First time buyer tips
Recently, I obtained my certification as a residential real estate broker and one of the first questions that I was asked is how can one figure out if they can afford to buy their first home. So, I have compiled a few tips for firsttime buyers that I hope will be some use to all of you.
1) Budget: With a detailed budget of all your revenues and expenses over a month, you will better understand your capacity to take on a mortgage expense. Do not forget that when buying a new home, you are also committing to maintaining a new home, therefore consider these expenses as well. You wouldn’t want to choose a house in a price range that is beyond your means.
2) Find out your credit score: Before even shopping for mortgage rates, you should see your credit profile to see that there are no errors or information that might hinder your chances at getting approved for a mortgage.
3) Meet with a financial consultant: This expert will help clarify the financial situation that you are in. They will help establish your borrowing capacity and discuss with you the real chances of obtaining a mortgage.
4) Get pre-approved: By getting pre-approval on a mortgage, you have a better idea of your price point for house shopping as well as a negotiating item to approach other financial institutions, as well as better your chances if you make an offer on a house by expediting the financial paperwork.
5) Sit down with a real estate broker: This expert will be able to guide you through steps to looking at houses. Brokers know the real estate market, have access to listings and can keep you updated on new listings that fit your criteria. Brokers are trained to help you throughout the process from visiting homes to negotiating an offer.
6) Know about all the fees related to buying a home. A house is much more than a mortgage. You may have to pay mortgage insurance if your down payment is low. An inspection is highly recommended and this fee is usually covered by the buyer. As well, once the house is bought, you will have to pay a welcome tax based on the price of purchase or value of the home, whichever is higher.
7) Additional costs: Consider the extra costs involved in purchasing a place with more space than what you rent: appliances, furniture, and lawn equipment. Consider the maintenance costs of lawn care, snow removal, and water treatment. Not to mention cost related to utilities and municipal and school taxes. Before putting in an offer, all these costs need to be factored in your calculations. One general rule of thumb is that house payment and house related expense must not exceed 35 per cent of your takehome income.
8) Saving for six months: One trick that I found that many financial experts mention is to save the difference between what a mortgage would cost and what you are paying now for rent. If you can do this, it would be good proof that you can make your mortgage payment. As well as proving a point, you may end up at the end of six months with a nice pile of change which you can add to your down payment and reduce the borrowed amount.
9) Get free from debt: If you already have a large debt load, this will make getting a mortgage extremely hard. By lowering your debt, starting with the highest interest grabbers, you will balance the percentage in your favor when it comes to pre-approval. If your debt is stable or reduces, borrowers will have an easier time getting you approved. Ideal debt repayment (other than mortgage) percentage is 15 per cent of total income.
10) Save for a rainy day: If you can, start putting aside savings: ideally 10 per cent of total income. This can serve twofold: it gets you in the habit of putting money aside in your budget early on, as well as building up a nest egg that can be used for your down payment or retirement
— Tayna Bardati is an Interior designer, home staging expert and most recently, a residential real estate broker in Brome-missisquoi (www.creationstayna.com). Follow her on Facebook @ Tayna Bardati courtier immobilier résidentiel, or on twitter #deco21girl.