First Time Buyers: Top Tips for Buying a Home
It’s an exciting time; that day when you are finally ready to move on to the next stage of your life, either buying your first investment property, or buying your first home. In either case, buying a home can be a little intimidating, so here are a few key things to keep in mind to make sure the purchasing process for your new home or investment property goes smoothly.
1. Budget: Find Out What You Can Afford
First, establish your affordability by calculating your household expenses and monthly debt payments, along with your monthly income. With that information, you will have an idea of your budget, and the likelihood of getting a mortgage.
The Canada Housing and Mortgage Corporation (CMHC) recommends that your monthly housing costs shouldn’t be more than 32% of your gross monthly income in order to be approved for a mortgage. Housing costs include mortgage payments, property taxes, and heating, along with renovations that a house might require, and maintenance costs. The CMHC also notes that your monthly debt load should not be more than 40% of your gross monthly income in order to
be approved for a mortgage.
2. Credit Record: Make Sure Your Credit is Good
Well before you start looking for a home, it’s a good idea to get a copy of your credit report from a credit agency. Make sure all of the facts are correct and if there are any problems, work to fix them before applying for a mortgage.
3. Pre-approval: Get a Mortgage Pre-approval
Finding out how much of a mortgage you can get can save a lot of time and effort by narrowing down your search. You should already have a good idea of whether you can be approved if you assessed your finances as recommended above, but now you have to put your findings to the test. Call and ask what information the lender wants before your appointment, but generally, it’s a good idea to bring the following:
- Job information, including a salary confirmation letter from your employer
- Proof of all income sources
- Information for all bank accounts, and debts
- Proof of all financial assets
- Information for where you will get your down payment and deposit
- Proof of funds to cover closing costs
- See our Mortgage Information section for more information on mortgages.
4. Location: Where You Want to Buy
What is the historical selling price in the neighborhoods you are considering buying in the past 12 months and what direction has the trend been moving in? You need to know the sales trend of homes that are similar to the one you’d like to buy, especially when you go to make an offer and bid on a specific home. You must know the market so you will have an idea of how much your dream home is worth based on fair market price.
5. After Market Re-Sale: Buy Where There Are Good Schools
Even if you don’t have children that go to school, this is still a good idea since if you ever plan to re-sell your home, having good schools in the area will attract many more buyers, as this is a high priority for many buyers.
6. For Best Results: Get Professional Help
Even with the ease of finding homes using the Internet, a professional REALTOR® will be invaluable in both finding potential homes via their network, and guiding you through the buying process, including the bidding process and negotiations.
7. Know What You Are Buying: Hire a Home Inspector
Although a lender will require a home appraisal, you need to find out more about your potential home by hiring a home inspector before you make a final offer on a home, preferably someone with experience in the area of the home in question.