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5 Things You Should Know Before Buying Your First House : Regardless of how smooth the process goes, buying a home is a huge undertaking. Between budgeting—which isn’t as easy as you’d think—to finding the best mortgage terms and broker, house hunting requires a lot of time and commitment. Here are five things, taken from our personal experiences in the industry, that we believe all first time buyers should know before buying a home.
01. Get pre-approved before you start house hunting
There are three good reasons for having a pre-approval in hand before you start looking for your dream home. First of all, your pre-approval will help you set a realistic budget, preventing you from browsing through, or even visiting homes you can’t afford. There’s nothing worse than falling in love with a property before realizing it isn’t within your financial means. Secondly, a pre-approval indicates to sellers and brokers that you’re a serious buyer, strengthening your offer and giving you an advantage in the case of a bidding war. And lastly, it secures your access to the lowest interest rate, in case there’s a fluctuation in rates while you’re looking for a property.
02. Set up an alert- it’ll save you time and money.
A property alert is an automated tool that sends you a notification each time a home that fits your criteria is listed for sale on the market. You enter your budget, required number of rooms, property type and acceptable neighbourhoods, and then sit back and wait for the perfect fit. You can also customize the frequency of the alert- to be instantaneously notified, or to receive a list of new listings every day, week or month.
With an alert running, you won’t need to spend hours each evening searching for new properties within your budget. You also won’t miss any great opportunities; the best deals tend to close within a few days of being listed for sale so to stand a chance at buying them you’ll need to request a visit before other buyers and investors put in their offers.
03. Work with a broker
A buyer’s agent is actually paid for by the seller when a home is sold, so working with a broker won’t cost you a cent. Brokers will be able to provide you with invaluable market knowledge, and will act as legal and financial councillors when it comes to the determining whether a home will be a good future investment. As a first time buyer, there is much value to having a professional representative who can guide you at every step of the way- from identifying an attractive opportunity (and warning you against risky purchases!) to navigating the legal contracts and representing you during the negotiation process.
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04. Don’t put in an offer without a CMA
Once you find a home you like, your agent should help you to put together an offer that will be formalized in a binding contract between you and the seller. Your offer should be based on (and justified by) a Comparative Market Analysis, which takes into consideration the physical characteristics of the property, and the recent sales made in the same residential district.
Based on the findings of your CMA, consult with your broker how aggressive you want to be in negotiations, and whether you want to add any terms or clauses to your offer.
Also decide whether you want your offer to be subject to the home passing inspection. A traditional home inspection covers any flaws in the property so that you know exactly what you’re getting into. The findings of an inspection can justify a price reduction to account for damages or renovations that will need to be made.
05. Don’t make any major life changes in the final stages of your purchase
After your offer is accepted, it typically it takes about a month until you finally notarize the sale and do the exchange of keys. During this time, the mortgage agents and lenders are reviewing your loan application, and making sure that all the documentation you provided, from tax returns to salary information, is truthful and accurate. Since the mortgage industry is heavily regulated, any red flags that arise during this time could compromise your application and cost you the home. It is extremely important not to switch banks, make big purchases (such as a car or expensive furniture), or change jobs while your application is under review, as this may cause your debt to income ratio to appear unstable. Until you’ve signed the final act of sale, keep your expenses as minimal as possible and don’t make any requests for new credit cards or credit checks.