Here we are, a new year and a new real estate market. These 5 steps will help prepare you for the Spring market so you can get ahead of the game while others are still hibernating and waiting for the weather to get warmer. There are other steps out there too, but in my experience these shouldn't fail you.
Step #1: Check your credit score - If it’s not good, clean it up
More than likely you will need a loan to finance your home. Lenders want to know if you are creditworthy before they hand over a big cheque. Do you pay your bills on time? According to Equifax, payment history alone makes up 35% of your credit score. A Credit score will range between 300-900. The higher your credit score the lower your rate will be.
Did you know that you can check your credit score for free once a year by contacting one of Canada’s credit bureaus? Transunion and Equifax are two safe agencies to help you get started. Check your score and see how worthy you are before you apply for your loan so that you have time to clean it up if need be.
Step #2: Find out how much house you can afford
This step really helps you learn what is practical based on your situation and lifestyle. To get a rough estimate, try using an online calculator. Of course the true test will be speaking with a mortgage professional either through your financial institution or through a mortgage broker. It’s good to set your expectations early so that you don’t end up disappointed later. It also has the added benefit of allowing you to lock in a good interest rate. Can you imagine being turned down for that sweet $450,000 home because you didn’t know that you were only able to afford a home for $300,000? This is why the first thing I always recommend when preparing to buy a home is to go and get pre-approved for a mortgage.
Step 3: Save money for a down payment
Unless you plan on buying your home in cash you will need to show that you have some skin in the game. The more money you can save up and put towards the purchase of your home, the lower your monthly payments will be. According to the Government of Canada, a home purchase of up to $500,000 requires that you pay a minimum of 5% down. Be mindful of your shopping expenses, entertainment costs and even guilty pleasures. Every dollar counts. An extra 5-10K can be the difference in a better location for you and your family.
Step 4: Sit down with a Realtor
A Realtor is a professional who can facilitate the entire process for you. There are two types of representation. Buyer representation is when an agent is looking out for your (the buyers) best interests during each step of the home buying process. Conversely, seller representation is when an agent is looking out for the sellers’ best interest. There is a big misconception that if a buyer contacts the listing agent of a property, they will get a better price. However, if you are not being represented by the agent showing you a home, than they are most likely representing the seller and their best interests, not yours.
The value a buyer agent can bring to you includes the knowledge of the entire process, helping determine which homes and locations are best suited for you, taking care of all the showings and paperwork for you and of course, negotiating the best terms for you. Best of all, these services are essentially free because your agent will be compensated from the proceeds of the sale of the home and not out of your pocket.
To find out more about the nine steps in the home buying process, check out my home buying guide. A Realtor is like the hub of the transaction. You can get directed to anyone involved in the process like a one-stop-shop, whether it has to do with finances, inspections, lawyers or even contractors.
Step 5: Begin your research
Once you know how much house you can afford the fun begins with browsing the MLS for properties. To make this even more efficient, your agent can set you up on a listing portal which will instantly notify you when the best homes that match your criteria become available.
Determining your needs vs wants is a great exercise to do. Another great tip is to narrow down what you don’t like or where you don’t want to live. This ongoing research will help you find exactly what you want and don’t want faster and will help you avoid missing great opportunities in a fast paced market. Also your research doesn’t have to just be online. Go outside and drive by neighbourhoods and visit open houses too.
Recap:
Fix your credit score if you think it’s not up to par so you can get the best rate possible
Find out how much house you can afford with a pre-approval from a mortgage specialist
Save enough money for a down payment and watch your spending
Sit down with a Realtor to understand the process and have your interests protected
Research as much as you can by exploring your needs/wants and getting outside to really understand the neighbourhoods you may be interested in.
Following these 5 simple steps will help prepare you to buy a home this year and put you in the best position to find the right home at the right price. For more great tips and material on buying a home check out shamiljessa.com.
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