First Time Home Buyer
Overview: Buying your first home is both an extremely exciting adventure and a daunting experience. The best advice I can offer based on my many years of working with first time home buyers is to take the time at the beginning to gather as much information as you can and to work with an experienced and professional mortgage person and realtor.
Start with a list: When you are thinking about making with switch from a renter to an owner it is best to start with a couple of lists. The first one is the pros and cons of renting vs buying. The pros and cons will be different for each person based on your unique set of circumstances. The goal here is to make sure this is the right time in your life to become a home owner. The second list is a list of your monthly expenses and cash flow. This will give you a comfort level for taking on the additional expense of owning a home. After you have worked through these two lists next comes the fun list…..start making a list of what you are looking for in a house, both for today and over the next 3, 5 and 10 years. I suggest taking a longer-term horizon when looking at how long you will be staying in your first house for it gives you flexibility. The longer your first home can fit your needs the longer you can delay the costs and hassles of moving. This flexibility puts you on a stronger footing so you can avoid having to sell urgently because you quickly outgrow your house.
How much do you qualify for/how much do you want to spend: This is the next step in your journey to being a first time home buyer. With my clients I show them the maximum they qualify for and then we have a discussion about what they are comfortable with. No one wants to be house poor….by going through your expenses and cashflow you can very quickly see where your comfort spot is for a mortgage. It is important to make sure you are pre-approved for a mortgage as opposed to just pre-qualified…..with being pre-qualified there can be some surprises down the road. With a pre-approval you eliminate the surprises and have the added benefit of locking in a rate so you get the lower rate if rates go up, or the lower rate if rates go down. We have a number of calculators on our web site that you can use to work out affordability, renting vs buying and different mortgage scenarios.
Down Payment: The minimum down payment now is 5% and there is a number of options on where the 5% can come from. This can be borrowed, gifted, saved or come from your RSP as part of the Federal Governments First Time Home Buyer Program. It is best to discuss your situation with a mortgage professional to see which down payment strategy works best for you.
What type of mortgage to get: There is a lot more to a mortgage than just rate. There is term, amortization, type, pre-payment options, penalties, type of charge etc. to consider. All of these factors need to be considered in light of your unique circumstances and goals. Taking the time to discuss these items with a mortgage professional who will help you put together a personalized mortgage plan which will save you thousands of dollars and lots of headaches down the road.
In-depth guide to buying your first home: If you would like us to email you a copy of our in-depth, step by step guide to buying your first home, please use the contact form to send us your request and we will email you a copy.