A Checklist For Your First Home Purchase
As a mortgage professional, I understand that purchasing a house for the first time can be quite daunting. Buying a home can be a stressful task, but you can quickly and efficiently handle your mortgage approval and legal requirements with a little preparation.
As someone who has assisted many homeowners with their first-time home purchases, I understand the intricacies and requirements that go into purchasing a home. To share the knowledge I’ve gathered over the years, I’ve created a handy checklist to help you complete your purchase with as little stress as possible. Follow my checklist during your first-time home purchase so you can complete it with ease and get back to the other important things in life.
1. Speak to a mortgage broker and get pre-approved
The number one reason behind home purchase fails is a failure to get pre-approved for mortgage financing. Many leave this step to the last minute, which is the opposite of what you should do if you’re serious about your home purchase going smoothly. Before you start falling in love with a property, make sure you have a full discussion with your mortgage broker about your income, credit, and savings. That way, you can ensure you’re not biting off more than you can chew, and you know the options that are available to you.
2. Make a budget
Owning real estate is an amazing goal to obtain, but it shouldn’t come at the cost of your wellbeing. What you are approved for and what you can afford are often very different numbers. Moreover, the reality of being “house poor” is all too real if you do not prepare for the extra costs associated with homeownership. As a result, make sure before you go house hunting you have a budget of all your daily expenses, including the necessities and the ones you spend on your passions, hobbies, and entertainment. This will help you determine what size of mortgage you can afford to take on without drastically affecting your quality of life.
3. Find a realtor specializing in your local area
An experienced real estate agent can be worth their weight in gold. An agent who specializes in the neighborhood you’re looking to buy can help a ton with negotiation and provide unique insights about that home or community. Hiring a real estate agent during the buying process is a free service, so make sure to leverage the expertise of professionals who can advise you on what to consider when submitting an offer to purchase.
4. Use a real estate lawyer, not a notary
As the saying goes, “you get what you pay for” and although a notary can be the more affordable route when purchasing a home, they cannot provide you any legal advice when it comes to the contract of your home purchase or your mortgage term when you go to sign the final paperwork. Especially when buying your first home, it is essential to surround yourself with professionals you can lean on and who can look out for any fine print you should be aware of. By hiring a real estate lawyer, you are hiring a professional who can walk you through the piles of paperwork you are about to sign and can legally explain the details of each legal term being used.
5. Review your personal insurance coverage
See if you have a plan of how you’ll pay for your home if you lose your job due to disability or injury. Similarly, if your partner or spouse is unable to work or something worse happens that results in you covering the whole expense, you need to have a backup plan. These are difficult instances to think about, but that’s why they are so important to consider. Before you go into likely the biggest purchase of your life, make sure you have something in place that will protect you on a rainy day. Make sure you review your current life and disability coverages to check if there is enough to cover your daily expenses and your home expenses (i.e., mortgage, taxes, strata, etc.). It’s common to realize a gap in your coverage, which could leave you vulnerable if the worst happens. Fortunately, there are specific insurance plans available specifically for your home purchase. Speak to either your insurance broker or your mortgage professional to learn more about these products.
6. Review your home insurance coverage
If you are buying into a strata unit, then there will be coverage for the building in case of a fire, flood, earthquake, etc. However, this coverage usually does not extend to your individual unit, so you could be at risk if a fire in another unit occurs. Similarly, if you are buying a detached home, it will be up to you to ensure your home is protected from any major events that could damage or destroy your investment. Lay down the proper foundation for your financial plan and ensure you have insurance in place to protect you from all scenarios. I work with Canada’s largest home insurance brokerage, and if needed, they can review your current coverage and assist you in negotiating the best quote for your needs.
7. Have extra set aside for expenses
As a first-time buyer, you are fortunately qualified to use the First Time Buyers Program to waive your property transfer tax, which is a large expense you’ll need to budget for on your next home purchase. For now, there are still plenty of other costs you may not be thinking of when purchasing your first home. For example, lawyer’s fees, appraisal costs, moving expenses, home renovations and repairs, furniture purchases, etc. As a rule of thumb, we suggest you have around 1.5% of your purchase set aside on top of your down payment. Alternatively, instead of waiting to save more, you can also consider including cash back into your mortgage to cover these expenses. Click here to learn more about cash back mortgages.
8. Be ready, but patient
As the saying goes, “patience is a virtue,” which couldn’t be more true when going through the home buying process. It’s common to feel disheartened when no properties in your area are suitable for you, or even worse when you find one but the seller receives multiple offers that drive the price out of your range. In such cases don’t fret. This is all a part of the process! The best attribute you can bring into your first home purchase is the expectation it won’t happen overnight. Be patient and confident in knowing the right property will eventually come up, and for now, just keep your finger on the pulse. When the right one comes up, be ready to pull the trigger and leverage the expertise of the professionals assisting you.
9. Be patient but flexible
Just as it’s essential to be patient with your future home purchase, it is also just as important to be flexible with your options to open up better opportunities that can appear along your journey. For example, a home may have to check all the boxes regarding location, amenities, appliances, the number of rooms, etc., but the kitchen may not be exactly what you dreamed of. Don’t let this small detail detour you from making the right decision. Think creatively, and remember you can always include renovation costs into your mortgage approval, so you can make improvements to anything that isn’t exactly to your liking. Don’t expect to buy the “perfect home.” You will need to make it the perfect home for you.
For more tips on how to prepare when purchasing your first home, reach out to Cody Rowe. I am a leading mortgage broker in Victoria, BC. I work with Canada’s largest national mortgage brokerage, Dominion Lending Centres. With their support and resources, I can help my clients to create and implement long-term strategies to achieve their real estate goals. I currently have access to a vast network of major banks, credit unions, trust companies, and alternative lending options. Through this network, I can ensure the correct solution for my clients’ unique situations.