Buying a home is not only a major financial decision; it is also a life changing decision. For many first time home buyers, understanding the entire home buying process can be overwhelming and quite stressful. You can remove that stress by knowing these eight simple things:
- Agents are not just for sellers
- Curbing your spending habits ensures you qualify for home ownership
- The importance of mortgage pre-approval and finding a legitimate lender
- Avoid buying from the wrong seller
- Lay the groundwork, build a plan, and get moving
- Understand market trends
- What you see is not always what you get
- How to avert the financial stress of buying a home
If you take this information and empower yourself, the home buying process can be seamless and effortless. After all, you are not just buying a property, you are buying a home.
Understanding Market Trends
The real estate market is not static, so understanding market trends will help you decide the best time to buy. A normal market will see a higher than average number of properties listed and an average number of people looking to purchase. This type of market does not necessarily favor either side of the real estate transaction which means there is no definite advantage for the buyer or the seller. A normal market is essentially a neutral market. Sellers may have fewer offers in this type of market, but it does not necessarily mean they are motivated to sell. So, as a buyer, you need to be prepared and understand that your chance to negotiate is likely, but you might be required to work for it.
In a competitive, or hot, market, homes can sell so quickly that they do not even make it to the listings. Sellers usually get multiple offers on their properties and can make large profits when buyers start offering more than the asking price. As a buyer in a hot market, it is important to remain in control and to be prepared because when a price battle occurs, you do not want to find yourself trying to pay more than the lender will give you.
When the market slows down and houses seem to be listed for long periods of time, the prices can drop dramatically. This is considered to be a cold market and can be unfavorable to the seller because buyers have time to shop around and make offers well below the asking price. Sellers generally accept these lower offers because there is no other interest in the property. However, as a buyer, do not try to exploit this market by offering unrealistic prices because you may lose out on your dream home.
Know What you Need from a Mortgage
Knowing what you need from a mortgage is as important as knowing what you want from a home. If you know exactly what your needs are, you will be more likely to find the right mortgage for your situation. While many lenders base their decisions to loan money on financial qualifications, there are still options available for almost every type of borrower.
If you are unsure of your finances, market trends, or what type of mortgage would be most advantageous to your situation, you can consult a mortgage broker. A mortgage broker will help you determine a budget and what you can realistically afford to spend on a new home. A mortgage broker can explain the different types of mortgages available and ascertain which will work best for.
What Can You Afford?
If you haven’t already gone through the mortgage pre-qualification process, you will need to meet with a lender or mortgage broker. They will establish how much of a mortgage you will qualify for. Mortgage rates vary considerably and it is paramount that you shop around for the best rate, terms and options.
The affordability calculator will help you determine what monthly mortgage payment and the maximum mortgage you can manage. Note: if you are buying a condo, the amount of your monthly assessment has a direct impact on how much you can afford to spend on your mortgage.
Questions To Ask When Assessing Home Features
- Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?
- Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs?
- Do you plan to have children? Downtown or suburbs? Proximity to recreation or work.
- Do you need a substantial backyard? Pets?
- Is there adequate storage space?
- Will any remodeling be required to make the home move-in ready for you?
- What service providers (cable, Internet, telephone, Satelite) are available in the area, and is the house completely wired for each? Can you hear me now – how good is the cell phone reception?
- How much are the yearly property taxes?
- How much do utilities run each month? Does the house use gas or electric for the furnace, water heater, and appliances?
- How old are the major appliances, and which are included with the house?
- Have there been any major repairs to the house, and if so, when were they completed? For example, how old is the roof? Has water ever damaged the basement or foundation?
- Ever had problems with insects, such as termites and spiders, or rodents?
- Older homes need to be carefully examined – Windows may need caulking or new sashes, bathroom tiles may need grouting, home may need rewiring (planning on a hot tub or sauna?), a new hot water heater, or a new furnace.
Location, Location, Location
- How far will you be commuting and what is the traffic like? Factor in cost of fuel.
- Where will your children attend school and how will they commute?
- Are there recreational facilities and parks close by?
- Are you close to family and friends?
- Is safety or high crime an issue?
- Is the property close to an obstacle or negative influence? (i.e. an apartment building, shopping centre, school, radio tower, power lines, LRT or railroad track, highway, airport or commercial project).
- Access to schools, work, recreation, shopping centres, public transportation, cultural attractions, libraries, churches and hospitals
- Adjacent undeveloped land – what is proposed for this or other green space?
- Heavy traffic can be noise nuisance and hazard for children
- Distance from the unit to amenities, parking, walkways, roads, public transit
- Does the neighborhood reflect positively on the value of the condo and your lifestyle choice?
- Does this neighborhood, for any reason, have a poor reputation?
- Is the future economic climate for the area good? Are businesses moving in? Is there government investment?
- Are people moving in or out of the neighborhood? What is their age, income level, family size?
- Are there plans for this neighborhood that you may be unaware of (i.e. a future highway, a commercial development or a new housing development) that will provide competition on resale?
Noise and Privacy
- Proximity to highways, driveways, parking lots, playgrounds, trains.
- Proximity to elevators, garbage disposal, fire exits, heating and air conditioners.
- How well is the building soundproofed.
- Visit at different times/weekends to check noise levels and activity.
Your Credit Rating
Getting your finances in order is probably the most important step you should take. Your credit reports are an ongoing look at how you manage your finances. You must know exactly what your credit reports say about your financial history before you apply for a mortgage, because the reports play an important role in the mortgage approval process and in determining the interest rate and other loan terms that a lender offers you.
Making the Offer
There’s no one set of instructions that can cover all the differences in real estate laws and customs that exist throughout, so the mechanics of making an offer and its specific contingencies depend greatly on your location. That’s why you should sit with your agent, attorney or advisor to fine-tune your offer and take care of all the contractual considerations.
Avoiding Last-Minute Changes
As your closing date nears, everyone involved in your real estate transaction should check its progress on a daily basis, because staying on top of things means you’ll know immediately if there’s a problem that must be dealt with.
Most of your home buying concerns are behind you now and you’re on your way to closing, also called settlement, or the event that transfers ownership of the property over to you. You will encounter issues specific to your location and your transaction, issues that can best be explained and handled by your local real estate agent, your lender, your attorney, your closing agent, or others who are helping you complete the home buying transaction.
Never hesitate to ask questions. Ask as many questions as necessary to help you understand the entire home buying process. You are making a long term commitment and spending a major amount of money – you’ll feel much better about the transaction if you stay informed and understand what’s happening every step along the way.