
A second advantage to pre-approval is that you will normally be given the best rate available from that lending for a period of up to 4 months – whether it goes up or down from your approval date!
Email us now if you’d like to know the experienced professionals that we recommend.
2. Check your credit report and score
Your mortgage professional will pull up your credit report and will discuss it with you. The cleaner your credit report and the higher your credit score, the more likely you are to be preapproved for a mortgage at a low interest rate. You are entitled to a free copy of your credit report, and the law allows you to dispute mistakes.
Read this good CBC Canada article about credit reports, credit scores and how to get them.
http://www.cbc.ca/news/canada/how-to-check-your-credit-report-1.1185975
3. Create a budget – or review it
Everyone has heard that it’s a good idea to create a budget. It’s particularly good to create one before beginning a home search to determine just how much house you can comfortably afford. A good rule of thumb is to devote no more than a third of your monthly household income to housing costs, including mortgage principal, interest, taxes, and insurance. There are several work sheets available online to help you figure out your income, debts, and expenses. It is very worthwhile to use this in conjunction with the information from your mortgage professional.
4. Be prepared for the extra costs
Don’t underestimate what you can comfortably afford each month!
Remember that there is a big difference between cash-flow and one-time expenses.
CMHC fees for mortgages will be added to your mortgage so it’s not an extra out-of-pocket expense, but will increase your mortgage payment slightly (your lender will tell you exactly), and therefore your on-going cashflow.
You know that you’ll be paying mortgage, property tax, and perhaps mortgage insurance every month. Remember to take into account property insurance and utilities. Perhaps life insurance as well? This is where your budget can help.
One-time fees can surprise people when they buy. Moving costs vary from a couple of hundred for do-it-yourself van rentals and pizza, to thousands for a cross-country move with a company.
Land transfer tax can be even more expensive. It varies depending on the price of the home, but between 1-2% is common – and it’s not wrapped into the mortgage. (Buyers in Toronto pay double that amount.)
A rule of thumb is to be prepared to spend about and extra 2%. However, the largest portion of that is land transfer tax, and most first-time buyers will get a full or partial rebate of it.
We’re happy to give you a more detailed idea of what to consider. Just email or call us.
5. Use professional help when dealing in real estate
Sure, it’s possible to go out and buy a home without the aid of a professional real estate agent. And most people use the web even when working with an agent. .
Yes, we want to recommend ourselves. But whether you choose us to help you buy or someone else, consider the advantages of using a real estate agent:
- real estate agents have direct access to the MLS system including all the properties that have been sold – and those that didn’t sell;
- therefore your Realtor® can advise you on whether the home is worth the price, and this is particularly important for the For-Sale-By-Owner properties (most homeowners feel that their property is worth more than it actually is);
- real estate agents work in real estate all day, and understand the market better;
- your Realtor® can provide expert advice on locations and property values;
- your Realtor® will arrange to show you all the properties that interest you, at your convenience;
- the agent for the Buyer is virtually always paid from the fees of the listing agent – so normally no cost to you as the buyer!(So why wouldn’t you get professional help when buying your biggest asses – especially when it’s free?)
Email us or call us to find out how we can help you.
6. Don’t pick your real estate agent or lender blindly
Ask relatives, friends, neighbours, and coworkers for referrals. And then interview some until you find someone that you trust and that you’re comfortable spending time with.
We work with you to find the home that fits you, and provide assistance throughout the process, from searching, to offering, to closing. It’s important for us that it be the right home for you for as long as you want to live there.
It’s important to ask any questions you might have – there are no dumb questions. We want you as friends and clients should you ever choose to move again!
7. Recognize that your “wish list” is just that
Please do tell us all of your “love to have” list. Note that you may find out that homes with everything on that list may be a bit more expensive than you can afford. We find it helpful to discuss and try your “perfect search” during our initial meeting. Then we can review and adjust together.
8. Hire a home inspector
Regardless of the age of a property, a home inspection is a worthwhile investment. We will do our best to provide advice on obvious shortfalls in a property, but inspectors have specialized training that allow them to provide a much more thorough analysis of a property for you. The vast majority of inspections result in a small to-do list for you after you acquire the property. Much less often the inspection will identify something significant, and in that case we will work to negotiate a satisfactory resolution between the buyer and the seller. (Or perhaps it’s just too much work, and another home is a better option.)
9. Research the neighbourhood
There are often good deals for properties on busy streets. Is the house quiet enough though? And the backyard if you like to entertain outdoors? Safe for children if you have them?
Are you comfortable in the neighbourhood? Would you be worried walking alone or with your dog at night?
Do you have good access to work or school by your preference of transit or car?
Are schools important to you? As you narrow down a couple of neighbourhoods you might want to speak with the principal and/or check out the Fraser Institute School Rankings website. Note that it breaks the municipality of Ottawa down into the “older” cities such as Nepean, but it’s still an interesting place to check out.
http://ontario.compareschoolrankings.org/elementary/SchoolsByRankLocationName.aspx
And yes, we’re happy to give you detailed info on a neighbourhood. Email us or call us.
10. Consider the resale value
But don’t make this a deciding factor.
You’ve just started the home-buying process. However, most people up-size or down-size over time. And life is full of surprises, whether it is a job transfer or having another child or taking care of an incapacitated relative.
When the time comes to put your house on the market, will your home be easy or difficult to sell? Properties on busy streets tend to be less expensive, but also don’t tend to appreciate as well.
Your real estate agent will be happy to give you a idea of the pros and cons.
Consider also renovating and decorating. Paint can be easily changed for the purpose of selling. But adding a bedroom that can only be accessed through another room may be a detriment rather than a positive…
We’d love to help you find your perfect home in Ottawa. Contact us by phone or email and we’ll get started.