It pays to do some simple research to understand the pros and cons of buying versus renting. Renting instead of buying a home can seem like a convenient or affordable way to go, but you may find that owning a home is a great long term investment.
Buying a first home is one of the most memorable events. If you’re thinking of checking off that milestone, there are a few things you should know about the home-buying process.
Here is what you need to know before you buy your first home:
Clearly Define your Wants and Needs:
Before you get started, create a wish list, a want list and a must have list. Clarify your needs before buying your first home; otherwise there’s a higher risk of facing confusion, uncertainty, and possibly regret.
Figure Out Where You Will Be in Two to Five Years:
Most personal finance experts say that unless you plan to live in a home for at least two to five years, you likely won’t recoup any of the expenses associated with buying and later selling the house. Why spend the time and money on something you’ll outgrow in a couple years?
Ask yourself some questions like, how often will you be at home? If you work long hours or travel a lot, it doesn’t make sense to buy a large home that requires extensive maintenance. A condo requires minimal upkeep. Who will live in the home and will that change soon? The home should accommodate the current and future household.
Figure Out the Financials:
Buying a house can have a significant impact on your finances, so make sure you can handle it. The key is to review your financial situation before you start to look. Use an affordability calculator to see what kind of monthly mortgage payment you can comfortably afford.
A down payment is the money you spend upfront to purchase a home. Typically, combined with a mortgage, it helps homebuyers fulfill the total price of a home. You shouldn’t deplete your savings account with your down payment because unexpected costs pile up and you need to be prepared to financially deal with them.
What about your credit? Lenders are looking closely at all documentation of your income, debts, assets and liabilities, to make sure you don’t exceed the maximum debt-to-income ratio. And when it comes to credit scores, the most competitive interest rates only go to buyers with credit scores above 700.
Gauge the Complete Cost to You:
First-time homebuyers should consider all costs of homeownership, such as closing costs, down payment, furniture, moving expenses, insurance, property tax, condo or home owners association (HOA) fees, maintenance and upkeep. To prevent a rude awakening, tally these up.
In today’s housing market, monthly mortgage payments rival monthly rents in some cities. While this may be the case in your area, keep in mind that securing the upfront costs of homeownership is the biggest challenge.
Neighborhood Has Big Impact – Choose the Right One for You:
Location versus space is one of the most common trade-offs you’ll be met with when shopping around for potential new homes. You may need to make some compromises when it comes to your first place. You may not be able to afford your ideal neighborhood or dream home, but you can get as close as possible. Buy a fixer-upper in the best neighborhood in the city, or buy new construction in an up-and-coming part of town. Just be mindful that your purchase price reflects the home’s market value. Look at the price of your house and the comparables and make sure to research the neighborhood.
Agents Really Matter – Consult a Professional:
Especially for first-time buyers who haven’t experienced it before, it’s important to consult with a real estate professional who can guide you through the process. An experienced and politely aggressive agent can make a massive difference. They should be an advocate for you, negotiate on price and move the whole process ahead faster during snags. Sotheby’s International Realty Canada is here to help you. Contact one our offices today.
What do you think is important for first time home buyers? Let us know in the comments.
