5 Tips for Buying a Home
Buying a home is exciting and scary. There are so many pieces to consider, and with housing prices so high, you feel like every decision can be life-altering. To help you make the best decisions consider these five suggestions on what to do in preparation for buying a home.
Sort Your Finances, First
While lining up a mortgage and saving a slush fund might not be the most exciting to-do items on your home buying checklist, these are critical steps when buying a home. To help create a smooth process, and create a great experience as a first-time homebuyer, consider the following steps.
Crush Your Credit
In the rush to begin a home search? When we’re excited about finding our new home it can be easy to forget the basics, such as your credit score.
Checking your credit report, from one or both of the credit agencies, TransUnion Canada and Equifax Canada, helps you start should be the very beginning of the entire home search process.
This step is particularly critical if you’ve missed a few bill payments or had outstanding, unpaid debts in the past. If you do find any problems or red flags on your credit report be proactive. Talk to your financial advisor about the best action to take and deal with the issues before applying for a mortgage loan. Keep in mind, errors can and do turn up on credit reports—and resolving these errors can take weeks or months.
Complete this task at least a month before applying for a mortgage. you apply for a mortgage.
Hold off on Significant Purchases
While you are working on paying down debt and improving your credit score, hold off on any significant purchases or acquire any new debt. From the time you pull that credit report until after you close on your home, don’t open up any new lines of credit, put a vacation on a credit card, or purchase a new car, boat, or other toys!
These items can cause unnecessary fluctuations in your credit score. More importantly, the lenders will be reviewing how wisely you utilize your money. You want your spending habits to smooth and stable just before you go for a mortgage pre-approval or before you
Seek Mortgage Pre-Approval from Several Lenders
Many first-time homebuyers take the easiest route available and apply for a mortgage with their usual neighbourhood bank. While it’s wise to maintain a great relationship with your local banker, don’t assume that they are always the bank with the best mortgage rates.
Check rates with multiple lenders and find the most favourable terms for your lifestyle.
Once you have obtained your mortgage pre-approval letter, you can shop confidently knowing precisely the amount of dollars you can spend on your home each month.
Avoid Closing Cost Calamity
As you are shopping for your first home, keep in mind that you will face other fees in the near future. These are called “closing costs,” and you will pay them to seal the deal.
While many buyers are vaguely aware that these fees exist, first-time homebuyers are taken aback when they total up the sum of these costs.
Some of the items you might need to lay out some additional funds for include the following:
- Land transfer tax
- Legal fees
- Title insurance
- Homeowners insurance
- Property taxes
These costs vary from province to province (with larger cities like Toronto, Vancouver, and Montreal also adding on municipal fees), so be sure to do your homework on these before you extend an offer on any home.
Expect Extra Costs
Homeownership is expensive. As a first-time buyer, expect extras and budget, accordingly. both for your move to your new home and to furnish it!
A home purchase is a wonderful long-term investment; however, it also requires a significant outlay of your hard-earned dollars. Many first-time homeowners get stuck in worrying about down payment funds and closing costs that they forget that other, extra costs will also pop up. To help ease the budget crunch, set aside additional funds. Use these funds to purchase any surprising or last-minute items you might need.
The Bottom Line
Being a first-time homebuyer, you are eager to get started on the house hunt. It’s certainly thrilling to head into the market, explore possible homes, and make a buying decision.
However, a home is also the largest investment you can make. Knowing your finances inside and out before starting the buying process will ensure you get a home you love and a worthy investment.
