Whether it’s your first time living alone or you’re tired of renting a space in someone else’s property, buying your first home can be just as daunting as it is exciting. From the kind of neighbourhood you want to live in to how much you’ll be able to swing a month for mortgage payments, there are a million questions you need to think about and ask yourself before taking the plunge and calling a Realtor.
Know Your Worth and Strengthen Your Credit
Before you do anything else, get a copy of your credit history and study it. Make sure there are no unexpected surprises or mistakes that will negatively affect your likelihood of being financed or approved for a mortgage. Best practice is to do this as early as possible (preferably at least a few months before you actively start looking for houses).
Understand your credit score and how it will affect your plans to buy a house. In general, a higher score means lower monthly mortgage payments. Use the time you have to do what you can to improve your credit score, or at the very least, let it help you shape your financing expectations.
In order to be approved, your credit score will likely need to be in the mid 600s at least. The higher your score above that, the better the deal you’ll get. If your score is 750 or higher you’ll have access to some of the best rates available.
Be Realistic and Plan
Make sure you know exactly how much you can afford to put down for your deposit, and how much you can swing each month for payments. It’s best to go get pre-approved for a mortgage before you even start looking so you know exactly what you can afford and don’t search beyond your means (potentially leading to some serious future disappointment).
Generally speaking, it’s best to buy a house that’s 2 and a half times your annual salary. If you’re still in doubt, you can always go to a broker or financial planner and get their opinion or use one of the many sites online that helps you figure it out.
It’s also important to determine your net worth. To do that, you have to subtract your liabilities (fees you owe – loans, lines of credit, overdraft, credit cards etc) from your assets (money you have, investments, physical objects like cars/boats and any other properties registered under your name).
Once you know how much you can reasonably afford, think about how much you’re willing to put down. The larger your down payment, the less interest you will have to pay. Make sure you also understand what mortgage terms and amortization periods are and how they work. Consider a weekly or bi-weekly mortgage rather than a monthly if you want to cut down on interest.
Talk to a Broker
If you’re still uncertain or would rather the advice from someone who knows their stuff, look into a mortgage broker or adviser. They can help you get a better deal than many of the posted rates, and are an excellent way to negotiate a lower rate with banks.
They can answer your questions and help you keep you educated and confident during the entire house buying process, and often the best way to find one is through word of mouth or a personal referral.
Get a Home Inspection
No matter how excited you are to finally find your dream house, make sure to hit the brakes before rushing to put in your offer. Before you do anything, get a home inspection from a certified professional. They’ll check for everything from issues with electrical wiring to structural defects, and if there are any issues (no matter how minor), it gives you some wiggle room when it comes to negotiation.
Never buy a house without a home inspection first. You never know what kind of horrors you might find after purchase, and unlike a sweater from the mall with a hole in the sleeve, you can’t return it.