Updated January 27, 2020
So, you are ready to set out and buy your first home. That’s wonderful! Becoming a homeowner can be one of the most rewarding experiences an adult can have. However, it doesn’t come without its fair share of homework that you should do before you settle on a home.
This is why we want to lay out some of the most common things most first-time buyers tend to ask themselves (or us) before they make their final offer. Do not hesitate to contact one of our Realtors to help set you on the right path for owning your new home.
What Can You Afford?
The very first thing you need to consider before you commit to any plans for homeownership, is to sit down and find out what you can afford. This does not mean merely looking into your savings account and counting it towards your down payment. This means looking into the long-term and understanding how much it will cost to live in your home.
On top of your down payment, you have to take into consideration mortgage payments, utility costs, property taxes, as well as home insurance. These costs will extend through the entirety of your ownership, so it is best to prepare early, and not let these expenses catch you off guard.
Location, Location, Location
Finding the right home is one thing, but finding the right area to live in can be a whole different experience. When you are looking for a home to buy, you need to take a good look at your values and needs, and how your home is going to be serving them.
If you are a young couple with no plans of having children in the next five years or so, you might not need to be looking at a four-bedroom, three-bathroom house in a good school district. Instead, consider looking at homes that may be more popular with young professionals like yourself. Look at how far your commute might be to your job, how close friends and family might be, or even maybe looking at areas with higher turn-over rates so that if you need to move, it won’t be as hard to sell.
The same things apply when you are looking for a family home. Be prepared to be living in a home for a long period of time by finding the right fit for the “you” of today, but also for the “you” years down the road.
Understand Down Payments & Amortization Rates
In Alberta, all home purchases require a 5% down payment if they cost less than $1,000,000 or a 20% down payment if it costs more. What this means is that if you are planning to buy a $300,000 home, then the minimum down payment you should be saving for is $15,000 (more or less including lawyer fees and title insurance).
Although having a lower down payment may be cheaper for you immediately, you should be aware of how a smaller down payment will affect your monthly mortgage payments.
This is just the tip of the iceberg, too.
Amortization rates (the period you agree with your lender to pay off your mortgage at a specific interest rate) will also affect your regular mortgage payments. The shorter period you have to pay off your mortgage, the higher your mortgage rate will be. However, choosing this option also means you will be paying less money in interest over time.
By speaking to a Mortgage Broker, you can find the best rates, so you are never paying more than you have to when you finally find the perfect home.
Don’t Forget About Pre-Approval
While you are getting caught up in the rush of buying a new home, it’s easy to forget about applying for a mortgage pre-approval. What a mortgage pre-approval means is that a lender has stated in an official document that you qualify for a mortgage based on your income and credit history.
This gives you a mortgage rate and mortgage amount that you can afford before you start house-hunting. Not only will this give you the knowledge of what type and price of home you should be looking for, but it also locks down your mortgage rate between 120-160 days. This will protect your interest rate, should they rise during your search.
Plan Renovations Carefully
Who doesn’t love a fixer-upper? Finding a home under development can save you heaps of cash, but only if you know what you are going in for. On top of that, you will have the opportunity to improve the value of your home. A lot of homes in Alberta may come with undeveloped or under-developed basements or garages. Still, these renovations can be costly, and if you spend unwisely, you could be losing more money than what you bring in when you sell.
However, you can maximize your profits by speaking to our property managers and planning your renovations carefully while you own the home. Some renovations might be best done with the help of a contractor (like plumbing or electricity), but you can save costs by painting or upgrading your fixtures yourself.
Remember Closing Costs
Just like down payments, there are a number of different closing costs you should keep in mind, and save for, when you start thinking about home ownership. These closing costs not only include down payments, but also legal fees, land title transfer tax, as well as the price of a home inspection.
Buying a home is never only the asking price, and it is always going to cost more at the end of the day. However, by planning and saving ahead of time, you can upset the more significant expenses and never be caught off guard with any fees you might not be aware of.
Hire A Realtor
The beauty of hiring a realtor is that you have someone representing you and your interests whenever you are looking for a new home to buy. On top of this, there are no realtor fees when you are buying a new home with the help of Mountain Park Real Estate. Not only do you save money, but you can also rest assured there is a team dedicated to helping you find the home of your dreams.
Mountain Park Real Estate equips you with all of your real estate and property management needs. If you’re looking to buy or sell your property, trust the experts at Mountain Park Real Estate and you’ll receive the best possible service. Visit our website at mtnparkpropertymanagement.ca or contact them directly by emailing: [email protected] or calling: (587)-355-2384.