BEFORE SAYING YES TO HOME OWNERSHIP- DO YOUR RESEARCH
Anyone who has been a home buyer in the past can tell you what they would have done differently had they have know what they know today.
Everyone who has bought a home has been through it, the scary, nervous time of learning a new language, relying on strangers you don’t know and making massive decisions you are sure will ruin your life. All this while getting opinions from everyone you have every known whether you want them or not!
Despite all this there is an upside…you also get to have you own home!
In the hope of helping those who have not gone through this “rite of passage” to home ownership, I want to share with you some of the most common mistakes people make and how to avoid those yourself. As a home buyer you must take the initiative to explore all avenues and to trust no one but yourself and the professionals you hire. Even then keep a close eye on everything you sign up for.
1. Most people don’t work out what their budget is
You are reading this here on Canadian Budget Binder, so I am sure you have created your budget by now. If you haven’t you can download a free excel budget from Canadian Budget Binder to help get you started.
You would be shocked how many people are not even aware of what they can afford, let alone what their plan is other than wanting a home. A detailed budget and plan of potential costs is a must to start a home buyer journey.
Staying with your budget is a key to living happily ever after!
2. Little or no understanding of the home buying process
You don’t have to become an expert in home buying, but having a basic understanding of the overall process and the steps that are involved is a smart move to avoid last second decisions which can cost you money.
There is lots of information online (stay on Canadian websites, US ones will just confuse you as their process is completely different), here are a few sites to look at:
- CMHC: Government owned corporation that insures those buyers with less than 20% down payment…good information here, though written by bureaucrats (a little dry!).
- Genworth: A Private Insurer, similar type of site.
- Various lender sites etc.
3. Not putting a team of experts together first
This is probably one of the biggest decisions of your life, make sure the people you are going to listen to for input on that decision are people who have the knowledge, experience and are worthy of your trust.
The majority of people drive by a property and call the Realtor who has the listing, without ever researching them, then rely on that person to refer them to a mortgage specialist and a lawyer or notary.
While this may work out ok, I highly recommend you meet with a mortgage specialist first…find someone who your friends or family recommend and who is going to look after you for the long-term, not just for this mortgage.
I am an Independent Mortgage Broker and obviously am biased, but feel strongly you are more likely to get objective advice from a Mortgage Broker than you are from a Bank Rep or Mortgage Specialist simply because Brokers have more options.
Get your budget out and review it with your Mortgage person, and make sure you are comfortable with the amount you are pre-approved for…just because the lender offers you more, doesn’t mean you should take it.
In fact, make sure whatever Realtor you end up with, never shows you homes above your budget. The reason behind this is a big part of why people end up house poor.
They see a home they really shouldn’t be looking at and then it’s hard to make a final decision or they base their decision on the bigger, more expensive home. This can cause grave financial trouble up the road if something were to happen.
Once you have your numbers set and your mortgage plan in place, the next step is to get a Realtor on working for you. This is very important, as you want to have someone negotiating on your behalf…so often people will end up paying more because they rely on the realtor who is listing the property they want. Get someone on your side…once again talk to your family, friends or mortgage person to find a competent, experienced Realtor who listens to your home buyer needs.
Home Buyer Legals
Lastly, as a home buyer you will need a Lawyer or Notary who is working on your behalf as well and who can help you with those tough decisions. Always have your contract reviewed by the Lawyer so they can point out problems with dates, subjects etc.
These are three areas that will make a great start for a successful first time home buyer on a journey towards home ownership. There are a number of other areas that are also important, we will get to those in our next post.
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Contribution by: Michael Anthony Lloyd is a Mortgage Expert with DLC Canadian Mortgage Experts