By Jennifer Lynn Walker
When most of us think of buying our first home, we have a picture of it in our minds. It may have a traditional white picket fence or a modern black door. As much as visualization can be a great place to start, there’s much more to consider. Buying a home is probably the biggest investment you’ll ever make. As exciting as it can be, it’s important to be prepared so you don’t end up overwhelmed or facing unexpected problems.
A mortgage pre-approval is fundamental
During a pre-approval, the bank will analyze your income versus your debt load and let you know how much they are willing to lend you. Once you’ve received a pre-approval, you’ll know your budget and sellers can have confidence that any deal you make won’t fall through.
Depending on your personal financial situation, most banks will require a minimum downpayment of five percent. If you want to avoid paying mortgage insurance, you’ll need a down payment of 20 percent or more.
A good real estate broker smooths a complicated process
The intricacies and pitfalls of real estate can be overwhelming. Real estate brokers know the market and have professional liability insurance. They’ll show you what has sold and for what price so you can assess a property’s market value. They’ll also draft contracts and negotiate on your behalf. And they’ll coordinate the work of other professionals such as notaries, banks, inspectors, and tradesmen during the process. A good broker is important because knowing the process and having the right mindset is imperative to being legally protected and getting the best deal.
A ‘wants and needs’ list helps avoid impulse buying
Before you start looking, write out your list of wants and needs in order of priority. Knowing what you can — and can’t — live without will help you make decisions more quickly because you’ll already understand where you can compromise. Being clear about your intentions from the start helps you avoid potentially disastrous impulse decisions.
Due diligence prevents unpleasant surprises
Costs and conditions change dramatically from property to property so it’s important you do your research. Aside from the mortgage, your monthly costs include heating, electricity, fees (ie: condo fees), and taxes. Be sure you know what these will be. Other things to check out include the neighborhood’s crime rate, schools, right-of-ways, neighbors, environmental conditions, and traffic. Understand that buying a condo means you are buying part of the condo association and how it’s run. Get to know their budget, expenses, and upcoming projects.
Buying within your means ensures you won’t be house-poor
It may be tempting to buy your dream home at first but be mindful to not overstretch your finances. Living in a home that eats up more than its fair share of your monthly income is stressful. Instead, defer the dream and buy a house where you can build your equity. Then sell within five or 10 years when you are prepared for a larger house and mortgage.
Don’t forget about closing costs
These can really add up. On average, there will be your notary cost, the inspection, adjustments at the time of sale, moving costs, and don’t forget land transfer fees, our Quebec “Welcome Tax” that can add up to thousands of dollars.
Buying a home is a process you’ll likely only do a few times in your life. Slow down, be prepared, and then have fun with it. Your dream home is out there waiting for you, whenever you can get to it.
Jennifer Walker has been active in Montreal Real Estate since 2003. She founded the Montreal Real Estate Investor’s Group, which has more than 1,150 members. She specializes in buying and selling, eco-friendly homes, and helping real estate investors. For more articles and e-books and to sign up for her newsletter, visit her online at: www.montreal-realestate.ca.