Following up on my latest post on first time home buyer tips, I’ve decided to share more insight on the great financial experience that is buying a house for the first time! I thought it would be interesting to delve deeper into each of the steps for a first time home buyer just to make sure you don’t forget anything. So here we go!
– Get your budget in order
All right, we all want to be a home owner. However, it doesn’t mean that we can all afford it. The very first step prior to shopping for a house is to get your budget in line. Consider your current expenses along with additional spending that comes with a new home:
– Taxes
– Energy costs
– Condo fees
– Insurance
– Renovation / Maintenance costs
– Equipment (lawn mower, shovel, tools, etc)
– New furniture
– Curtains and accessories
– Get your documents in order
Before making an appointment with a banker, make sure you have all your documents. You can call your local bank to know what is required. Ask for a specific list according to your financial situation (documents are not the same depending if you are an employee, self-employed, property owner, etc.). Get everything in a file and then book an appointment).
– Go see your bank for a preapproval
As I have mentioned in my first home buyer tips, it’s easier to shop for a house with a preapproval. This is your occasion to ask your banker all the questions that come to mind regarding the transaction. It will also be a great opportunity to check with him if your budget calculations were in line with the bank’s debt ratio calculations!
– Go see a real estate agent to shop
Now the real fun begins! Sit down with a real estate agent and tell him what you are looking for in terms of:
– price
– number of rooms
– neighborhoods
– nice to have (pool, near schools or parks)
– things you don’t want (near a highway or commercial center)
He will then pull out all the properties matching your criteria and send you the listings.
– Visit at least 5 properties
In order to make up your mind and make sure you make the right decision as a first time home buyer, it’s important to look at a minimum of 5 properties. You will then be able to compare them and know exactly what you are looking for.
– Make an offer (negotiation process)
Once you find your first home, it’s time to make an offer. Ask your real estate agent to pull out recently sold houses in the same area. You will be able to assess what is the value of the property and what would be a good offer to make.
– Get back to your bank for the official letter of approval
Once the offer is accepted by both parties, it is time to turn around and ask for the official letter of approval from your banker. You then ask him for his best rate and you let him know that you will negotiate with a mortgage broker as well. Remember, the rate is one thing, but the structure of the mortgage is important too. Make sure to have a good discussion about which kind of mortgage you want.
– Negotiate rate with your banker and a mortgage broker
If you really want to pay the lowest rate possible, you can always go see a mortgage broker. This is an additional step that requires that you go through the whole process of mortgage qualification. Sometimes, you might negotiate harder with your banker and get the right mortgage and the right rate the very first time!
– At the same time, you need to get an inspection done on the house you are buying
While you are in the middle of the mortgage process, you also need to have an inspection of the house completed. This is very important as the inspector will tell you if the house is in good shape or not. If major renovations are required such as new replacement windows or a new roof, you are allowed to back off and withdraw your offer. You can also renegotiate the price according to the things that has been discovered.
– Start looking for a lawyer to close the transaction
You will need to get in touch with a lawyer in order to finalize the transaction. Prices and services are different so make sure to call a few lawyers to know what is involved.
– Shop around for insurance
You need to insure your property against fire, flood, break ins, etc. but you should also insure your loan through a life insurance policy. Take a good day to shop around, the internet is a wonderful tool to ask for quotes ;-).
– Sign your documents at the lawyer and receive your keys!
That’s an easy step! The lawyer will contact you a few days prior to your meeting telling you how much you need to bring (your cash down + fees). The bank will send the money from the mortgage.
– Move in and enjoy ;-D
That’s it! You are in your new house, Congratulations to all first time home buyers!
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