Tips For Buying Your First Home
Buying season is quickly approaching. Historical trends show a spike in the number of homes that are sold in Ottawa over the next few months. As more and more first time homebuyers are exploring their buying options, here are a few things that you should be keeping in mind.
1- Determine what you want
Many people will say that it’s your first home and that it won’t be the perfect house, so don’t worry about the small details. I still have trouble determining why people would be saying this. Worry about the small details. You’re making one of the most important purchases of your life and if you’re going to regret your decision in 3 months, then don’t buy it. Make sure that the home you’re going to buy is within your budget range but that it’s also a purchase you won’t regret. Trust me, the worst feeling in the world is extreme buyer’s remorse.
2- Research! Research! Research!
I know that I just said you shouldn’t settle. In reality, you’re going to have to do extensive research to determine what you can actually afford. The first thing is to determine the purpose of the house. Are you planning on raising a family for the next 10 years, is it your chance to downsize or are you simply looking for an investment property. This should help you out with the majority of your decisions. All your research should be done with purpose in mind. Neighbourhood should be the second decision. Do you want a quiet neighbourhood with parks and good schools or are you looking to be around the action. Once you have determined neighbourhood, then you’ll be able to figure out what kind of property you can afford by comparing your needs to listed properties.
3- Check your finances
Lower interest rates have pushed more and more people to squeeze their budgets to get a more expensive property. There is a simple solution but most people reading won’t listen: Do not squeeze your budget just to buy a house. New home buyers tend to look at the cost of the down payment and the payment without considering everything else. The fact is that there are many additional costs including closing costs, monthly maintenance costs, property sales taxes and etc. You should also consider the fact that current interest rates may change tomorrow or next week. As a result, homeowners with large mortgage balances and stretched budgets could lose everything. Here are some general formulas to keep in mind:
- Closing Costs: Generally 2-5% of the purchase price of the home.
- Maintenance Costs: 1-2% of the purchase price per year.
- Property Taxes: 1-1.5% of the purchase price of the home.
- Insurance if down payment < 20% of purchase price.
- Rate hikes: Do research and prepare for the worst.
- GST/HST: Is applicable to newly built homes or condos.
4- Get an inspector
We’ve all heard the horror stories about buyers not hiring a certified home inspector and seen Mike Holmes come to the rescue. The fact remains that we cannot stress this enough...GET AN INSPECTOR!! You’ve heard this expression before but it couldn't be closer to the truth if we tried: Don’t judge a book by it’s cover. Many homeowners, especially first time home buyers are looking for a modern kitchen with granite countertops and hardwood floors in the living room but they tend to get attached to the house based on what they see as a house fulfilling all their needs. If there’s one thing to remember from this reading, it’s that you always need an inspector.