The real estate market can be tough to navigate for first-time homebuyers.
Here are 10 tips for first-time homebuyers:
1. Determine what you can afford. The first step is to meet with a lender, review your finances and find out how much you can afford to spend on a home and how much you have for your down payment. Experts warn also not to shop for the most expensive home you qualify for, unless you truly can live with the payment that comes with it.
2. Make a list of your criteria and priorities for your first home. Purchasing your home will require compromise and its important that you have thought through what you are prepared to give up to get into the market.
3. Shop for a mortgage. Don’t use whatever lender your agent recommends without doing some independent shopping. Another classic mistake: calling 10 lenders and asking for their interest rates. A lender can’t be held to those quotes. It’s better to look up mortgage rates online, then call three or four lenders and mortgage brokers and ask them for a written list showing their fees.
4. Get pre-approved. Getting a lender to pre-approve a loan before you shop can make your offers more attractive, while avoiding deals falling apart because loans don’t get approved during escrow.
Get all the documentation you’ll need for the loan process – tax returns, pay stubs, bank account statements. Find out from your lender exactly what you’ll need.
5. Pick an agent who’s right for you. Get referrals for agents from friends and family, then talk to each one. Look for someone with whom you can communicate. Actually interview them as if they were job applicants since, after all, they do work for you.
6. Find a home you can afford. Make a wish list of where you want to live and what you want to have in your home. But don’t fall so in love with a particular home that you don’t see its flaws. Move on if the asking price is unrealistic or the seller is unreasonable. Or if the bidding rises beyond your budget.
7. Scope out the neighbourhood. Your agent likely can provide local school ratings and area demographics. You can get crime reports from local police departments or their websites. Then walk and drive the neighbourhood, returning at different times of the day and different days of the week. Visit local supermarkets to see who goes there.
And talk to the neighbours. That’s the only way to learn about the neighbour from hell, the incessantly barking dog or whether trains blow their whistles nearby.
8. Make a realistic offer. First-time buyers should find out what comparable homes sold for, learn the true value of the property and make a realistic offer. A good agent will be diplomatic, but honest if your offer is too low. If the home is priced right, bid the asking price or a little over. You might, however, run into trouble getting a loan if your offer is higher than the lender’s appraised value of the home. Lenders won’t approve the loan if the appraisal is less than the loan amount.
9. Find a good home inspector. Talk to two or three inspectors rather than blindly accepting one your agent recommends. Get referrals from family and trusted friends to make sure you find someone working for your best interest and who isn’t trying to help his or her friend, the agent, close the deal. Be aware of deadlines during escrow. And respond in a timely manner to the home and termite inspections, seller disclosures and the preliminary title report so you don’t miss your chance to opt out if a problem arises.
10. Be patient. Finding a home in the Toronto market is not easy, it takes work, perseverance and patience. If you stick to the plan, I am confident that you will find that home. And of course, if you need help with the process, I would be happy to help.