Owning a home may be your dream, but in order for the purchase to be the positive and satisfying experience it was meant to be, you need to ensure that you are financially and mentally prepared for the responsibilities that come with it.
A residential or condo comes with the responsibilities of a mortgage, taxes and home maintenance. Preparing for home ownership requires you to take critical stock of your finances and your expectations.
Owning your own home is about more than just being able to decorate any way you like; it's about being prepared to maintain your home over the years, realizing that part of your income and time will go towards repairs and maintenance.
A rule of thumb is to allocate about 1% of the value of the house for maintenance issues. For example if your home costs $500,000 plan to spend $5,000 annually to take care of the lawn, install a new garage door, replace a broken refrigerator, etc. It's about being willing to take the risks of home ownership with a realistic expectation of the rewards.
It is discouraging to find that your income won’t let you purchase the home you want to own. However, sacrificing a huge part of your income just to pay the mortgage will quickly make home ownership a burden rather than a point of pride.
If you are a couple, you need to know that finances are the #1 cause of divorce in Canada. Don’t let home ownership turn you into a statistic. It's better to buy a modest home now and look at purchasing a larger home in a few years. You will increase equity in your first house every month as you make a mortgage payment, making the purchase of your second home an easier endeavor.
This is something that lenders take very seriously. Your overall debt should not be more than 40% of your income, and your housing debt should not be more than 32%. What 32% of your income will buy depends on where you want to live. In rural or less desirable areas for example, it can buy a very comfortable residence and ample acreage. In highly sought-after urban areas however, it may not even buy a 400 square foot bachelor suite.
Don’t guess at these ratios. Visit an experienced and qualified mortgage lender. This may not be the person sitting at a desk in your local bank. Many of these people can be rookies so don’t be shy about asking them about their experience, how many mortgages they do per month, etc.
When the mortgage manager provides you with the information you need, get it in writing. If mortgage rates increase you will be exempt from paying the new higher rates for 90 to 120 days. Besides knowing what price you are qualified for in buying a house, you need to budget for “closing costs”. These are Land Transfer Taxes, legal fees, etc.
Budget 1.75% of the value of the house. These costs must be paid on the day you assume ownership.
Do you like the idea of cleaning your own gutters? Do you shudder at the thought of lawn care? Would you rather just pay a fee every month and have everything done for you? Would obeying rules about when you can have your garbage cans out bother you, or do you want to live in a neighborhood where everything is 'just so'? The answers to these questions can help you narrow down the search for the right type of property for you.
You need a good agent who will work hard and smart for you. Our real estate team is dedicated to helping you find the right home, at the best price. We want you to find the home that will NOT just make you happy but will also be a good investment.
We are problem solvers. Our years of experience has provided us with great contacts in the financial, legal, and inspection professions. If we don’t have the answer immediately, we can get it quickly.
Keep your objectives in mind when visiting a home. Sometimes the idea of owning a home can overwhelm your practical sense, so keep your feelings in check. Keep a list handy of the features that you need and want in a home, and judge each home by your criteria instead of by details that could distract you from your goal.
When you're alone with your agent, you can go over the pros and cons of each home. We can help you stay on track while still keeping our eyes out for a great property.
Engage the services of a good real estate lawyer. We can recommend several lawyers in the area who might be a good fit for you. The legalities of transferring land ownership are complex and a lawyer can be your best defense against future legal troubles. A good lawyer can save you thousands of dollars in legal fees later on, which makes this a good expense.
New home sales is something that we can help you with as well. Don’t think that just because you are buying a home from a builder that you should not have representation. Let us guide you through this process as well.
Make the offer. This can be a maze of "buyer", "status report", "chattels", "irrevocable period", and "completion". We will prepare the paperwork and go through it with you before submitting it. Remember, the seller may reject or counter your offer, so even at this late date, avoid setting your heart on the home you hope to own. You'll probably have to write a deposit check to the seller's broker that proves the seriousness of your offer.
Get all necessary inspections done. A home inspector will check for signs of harmful materials like asbestos, lead paint and mold. They'll also check for evidence of pests, faulty wiring and leaks. This is a crucial part of the home purchase.
Not getting an inspection done means that you could be stuck in a home with a bad case of black mold and no recourse other than to pay for its removal. Inspections will cost a few hundred dollars, but again, this is more than worth it in the end. There are several inspectors that we can recommend.
Objectivity. When we refer you to a lawyer or inspector it is important for you to know that we do not take referral fees from them. We refer our clients to other professionals because they are excellent at their job and charge a fair price.
Contact us for more information about first time home purchasing.