Buying your first home? This is an exciting experience that you will remember for the rest of your life. However, you want to make sure you are able to look back on this journey with fondness instead of disappointment! It’s important to ensure you are fully ready to enter the housing market before diving in. Here are some questions you can ask yourself to help answer whether or not you are ready to become a homeowner.
Have you been saving a down payment?
Your down payment is the largest upfront cost you will face when purchasing a home. The exact amount, however, will depend on your future home’s purchase price. Homes under $500,000 require a down payment of at least five per cent. If your home is between $500,000 and $1 million, you can pay five per cent on the first $500,000 and 10 per cent on the rest. Any home over $1 million requires a full 20 per cent of the entire purchase. As an example, a five per cent down payment on a $400,000 home is $20,000. Even the smallest down payment is still a major expense.
If you are planning to enter the housing market, you need to have a down payment saved up ahead of time. It takes time to build up to this level of savings, meaning most first-time buyers cannot just jump into the market without any planning. If you have been consistently adding to a savings account dedicated to a down payment, this is a sign you are in a good spot.
Do you know what you’re looking for?
Another important part of buying a home is knowing what it is you want. It makes the process much easier when you know what you’re looking for before you start house hunting. This includes things like location, property type, size, and any specific housing needs you have. If you are part of a family of five, you probably won’t be interested in viewing a two-bedroom bungalow. Conversely, a young couple likely won’t be looking for a six-bedroom house. Take some time to think carefully about what you would need to have in order to live in a certain home. You should also isolate your needs from your wants. Make your must-haves a priority before you start thinking about your nice-to-haves.
Are you prepared for more responsibilities?
Owning a home automatically means more responsibilities, especially in terms of maintenance. When you rent a property, you are still in charge of things like cleaning, but generally exterior maintenance or repairs are covered by the landlord. However, once you own a house, all of that responsibility transfers over to you. You need to keep your house clean, your yard tidy, and pay for anything that needs to be replaced or repaired. Over time, every homeowner experiences a broken furnace or busted freezer, and it’s on them to take action. It’s important to make sure you are ready for the extra effort and cost of these kinds of situations, as they are sure to pop up!
Do you have a proper budget?
This is perhaps the most critical part of preparing to enter the housing market! Having a firm budget gives you a clear guide of what you can and cannot afford. Staying within your budget ensures you don’t become house poor or overwhelmed by the responsibilities of homeownership. How do you create an accurate budget? Your income, expenses, debts, savings, and credit will all come into play here. Of course, sorting out the right budget on your own can be tricky, which is why we recommend contacting a mortgage professional (more on that below!). Once your budget is confirmed, do not go over it. Assuming you are accurate in your calculations, you know exactly how much you can afford. Anything past this amount should be treated as too much.
Your first step is to contact a broker!
Like we just mentioned, a mortgage professional is a key part of entering the housing market. A mortgage broker can help new home buyers with a variety of items. We can guide you through your budget, predicted expenses, interest rates, potential mortgage products, and more. If you’re a first-time home buyer, that probably means you’re not an expert on the housing market! That’s totally fine, as long as you invest in the professional guidance of someone who is. If you try to go through this process alone, you will have a much more difficult time and are likely to end up overspending, or be unable to secure a mortgage at all. Many lenders prefer to only work with clients who come from a broker. With that in mind, make it a priority to reach out to a mortgage professional as soon as possible.
The decision to enter the housing market brings the potential for lots of excitement, but only if you’re truly prepared for it. Buying a home can feel stressful and complex, so you want to make sure you are going to enjoy the feeling of homeownership in the end. Getting in touch with a broker is a great way to start your buying journey! Taking this step means you can begin the purchasing process on the right foot.
If you have any questions about your mortgage, get in touch with me!