Buying a home is an important financial decision, maybe one of the biggest you’ll ever make in your lifetime. It can be one of the most exciting and yet stressful experiences in your life, but with some research, planning, and the help of an expert real estate professional who really knows the market, purchasing a home can be a less overwhelming experience.
The home buying process requires a lot of research, time and effort. These home buying tips and guidelines can help make the home buying process more manageable and help you make the best decisions possible.
Type of Home and Location
Deciding what type of home you want is very important. You should determine what type of home you want to buy and what style of home fits your needs (single-family detached, semi-detached, condominium, or townhouse). Decide on the number of bedrooms, bathrooms, single or double garage, and other features that you would like in a home. When you find the perfect home to purchase, learn about the neighborhood where the home is located taking into consideration your lifestyle. Will your new home shorten or increase your commute to work? Are there grocery stores, shopping centers and other amenities close by? If you have small kids, are there child care facilities and schools nearby?
Verify your Credit Report and Finances
Your credit report provides your credit score and a snapshot of your financial health and is one of the calculations that lenders use to determine whether you are a good candidate for a mortgage loan. A credit score of 680 or higher will allow you to gain access to lower mortgage interest rates. Don’t forget to contact creditors who haven't updated their financial records to reflect balances that have been paid off or to correct errors on your credit report. Review your finances to determine how much you’re willing to spend to purchase a home. Compare your monthly debts to your monthly gross income to get an estimate of the monthly mortgage payment you can afford.
Determine Your Budget
Once you know how much you can afford you can determine how much you want to spend on the purchase of your home. Budget for other costs associated with buying a home such as future mortgage loan interest rate increases, a home inspection, a good faith money deposit when making an offer to purchase, legal fees, appraisal fees, property taxes, registry and land transfer fees, moving expenses, and closing fees. Keep in mind that in addition to a mortgage, you will need to pay for home mortgage default insurance (depending on the type of mortgage you obtain), home and property insurance, home maintenance, and utility costs such water, heating (oil, natural gas), and electricity each month. To avoid financial stress in the future, set a price range based on realistic, affordable budget and then stick to it. Consider the impact of COVID-19 on the real estate industry and how it has affected home prices. Before purchasing your home it is a good idea to have enough money put aside in a savings account to cover three to six months of emergency living expenses incase it is ever needed.
Review Mortgage Options
It’s important to learn about the different types of mortgage loans and interest rate (fixed or variable rate) options available to homebuyers. Use online resources such as mortgage calculators.info to compare mortgage interest rates and to do mortgage affordability and payment requirement analysis. The Mortgage Calculators website is a great resource for mortgage calculators wether your are looking for basic or advanced mortgage calculations and includes calculators for the US, Canadian, and UK markets. Consider your down payment amount. Most mortgage lenders require a down payment between 5%-20%, depending on the amount of the mortgage you are applying for. Most mortgage lenders will not require you to obtain home mortgage default insurance if you are making a down payment of 20% or more. Contact a reputable mortgage broker who will contact mortgage lenders on your behalf to find the lowest mortgage interest rate available to you, to determine the best mortgage option for you, and to determine whether you qualify for a variable or fixed interest rate mortgage.
Get Pre-Approved for a Mortgage
Before you start home shopping, it's important to get an idea of how much a lender is willing to lend you for the purchase your home. You’ll want to get pre-approved for a mortgage before you start looking for a home. This will save you time and ensure you are looking for homes in the right price range. To get pre-approved, you will need to provide some financial information to your mortgage lender, such as proof of your income, assets, your level of debt, and employment verification. A pre-approved mortgage will indicate to home sellers and realtors that you are a serious potential buyer and that you can afford to purchase a property.
Hire a Professional Realtor
Real estate agents are an important part of the home buying and selling process. Hire a reputable real estate agent. A real estate agent will guide you through and explain all the steps involved in the home buying process, help you to complete the offer to purchase forms correctly with any needed conditions, reduce stress, save you time, and advise you on which homes for sale on the market could be a good fit for you and for your budget. Ask your real estate agent as many questions as you need to help you understand the entire home buying process.
It doesn’t cost you anything to use a real estate agent when you are buying a home. They are compensated from the commission paid by the seller of the house. Ask your real estate agent to give you a comparative market analysis that shows similar homes in the area with their selling prices and time on the market, when you locate a home you are interested in buying. This will help you determine what amount to start with if you decide to make offer on the property.
Get a Home Appraisal
A home appraisal by a professional appraiser will give you an impartial opinion on the current fair market value of the property you are interested in. Most lenders will require an appraisal to ensure the mortgage request for the home adequately reflects the fair market value of the home. The home appraisal will calculate the value of your home by considering its age, location, size, upgrades, amenities, and recent sale prices of similar homes in the area. Most mortgage lenders will pay for part or the entire appraisal fee if you negotiate with them.
Hire a Real Estate Lawyer
Hire a real estate lawyer to review the Agreement of Purchase and Sale and other legal documents. A lawyer will review the agreement for any errors and make sure it is legally binding. A real estate lawyer will also complete a title search on the property to make sure there are no liens or judgments on the property, arrange for title insurance, confirm property taxes are paid up to date, review the mortgage documents, calculate the amount of land transfer tax due on closing, file a real estate deed transferring the title of the property to you, close the transaction and ensure all financial and legal conditions are met, and exchange legal documents and the keys to your new home with the sellers lawyer.
Get a Home Inspection
Usually one of the conditions of an offer to purchase a home is a satisfactory home inspection of the property. Always get a home inspection for a property you have made an offer on. A home inspection will identify any potential problems with the property, and future costly maintenance issues that will have to be addressed. If the home inspection indicates there are issues with the property that need to be addressed, you can negotiate with the seller to see who will pay to fix the repairs needed, negotiate with the seller a reduction in your initial offer to account for the repairs, or you can withdraw your offer.
Complete a Thorough Inspection of the Property on Closing Day
Complete a thorough inspection of the property with your real estate agent on closing day to make sure the seller has vacated the property and left it in the condition agreed upon in the purchase of sale agreement. Meet with your real estate lawyer to sign all legal documents finalizing the purchase of the home after completing your closing day inspection, and obtain the keys to your new home! Plan any needed home renovations and complete them before you move into your newly purchased home.
Purchasing a home is one of the biggest decisions many people will ever make both financially and psychologically. Even though mortgage interest rates are currently at all-time lows don't take on more financial debt than you can comfortably handle in the event of future rate increases. It is a good idea to always have an emergency contingency fund put aside in case funds are needed to make your mortgage payments on a short-term basis due to financial changes in your life. Follow these home buying tips when you are ready to buy a home to be more knowledgeable and confident about the home buying process.
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