I just love when I meet Buyers and they ask for advice before shopping for a home. Each Buyer of course has a different situation, so my advice is much more detailed, but I believe these 10 items apply to everyone.
1. BUY FOR THE LONG RUN. ASSUME YOU WILL OWN YOUR HOME FOR AT LEAST FIVE YEARS.
A home is a significant investment. In reality, most people live in their home for at least a decade before selling.
Some are even staying for the long haul. Almost half of all homeowners are living in the first home they ever purchased. In short: Buy a home you want to live in — one with the right location and space you need, both now and in the future. Always think about what life will bring 10 years from now.
2. BUY TO IMPROVE YOUR LIFE
Your home is your biggest investment. It is also where you sleep, eat, host friends, raise your children — it is where your life happens.
The housing market can be unpredictable. Buying a house to quickly sell again to make money can backfire. You will most likely be living in this home for several years, regardless of how it appreciates, so your first priority should be finding a home that will meet your needs and help you build the life you want.
3. FOCUS ON WHAT’S IMPORTANT TO YOU. DON’T FIND YOURSELF FOCUSED ON BUYING WHAT YOUR FRIENDS HAVE
Today’s housing market is short on inventory to buy. So, focus on finding a home you can afford that meets your needs — but don’t get distracted by features that might break the bank. Features that you don’t need that suck your money away will lead to frustrations.
Make a list of your basic needs for both your desired home and your desired neighbourhood. Stick to finding a home that meets these needs, without buying the extra stuff that adds up.
4. DETERMINE A BUDGET AND STICK TO IT. DON’T LOOK AT HOUSES ABOVE THAT BUDGET.
It’s important to set a budget early — ideally before you even start looking at homes.
Be realistic about your local market and about yourself. Know what you’re willing to compromise on — be it less square footage, home repairs or a different neighborhood. Make sure you look at your entire budget as well. Not just mortgage payments.
5. A 20 PERCENT DOWN PAYMENT IS IDEAL IF YOU CAN SWING IT
If you can afford it, a 20 percent down payment is ideal for three reasons:
Buyers who don’t put a full 20 percent down pay a premium, most commonly in the form of private mortgage insurance. Buyers who put more down upfront typically make fewer offers and buy faster than those who put less down. A higher down payment reduces your financial risk. You don’t want to owe more money than your house is worth if local markets dip when you need to sell. If you can’t gather 20%, then let’s talk about strategy to gain equity quickly.
6. HAVE A 6 MONTH EMERGENCY FUND BUILT UP BEFORE BUYING
A down payment is a significant expense. But what happens if something comes up and someone can’t work?
This reserve fund should cover six months of living expenses. A strategic reserve will not only save you from financial hardship in the event of an emergency but also provide peace of mind.
7. GET PRE-APPROVED AND LEARN ABOUT YOUR MONEY
The pre-approval process requires organizing all your paperwork; documenting your income, debt and credit; and understanding all the loan options available to you. It helps you understand what you can afford.
Align yourself with a good mortgage broker so you truly understand what you are signing. There are a variety of mortgage types, and it’s important to evaluate all of them to see which is best for your family and financial situation. Don’t be pulled in by the lowest rate. Many of those have penalties and restrictions if you ever need to break the mortgage term. They also make you feel like you can spend more. What then happens years later at renewal time?
8. COMPARISON SHOP TO GET THE BEST MORTGAGE.
Though a home is the biggest purchase many of us will ever make, most home buyers don’t shop around for a mortgage (52 percent consider only a single lender).
The difference of just half a percent can cost you thousands over years.
9. SPEND NO MORE THAN A THIRD OF YOUR AFTER-TAX INCOME ON HOUSING
It’s better to regret spending too little on your home than spending too much. One-third of your after-tax income is a manageable amount. There is a reason lenders have set this ratio. They take homes away from people that can’t pay remember?
10. WHEN GETTING READY TO BUY, ALWAYS BE WILLING TO WALK AWAY.
Buying a home can sometimes be stressful. Ultimately you want a home that meets your needs. It’s important to manage your expectations in case you don’t immediately find a home you can afford with the features you need. Then you won’t just buy a house because you are sick of waiting.
Always be prepared to walk away if the sellers don’t accept your offer, the home doesn’t pass a rigorous inspection or the timing isn’t right. Hold fast to your list of must-haves, stick to what you can afford and don’t overreach or settle.
It’s no tragedy to miss out on any particular house. Remember that you’re playing the long game. You want to be happy 10 years from now.
I would be happy to sit down with you to discuss your plan and come up with a strategy that works!