Buying your first house can be a daunting task. I just bought my first house 6 months ago and had no idea what I was doing to start with. If you are in the same boat, here are 5 things you can do to make buying your first house a little easier.
Things You Will NeedPatience
Take a DriveOne of the first things you should do when looking to buy your first house is to take a drive around the neighbourhood you want to live it. Look at the types of homes / condos / apartments in the neighbourhood, is this what you expected? Some things to pay attention to are:
1. How many For Sale signs are there? If you see quite a number, it could indicate there's a problem and people want out.
2. How close is the closest grocery store, restaurant, work, gym, highway, corner store? You may not mind driving but having to drive 30 minutes to get to any necessity can quickly add up on the gas bill.
3. What do the other houses look like? Are they run down? Your neighbour's property and houses will affect your future home's value down the road when you are looking to sell.
4. If there are some homes being sold, see who the real estate agent is. You want to make sure you are working with someone who knows the area.
Browse Online ListingsTake a look at online listing sites like mls.ca or mls.com. These tools have come along way in the last couple of years and allow you to browse neighbourhoods to see what homes are being sold and filter down to your wants / needs. For example, you can narrow down your search to a specific city block, filter results to detached homes, priced $300,000 - $400,000 with 4 bedrooms and air conditioning.
Using these tools allows you to quickly search neighbourhoods and get an idea of what common house prices are. This helps narrow down what areas you can afford and what you are looking for.
Define Your Must HavesGrab a pen and paper, sit down and divide the paper up into 3 columns, Must Haves, Nice to Haves, Don't Want. Take some time to sit down and think about what it is you absolutely must have in a house. Is it 2 bathrooms? Does it have to be detached? Does it need a finished basement? Then do the same thing for things that would be nice to have and things you absolutely couldn't stand. For me, I absolutely wanted a refinished home so I didn't have to do any work. It was nice if it was detached (I didn't buy detached but wish I did - I hear my neighbours sometimes). And I absolutely didn't want to spend more than $400,000.
Contact A Real Estate AgentNow that you have an idea where you want to live, how much homes cost, what you can expect in those homes and what you really want vs. kind of want, it's time to talk to a professional. If you found some agents to call when you explored your neighbourhood of choice, this is the time to call them. If you didn't, go back to mls.com or mls.ca and look in the neighbourhood again. You'll see on the site who the listing agent is.
Call the agent and explain your situation, you are a first time buyer, don't know what to expect and want to sit down and talk. Be prepared for some agents to push back. When I did this, some agents told me to call back when I was ready to buy (I told them I was looking to buy in 6 months). Other agents brought me in to chat and explain the process. I suggest you meet with 3 agents to get a feel for the right person. Be up front and explain your situation and that you are meeting with other agents to find the best fit.
When you meet with the agents, you want to prepare questions. Here are some common questions to ask:
1. Who is your typical client? (you don't want to work with an agent whose typical client is a millionaire - unless you are).
2. What areas do you primarily deal with? (you want to make sure they are familiar with the neighbourhood you are interested in and that they know the market).
3. What is the typical process once I've decided I want to make an offer? (my wife and I didn't realize but in the Toronto market, when you make an offer, you include a 20% deposit. This can be pretty financially steep for some first time buyers).
4. What should first time home buyers know? (again, make sure they have dealt with first time buyers. It's going to be pretty stressful at times and you want to make sure you're agent will be there to support you).
5. What if the seller isn't offering the usual commission? (Typical sales commission is 5% in Toronto and is paid by the house seller. Sometimes they will only be offering 4% which means your agent will only get 2% instead of 2.5%. Some agents expect the buyers to pick up the slack in that case).
Check Out MortgagesNow that you have an idea on the process, it's time to make sure your money lines up. Book an appointment with your bank and look into mortgage lending rates. A mortgage is a huge loan that banks or other lenders will provide you to buy a home. Typically, you are allowed to pay off the loan over 15, 20, 25, 30 and in some cases, 35 years. This will likely be the biggest loan you ever receive so take some time with it.
After you meet with your bank, set up some time with another bank and then a mortgage broker. Mortgage brokers are people who are (typically) licensed to work with lenders and help home buyer find the best mortgage rates. I chose to work with a mortgage broker because he worked with all the major banks and was able to get us a cheaper rate than our bank could offer.
If you are looking for a mortgage broker, the best way to find a reputable one is to ask the real estate agent you were working with. They often have a network of contacts they can pass along.
First time home buying can be pretty stressful. The number one thing to do is to take your time. This will likely be your biggest purchase and you want to make sure you do it right.