Your Home Buying Guide
ARE YOU READY TO BUY A HOME?
There are a lot of factors to consider when deciding to buy your own home. When you first started the process, you were probably given a lot of advice from friends and family about the right time to buy. Unfortunately, no one can predict with any certainty when the market will reach it’s highest or lowest point. You have to keep in mind one thing:
The purpose of buying a home is to provide you and your family with a comfortable place to live for a long time (think in terms of years, not months.)
Your home is a long term investment. Regardless of when in the up and down cycle of the housing market you buy, home ownership will always be one of the best investment opportunities available to you. Over time your home, with proper care, will most likely appreciate in value. After 25 years when you’ve paid off your mortgage and own your home free and clear, you will be sitting on a considerable asset that will continue to grow in value over time. This can provide tremendous peace of mind.
Once you’ve looked at your financials and made the decision that home ownership is something you want to pursue, it’s time to start looking at homes and prices. you might be surprised at what you see. Up until now, your biggest purchases have likely been a vehicle, or furniture for your apartment. Now you’re looking at something that can be up to 20 times the amount of what you have ever paid for a single purchase.
The good news here is that real estate values are expected to continue increasing over the long term. That means the sooner you buy your first home, the sooner the appreciation of its value will help you.
When first time home buyers start looking, they tend to want their dream home right away. Then reality sets in. The price of that home will likely be impossibly high, not to mention the down payment. Again, proper planning is required, so many first time buyers purchase a “starter home”. This is a common sense approach to home buying that won’t stretch your budget to its breaking point.
How much home can I afford?
There are two types of costs in buying a home.
- Purchase costs: This is the amount of money you will need for the initial purchase. This is your down payment, as well as legal fees, inspection fees and taxes.
- Mortgage & maintenance payments: This is the ongoing cost of paying back your mortgage, along with monthly operating costs like utilities, maintenance, insurance and annual property tax.
When lenders are assessing your ability to buy and how much they’re willing to lend you, they look at your ability to pay both of these costs.
Zeroing in on Your Home
Once you’ve done the math and gone over your budget with your banker or broker, it’s time to look at the market and see what kind of home you can buy, and where it might be located.
Keep in mind that a similarly styled home is priced considerably differently depending on where it’s located. Urban areas will have the higher prices, while suburban areas tend to give you more for your money. Smaller cities usually have lower property taxes, and housing prices are sometimes lower than in urban areas. Alternatively, rural living, while not for everyone, might be appealing if you like the idea of owning a few acres with a pond. Housing prices in rural areas tend to buy you more than the aforementioned options.
What features are important to you?
It’s time to decide what you want in your home. Sit down with anyone involved in the purchase, and decide what’s important. Make two lists, one of your “needs” and one of your “wants”. Three bedrooms, or two bathrooms might be ”needs”, whereas a finished basement might be a “want”.
Comparing homes and locations.
With your list off needs and wants in hand, the next step is start looking at locations. Remember now that prices and styles are going to vary. A Victorian style home is not going to be found in a new development, nor will a home with large bedrooms be found in a historic section of town.
Also, consider your lifestyle and the homes’ locations. Is it close to the things that are important to you? Starting your search on www.greatermonctonrealtors.com will show you what’s available locally by price, style, area, specifications, etc.
Working with a Real Estate Professional.
Once you’ve decided on your wants and needs, it’s time to find your REALTOR®, the real estate professional who will help you get an idea of the neighbourhood and the style of home you’re looking for. Your REALTOR® has access to the right tools to serve you, including the MLS® System. You will also want to be sure that they are Members of the Canadian Real Estate Association because that means they are held to a higher standard through the REALTOR® Code. Take care in choosing your REALTOR®. You will be working closely with this person for several weeks (or more.) You must ensure you feel comfortable with them.
You may wish to interview more than one to make a comparison. Ask friends and relatives for referrals. At the end of the day, choose someone with knowledge of the area you are looking in, someone with the tools and marketing plan that meet your needs, and someone who communicates well with you.
House Hunting with a REALTOR®
Once your REALTOR® has an understanding of what you want and what you can afford, they will take your information, pair it with their knowledge of the market, and find what lines up. Most of the preliminary searching will be done using the MLS® (Multiple List Service®) with you and your REALTOR® narrowing the focus of the search. Take the time with each listing, and remain objective. Don’t let the “wants” get in the way of the “needs”. Take your time with each visit, take notes, and remain open and objective.
Adding a Lawyer to Your Team
When you’re buying your first home, you’ve likely never employed a real estate lawyer before. There will be ample opportunity to sign your name on legally binding contracts, so you will need one to help you wade through the “legalese”. As with choosing your REALTOR®, you may want to ask for referrals from those you trust.. Ask your friends and relatives who they’ve dealt with. Also, your REALTOR® may be able to give you the names of several lawyers to contact, although they cannot recommend or endorse a specific lawyer.
Choose a lawyer whom you feel best meets your needs. Go with the person who has the right experience and you feel confident will help you understand the full legal process.
Making an Offer
You’ve found a home. It meets all your needs, most of your wants, and fits your budget. It’s in a great neighbourhood and is move-in ready. Now it’s time to make an offer to purchase your first home.
Your offer is a precisely worded legal document that sets the terms and conditions between you (the buyer) and them (the seller). Once the offer is made and accepted, and the conditions are met, the offer becomes legally binding. For this reason, you have to be very sure you understand what’s in the offer before you sign it.
Once the offer is submitted, the seller will have a predetermined amount of time to respond. This response will go one of three ways; accepted; rejected; or a counteroffer. In the event of a rejection or a counteroffer, meet with your REALTOR® to discuss the reasons and decide if it’s worth pursuing.
Arranging a Mortgage
Chances are you don’t have the kind of money laying around that it costs to buy a home. (Hardly anyone does.) When it comes to home financing, there are a plethora of options available to you. Your bank likely has a mortgage specialist who could assist, and REALTORS® are well versed in many aspects of home financing as well. Whether it’s a new mortgage, or assuming the mortgage on the home you’re buying, there are professionals who can help.
Additional Costs When Buying a Home
In addition to buying your home, there are other costs involved. Your REALTOR® can help you with the details, but they include insurance, as well as a home inspection and legal fees. The great news is that your REALTOR® is an expert in all these things and can help you navigate this with ease.
The Home Inspection
When you’re walking through the home you intend to buy, emotion may get in the way. While you’re imagining your family sitting around the table in your new dining room, you may not be thinking about whether or not there are cracks in the foundation of the home. This is where your home inspector comes into play. Like with other professionals, you should interview Home Inspectors and have an understanding of what professional organizations they belong to. This will dictate the standard of service they must provide in a home inspection. Your REALTOR® can also help you start your search.
Finalizing the Transaction
The offer has been accepted, the inspection is done and you’re ready to move in. Before you rent that truck, there’s a bit more work to do. There’s a closing checklist that your REALTOR® will bring you through to make sure everything is done. In addition to what they help you with, there are things you will have to do yourself, for example, changing your address, making sure utilities are set up, or giving notice to your landlord if you’ve been renting.
Making a Smooth Move
Now that closing day has arrived, and you’ve had the celebratory champagne it’s time to get things in order for the move. Start planning the move as soon as you can so you can head any troubles off at the pass. It’s time to decide things like if you’re going to do it yourself, or hire a professional. Either way, enjoy this time. You just bought a home. Congratulations!