First Time Home Buyer In Greater Moncton and Surrounding Area’s
I have quite a bit of experience working with first time home buyers so I know it’s much more than finding the right home, it’s an educational process. In most cases, this is the first time being exposed to lenders, real estate agents, lawyers, home inspectors, appraisers, not to mention a number of costs never seen before. So, I wanted to share my top tips for first time home buyers:
#1 – Get pre-approved by a lender
Meet with a mortgage specialist at your local financial institution to get an idea as to what you can afford. The pre approval process involves the evaluation of your income, job status, debts and credit rating just to name a few things, there are many different factors that play into what your home budget will be. Remember, don’t just take the first offer that is given to you, shop around! While the rate is a huge factor, don’t forgot about the fine print – Extra fees, penalties, renewal process. If you’re not the type of person to shop around, meet with a Mortgage Broker. They usually have access to a bunch of lenders/banks (Yes, even the big banks) and they shop around for the best package for you based on your individual needs and future goals. You never know what the future holds, so know your numbers for the unexpected. Oh, and if you can’t get a mortgage for whatever reason (it happens), ask your specialist/broker to help you develop a road map to help you save and increase your credit score.
#2 – Hire a great real estate agent and assemble YOUR team
A great REALTOR® is a crucial component to your home buying team. I know what you’re thinking “Oh, a real estate agent is writing this article so he’s just going to talk about how great agents are”. No, but the truth is you want an agent that you like and feel comfortable with representing your best interests. This goes beyond just getting the house you want for the right price, this is inserting the right conditions that protect you and offer you a enough time to do your due diligence. The insertion of the right conditions can save you thousands of dollars and time.
Furthermore, you want to create a team that works for YOU. This could include a mortgage broker/lender, lawyer, home inspector, insurance agent and contractor (just a few people you may need). Do your research on potential team members and remember, you get what you pay for – don’t let just price determine your decision. Trust is invaluable.
#3 – Know your budget
Just because you were approved for a mortgage up to a certain amount doesn’t necessarily mean you can afford that price of home. For example, if you are approved for up to $250,000, your personal budget may only allow you to comfortably afford a home at $220,000. The reasons will obviously vary but factors to be considered are:
Current debt payments – Do you have a automobile to pay for? (don’t forget about associated costs: gas, insurance and repairs) Do you have outstanding student debt? These are factors to definitely consider.
Lifestyle – Are you the type of person that tends to eat out frequently or likes to go out frequently on weekends? If so, factor this in because either your lifestyle will change or your budget will.
Also, understand associated costs of owning a home, which include utilities, property taxes, home insurance, improvements and potentially condo fees if you are going the condo route. You can’t forget the closing costs either, it’s good to budget for 2% of the purchase price. Closing costs usually include: legal fees, title insurance, land transfer tax and closing adjustments (eg. prepaid property taxes.
#4 – Evaluate your wants and needs
What you need is very different than what you want. Needs are items you could not live without or that would hinder your current routine or lifestyle. On the other hand, wants are items/features that you don’t necessarily need but would make life much easier or satisfy an interest. Everyone’s needs and wants are different, so it’s up to you to determine what you 100% need over what you may just want for whatever reason. For example: You may NEED three bedrooms because you have two kids but you may WANT a rec style basement because you have a ton of hockey jerseys and want a place to hang them. You may NEED to be close to a certain school or within range of the bus to keep your child at the same school but you may WANT to live closer to friends that just purchased in a new subdivision. The rule of thumb is to make sure you can check-off all your needs and try to get as many wants as you can get within your budget.
#5 – Develop the right mindset (Think Resale!)
Likely your first home isn’t your last so you will likely be selling at some point. Studies show that first time buyers usually sell their home within 3-5 years after their initial purchase. This could be for a number of reasons but the most common ones are: marriage, divorce, children or work. So with all that said, it’s important to purchase a home in an attractive area, three bedrooms and generic layout. In short, you want to attract as many buyers as possible. You don’t want to shoot yourself in the foot and purchase a home that is very specific or has features that the majority of buyers would not like. An example of this would be a 1+2 bedroom arrangement where there’s one big bedroom on the main floor and 2 additional bedrooms in the basement. While this could work for you because you are a single person, it’s not going to work for a young family where the children have to be close to their parents. Other examples would be: oil heat (not liked by everyone) or proximity to train tracks (noise). With that said, if the price is right it may make sense, just be sure to understand that when you sell, because that will likely be the negative feedback from potential buyers.
If you are planning renovations or looking to improve your home for resale, don’t hesitate to ask me. I can give you some advice as to what buyers are looking for and give you some comparable sales in the area to show you the potential increase in value. I honestly couldn’t be happier to help.
#6 – Understand what you are signing
When you buy your first home, there’s no doubt the paperwork will be overwhelming. With that being said, it’s a learning experience for you so don’t hesitate to ask questions. I know when I’m going through the offer process with clients, I explain all items and even give either real or hypothetical examples to better explain the insertion of a specific condition or the reasoning for a certain time frame. Whether it’s with me, your lawyer or your mortgage professional, don’t hesitate to ask questions, you’ll be buying again one day.
#7 – Don’t get emotionally attached and overpay/low ball
Purchasing a home can be an emotional rollercoaster. You may have missed out on a home that you thought was perfect or a seller isn’t taking your final offer. Out of frustration or defeat don’t give up because stuff like this does happen. It’s amazing because something like this will happen and then another house will be listed a few days later that has almost everything you’re looking for. I’m not sure if it’s luck or a shock to the brain as to what is really important in a home that you begin to see past the little things.
It’s important not to overpay for a property even if it has everything you’re looking for. And if you do, understand this will affect your sale proceeds down the road when you sell (Remember, that’s usually 3-5 years). The value of a property has little to do with the asking price and more to do with the comparable sales in the area. This is where a REALTOR® can really help. A REALTOR® can show you the properties that have sold and recommend the best price.
Yes, sometimes it might be appropriate to submit a low ball offer but not for every home on the market. Again, the value of the home has little to do with the asking price. So, if a house is listed at $250,000 and the same house down the street that was not as updated recently sold for $245,000, chances are the price isn’t going to move very much. But on the other hand, let’s say a comparable sale down the street was only $220,000, then it could be time to lowball. Everybody will tell you “Go really low, you never know what will happen” while this is partly true, we need to do our homework. An unnecessary low ball offer can sometimes offend the seller(s) and make negotiations start off sour.
#8 – Pay for a home inspection
A home inspection may run for $400-$600, but in my opinion it’s worth every cent. Not only will they inspect the property for any issues but they will suggest maintenance tips and ways you can save money. As a first time buyer, this information is critical to the value of your home and it’s overall safety. Not only that, after you complete your home inspection there may be issues you didn’t see before. I can honestly tell you that the home inspectors I’ve recommended have saved my clients thousands of dollars. This includes notifying the buyers of potential vermiculite insulation containing asbestos in the attic space, foundation damage leading to water penetration and/or serious plumbing/electrical issues.
#9 – Enjoy home ownership!
I can give you all the suggestions in the world but at the end of the day, you need to love and enjoy YOUR home. After all that hard work of saving for a down payment and getting the house you wanted, you deserve it!
If you are looking for your first home, feel free to contact me. I’d be happy to help.