Before you start searching Realtor.ca, here are some things you need to consider.
Owning a home is rewarding and probably the best investment you’ll ever make! But there are many things to consider before you jump into buying a home.
I remember buying my first home; I was twenty-three years old. Other than my car, it was the first “grown-up” decision I had to make, and I was petrified! I knew I wanted to be a homeowner, and I craved that exhilarating feeling of pride, accomplishment and responsibility that went along with it. Little did I know, along with these wonderful feelings, came the reality of stress, fear and, of course, a rollercoaster of emotions.
It doesn’t matter if you are twenty-three or forty-three; purchasing your first piece of real estate will be scary and overwhelming. You may feel nervous about making the wrong decision or worried that you’re getting in over your head. Let’s face it, you, like many others, may be clueless about where to begin, and for this reason, I have put together this list of my top tips for first-time home buyers.
Tip 1: SAVE SAVE SAVE
Save your money, lower your expenses, and even open up a TFSA. Sounds easy, but believe me, this part can be pretty challenging when you are used to a particular lifestyle and spending habits. Record your expenses and give yourself a budget. Don’t make unnecessary purchases. Instead of stopping at Starbucks on your way to work, make your coffee at home. Limit your restaurant visits and make your lunches. Take the train to work to save on the expensive gas prices or paid parking, carpool, wash your car yourself instead of going through the car wash. There are many opportunities to save money; I could go on and on (lookout for my next blog on “How to save money”).
So why is this my first tip? Well, there is this thing called the down payment, and the more money you put down, the less you’ll have to borrow. There are so many ways to save money.
Tip 2: PRE APPROVAL
You’ve been saving, and you have all this extra money, now what?
The first and most important thing for you to do before looking for that perfect house is to get pre-approved.
YOU DO NOT WANT TO SKIP AHEAD OF THIS STEP
A pre-approval will ultimately set the stage for the type of home and what neighbourhood you should be exploring. Purchasing your first home should be an exciting process, and the last thing you want is to have your heart set on a house you can’t afford. Get pre-approved; and, I’m talking about an actual pre-approval that you get done by a lender; this can be done at your bank with a mortgage broker or a private mortgage lender. The 60-second mortgage pre-qualification that you stumbled upon and did while online banking doesn’t count. Know what you can afford, and know what your monthly payments will be.
Lenders grant pre-approvals based on income, your credit score (you can improve your credit score by paying your bills on time and not cancelling your credit cards), assets, liabilities, and your down payment size. Plus, you want to have a leg up when the time finally comes for you to start looking for your home because being pre-approved means you’re serious.
Tip 3: STAY WITHIN YOUR BUDGET
As tempting as it may be, try not to commit to more than you can afford. You may come across a lender that can pre-approve you for more than you’re comfortable with, but it’s essential to stick with what works within your budget. There are many expenses that first-time homebuyers don’t consider; you don’t want to fall into the trap where you bite off more than you can chew. These expenses include closing costs, property taxes, utilities, home maintenance/repair, furniture and appliances. This list goes on and on, and while some of these significant expenses will be a one-time expense, you still need to be prepared for these extra fees.
My first home was a semi-detached home, and at the time of purchase, we had an opportunity to purchase a fully detached home two streets over for 60K more. It was very tempting because adding 60K to a mortgage spread over 25 years sounded doable. However, we knew that a larger home would mean more expenses, larger utility bills, higher property tax, more maintenance and more furniture. The bottom line is to stay within budget and not commit to more than you are comfortable with because the last thing you want is to be “house poor.”
Tip 4: BE REALISTIC
Let’s get real friends; you are buying your first ever home and most likely not your forever home. This does not have to be that perfect HGTV inspired, magazine-worthy home. Don’t get me wrong, some of us may be fortunate enough to have our first home be our dream home and never have to move again, but for most, the reality is that we begin our homeownership journey with a starter home.
This starter home will probably be smaller than our dream home, with fewer features and upgrades. It won’t have the enormous kitchen with the waterfall countertops that we see all over Pinterest, and it probably won’t be in the most desired neighbourhood. Still, it will be your home, and it will be precisely what is needed to purchase your dream home eventually.
What NEEDS Do You Have?
Before jumping onto Realtor.ca, make a list of your needs and wants. Your needs should come first. You need a home that will accommodate your family; the number of bedrooms and bathrooms is a significant factor. How many cars do you have? Will you be needing a double-car driveway, or is a single-car driveway enough? Are you commuting and need to be close to the highway or the transit system?
Your needs are important, and they will influence your decisions in choosing which house to purchase.
What WANTS Do You Have?
Now it’s time to make your wants list; it’s a good idea to retain some flexibility here. You are making the biggest purchase of your life, and, yes, you deserve to have all your wants and needs, but this is the time to be practical. You want the waterfall countertop, the massive kitchen with top-of-the-line stainless steel appliances and hardwood flooring. Oh, let’s not forget about the large ensuite bathroom with a his-and-her sink and a separate glass shower. These are all great, but why don’t you save those wants for your next home. For now, I suggest you focus on your needs and decide what is most important, and sure the granite countertop may be nice to have but so are having mortgage payments that aren’t too much of a stretch or an onerous commute.
Like I said before, owning a home is rewarding and probably the best investment you’ll ever make. Follow these tips, and you’ll be on your way to that perfect dream home.