Tips for First Time Home Buyers
Purchasing a home can be an overwhelming ordeal for first time buyers. Not only is buying a home the largest investment you will make in your lifetime, but it is also an incredibly complex process with endless intricacies popping up along the way.
Remember, investing in a house has massive ramifications - it is not as simple as buying groceries or a weekend of clothes shopping. Rather than get tripped up by these stress-inducing hiccups, prepare in advance to ensure that your journey is as smooth as possible.
So what are the Do’s and Don’ts for first-time homebuyers?
Do Prepare a Budget
Understanding your adjusted budget after a hefty home purchase is a must. Without a clear budget outlined, homebuyers run the risk of sacrificing their lifestyle after moving into their new place as new mortgage payments enter the fray. Take note of what your mortgage payments will look like and how that will affect your day-to-day life.
It is also vital to put as much savings away as possible to go towards your down payment. In Canada “you need a down payment of at least 5% to purchase a home” 1, aim for 10-15% in order to lower your monthly mortgage payments.
Do Get Preapproved
Many real estate agents will not work with you unless you have already been preapproved for a mortgage. Preapproval is essential for first-time buyers to gauge how much they can truly afford when house hunting.
Without a preapproved mortgage, you are put in a compromised position when it comes time to make an offer on a home. You don’t want to miss out on buying the perfect property because you were too lazy to complete a simple task that can be done online in minutes!
Do Use a Realtor
Cutting the cost of a real estate agent is a rash decision that may bite you in the behind later down the road. The initial cost of an agent may seem hefty, but their expertise will stop you from making an ill-informed decision.
Experienced agents will identify repairs that a home needs the moment they set foot on the property. Furthermore, they have a far greater knowledge of home prices, the surrounding neighbourhood, and will deal with the complicated paperwork that comes with offers and counteroffers.
Don’t Forget About Closing Costs
Just as you think that you’re finally in the clear, closing costs will inevitably rear their ugly head. Understanding what they are and calculating it into your budget will alleviate any last minute obstacles to your home purchase.
These fees can appear for a multitude of reasons, such as “hooking up gas and electricity meters, plus mortgage discharge fees, development fees, deposit verification fees” 2. Look to save between 2-4% of the purchase price to accommodate for the late costs.
Don’t Get Too Emotional
Odds are you will not be living in this home forever, so do not get emotionally attached! Emotions will cloud your judgment and you cannot let that affect the largest financial commitment of your life.
Do not fall in love with the fancy pants home-staging that has filled a home with ridiculously expensive furniture, you are purchasing the property not what is inside of it. You want to commit to being in a home for several years, however be keenly aware of the property’s resale value for when you want to transition to a different place in the future.
Resources
1. http://www.rbc.com/newcomers/credit-advice/buying-first-home.html
2. http://www.moneysense.ca/spend/real-estate/the-top-10-mistakes-new-home-buyers-make/
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2022 Advisor Websites.