Nobody ever said buying a home was simple. If you're buying your first home, the process can be extremely stressful. It can be a challenge trying to figure out everything you need to do.
These four tips for first-time homebuyers can help you navigate the typical difficulties process - and help you to save money in the process.
Start saving early. Even if you're still in the 'thinking about it' phase, it's a good idea to begin saving for your downpayment. Often, first-time homebuyers can get away with putting down as little as 5%, but the more you can squirrel away, the better your financial position will be. Putting down 20% or more can move you into a very favourable position in saving the most amount of money over the course of your mortgage!
Find and compare mortgages. Not all mortgages are created equal, and not all lenders offer the same rates. To make sure you don't end up paying more money (higher interest rates or extended mortgage amortization period) than necessary, a few minutes spent finding and comparing mortgages can really pay off.
Know your budget. Checking out homes online or attending open houses can be exciting. It's easy to imagine yourself cooking in that kitchen or watching television in that games room. But before you start shopping for a pool table or planning your garden, look at your budget. Knowing how much you can realistically afford - downpayment as well as monthly mortgage and other carrying costs - will help you find the best home at your best price.
Check your credit. Your credit rating (also referred to as your beacon score) plays a large role in your chances of being approved for a mortgage. Too much debt compared to your income, a bad credit score, missed or overdue payments can all impact whether or not your mortgage is put in yes or no pile.
Get preapproved. Mortgage preapproval is not only a great way to speed up the process when you find your dream house, but it can also put you in a very favourable light for sellers. Mortgage preapproval lets sellers know you already have financing in place for the price of the house. In a bidding war, a seller will sometimes opt to accept an offer from someone with preapproval over another that doesn't have their financing in order. Preapproval requires evaluation of your finances, so spend a few days gathering all relevant financial and banking information.
Choosing the Right Home
Location, location, location. Some might say it in jest, but the 'location, location, location' of your new home really is critical. What might look like a great neighbourhood at first glance might have hidden issues - like freight trains at odd hours, irregularities in crime or safety statistics, or no access to amenities on weekends. Whereas a neighbourhood you may have initially overlooked can have excellent access to hospitals, grocery stores, and be in an active school district as well.
Nightlife or after work/school. Check out your dream house's new neighbourhood at different times of the day. Either drive through the area or park in a public spot and walk about your potential block at times you'd be doing so if you lived there.
Explore open houses. Take advantage of open houses to see a variety of homes in your potential neighbourhood. If the other homes are well cared for, your property will be better positioned to increase in value faster than neighbourhoods requiring significant improvement.
Mistakes to Avoid
Forgetting about closing costs. Be sure to include an estimate for closing costs of between three to five percent of your mortgage amount when calculating how much you can afford. You can save some money by shopping around and comparing rates for closing expenses, homeowners insurance, and home inspections.
Not negotiating. The deal isn't done until the offer is accepted. Have you considered asking the seller to pay for a portion (or all) of the closing costs? They may say no, but they might answer yes - or come back with their own offer that lessens the amount you need to pay. Consider negotiating to get the best possible arrangement for your situation.
Homeowners insurance. Your mortgage lender will require that you have insurance for your new home before the deal can close. Check out different insurance providers and compare rates to make sure you're getting the best price and the best coverage.