Last week, I asked people on instagram who had bought homes or are in the home process journey what they wish they had known before the wish they started their home ownership journey and the answers were so good I had to share it as a blogpost. Disclaimer: this is specific to people who live in Canada but could apply to other places in the world.
For starters, here are some things you should probably know before you get started on this journey.
- Check your credit and if you need to, build your credit to ensure you are able to secure the best interest rates.
- Find out how much Mortgage you qualify for – there’s no point going home shopping if you don’t know how much money you might be able to spend. This helps you adjust your budget and find homes that are within that price range. For example, can you imagine looking at $700k homes, deciding on one and finding out you can only get a mortgage of $300k. You would have to pay the $400k cash if you want that home. Side note: As a rule of thumb, in most cases, the amount you can get on a mortgage is driven by your income and is typically about 5X your income.
- Decide on your budget– When you know how much you qualify for, you can decide on a budget based on how much cash you have saved up and are willing to put into the property and how much you can get from your mortgage.
- Find out how much you would spend monthly on the house – this includes mortgage payments, insurance, strata fees, taxes and other things that might come up. This would also be good if you are deciding on renting versus buying a home.
- Decide what you want to use this property for and what your longterm plans are with this investment. Typically, homes that are bought as investment properties require a bigger downpayment than a home that is bought for personal use – i.e you plan to live there. For example, for homes under $500k, as a first time home buyer, you can put down 5% if this is where you would live, but if it is an investment property, some mortgage lenders would require a 20% down payment.
- Figure out what you want your house to have – you might need this to before you start looking. I think if you have the basics, this can help you narrow down your search. Where do you want the house to be? Does location matter to you? Do you want a newer build? Do you want a place that is transit friendly or some place close to work- these are questions you should ask yourself as you draw up your needs and want.
- Highlight your needs versus wants – if you have a limited budget, you might not find everything you want and desire for that price range so it is important to know what your needs and wants are when you are looking for a home.
- Do your research.
- Work with a realtor – a realtor would help find you houses that are on the market for the price range you are looking for and walk you through the process of actually buying a home. And for the most part, they are free!
- Figure out how much the entire process would cost you– finding the house and putting in an offer that gets accepted isn’t where it ends, there are legal fees and there might be renovation fees that you need to budget for as you begin this process.
That’s all I can think of for now. I guess you could start looking for a home now. 🙂
Here are some of the tips I got from people who have gotten properties or are in the process of getting one:
- Working with a realtor is optional. You save at-least 2-4%, know the market better through Open Platform Communication.
- The buyer doesn’t pay for the realtor so get you one.
- Just because you qualify for a $500k loan doesn’t mean you should buy a $500k home.
- Real estate is always a good way to park/grow your money. Start early.
- Don’t buy a house cause you think it’s the logical next step. Have a need for it first.
- Get two realtors to show you homes so you’re not relying on one person. (Note: someone mentioned that most realtors wouldn’t work with you if you did this so pick one and if they are not meeting your needs, move on).
- Get a mortgage approval first – this will make going into a bidding situation more favourable to you.
- Also always look at the Strata’s meeting minutes (if you are getting a condo) to see if there are any upcoming large repairs for the building that might cost you lots of money.
- Try to get parking if you are getting an apartment because if you don’t have a car, you can rent out your spot if you live in a desirable area and would be able to resell your condo much easier.
- Do your own research and don’t rely on the realtor’s information only. Read and understand the purchase contract, MLS (multiple listing service) and strata documents (if you are buying a condo).
- Have a home inspection/ full appraisal before you move in.
- Don’t let the realtor pressure or rush you into buying anything.
- Take your time to get one, don’t rush it. Small house/good location > big house/bad location.
Here are some things people wish they knew before they got started
“I would definitely not buy a condo again if I could go back. Not a good investment property. In my case, the condo fees eat up your monthly income and since it goes up each year, there’s only so much you can increase the rent by to match up the price increase. An alternative could be buying a brand new condo, holding for 4-5 years -this is how long the new build insurance typically last and fees are usually relatively low in that period. After that period, it starts to climb up substantially.” – Anonymous
“I wish I had more knowledge about rates, buyers market and sellers market.” – Anonymous
That’s it from me. I know there’s so much to cover when it comes to this and I’m probably just scratching the surface but here are some of the things I thought would be nice to know before you get started on the journey. If you are still thinking about it and not ready to commit to getting a property just yet, here’s four things you can do in the meantime:
- Keep saving towards your down payment
- Increase your income
- Build your credit
- Invest in REITs – Real Estate Investment Trust
Have you gotten a home? What do you wish you knew ahead of time? What lessons/ tips do you have for others who might just be starting out? Please share in the comments.