Tips for First-Time Home Buyers
If you have never bought a home before, the idea of getting a mortgage and finding a home can be incredibly daunting. There seems to be mystery surrounding the process, especially with more and more people waiting until their late twenties and early thirties to finally quit renting and invest in a home. However, it doesn't need to be a mystery. If you do a little bit of homework and walk into the process educated and prepared, you might find that buying a home is a lot easier than you thought.
How's your credit?
The first thing you should do is look at your credit report. There are three agencies that issue reports: Equifax and Transunion. These reporting agencies create your FICO score, which will be used by your lender to determine what sort of credit risk you are. Basically this means the higher your FICO the lower your interest rate and the more likely you are to get a loan. Your FICO score is so important that you should stay on top of your credit reports. Each agency offers a free report annually and you should take advantage of this to check your score. Knowing what your FICO looks like will allow you to work on raising your score, catch any mistakes and quickly take action if you are a victim of identity theft.
What are your needs?
If your credit is in great shape, the next thing you need to determine is your needs. If you plan to work at home, you'll need a home with an extra room for an office. Maybe you need a large yard for children or an even bigger property for horses. Do you entertain a lot? Then maybe a large kitchen is a priority. Location may also be important if you commute to a job or need to live in an excellent school district. Figure out what features in a house are a must, what are desirable and what are unnecessary. This will help you begin your search and get some idea of what your finances need to look like to get a house that makes sense for your lifestyle.
What can you afford?
Understanding what you can afford is a critical factor in the process of buying a new home. Take a hard look at your income, your expenses and evaluate what a house will actually cost. A mortgage banker or real estate agent can help you crunch the numbers. It isn't enough though to figure out how big of a mortgage payment you can make and squeak by. You'll have to keep in mind a home has extra expenses like insurance, property taxes and repairs.
What are your mortgage options?
It is also important that you do some research and learn about the different types of mortgages that are available to buyers. If you are a first time homeowner, there will be special options available to you, especially if you have a lower income. You'll also want to learn about the difference between fixed rate, adjustable rate and the various exotic mortgages. The more you know, the more likely you will have a loan that you can comfortably make the payments on monthly.
Do you want the best advice?
The Internet is a great resource and researching online can give you more confidence when you meet with mortgage agents, but don't try to do it on your own. Our Mortgage Brokers can help save you time and money and relieve a tremendous amount of stress and confusion.
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The Perfect Match: Choosing the Right Home for Your Family and Lifestyle
Whether you are buying your first home or upgrading to a larger place to accommodate your growing family, there are many things to consider when choosing the best home. It is, of course, important that you love the house you buy, but watch out for first-impressions and infatuation. Just like a love affair, making long-term decisions based entirely on impulse can end tragically. Instead, think through your home purchase carefully and ask:
What can you afford?
The first thing you should look at, of course, is what you can afford. This may not necessarily be what you qualify for; it will probably be less. Take into consideration all of your expenses, including having enough money to set aside for emergencies. If you have never owned a home before, you may be unaware of the expenses that arise with homeownership. If your hot water heater breaks, you can't depend on your landlord to fix it. You also need to take property taxes into consideration. If you've never paid them before, you might be surprised at the expense. Make sure you leave your budget with a little wiggle room. You don't really want to have to live off of instant noodles and soup in order to make your payments. However, if you are just getting off the ground, keep in mind that your income should increase over the years. It's okay to scrimp a little, but be prepared.
How important is location?
Now that you have an idea what you can afford, consider location. The neighbourhood you choose is incredibly important. You will want to think about the school system if you have children. Sure you might find the home of your dreams, but if the school system is terrible, how much more will it cost you to send the kids to private school? Consider the crime rate, traffic, proximity to places that may be important to you like the hospital, your job, the freeway, airports, grocery stores and so on. Call the local police department and ask about the crime rate. Talk to people in the neighbourhood and see what they think about living there. It's a good idea to drive through the neighbourhood at different hours of the day. There may be heavy traffic at rush hour or shady characters lurking about at night. You'll want to pick a neighbourhood where you feel comfortable and hopefully one where the properties are quickly gaining value.
Is it time for something smaller?
If you aren't new to the home buying market, you probably have a pretty good idea where you want to live. If you're an empty nester looking for a smaller home, consider getting a much smaller home with some luxuries. Chances are you won't need a basement or more than a couple of extra rooms. Keep in mind that the bigger the house the more your utility bills will be. Why not treat yourself to efficient home with beautiful wood flooring and maybe a gourmet kitchen. Find a place with fewer rooms and more features.
Whatever stage of home buying you're at be sure that the house you choose and terms of your mortgage will allow you to gain equity in your home. Life changes, sometimes surprisingly and rapidly. You should always be in a position where you can sell your home and break even if not come out ahead. You don't want to be in the position of having to pay out of pocket after the sale. Choose carefully and your house will be more than a home, it will be an investment. Our Mortgage Brokers can help.
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Tips for Buying a Home with Strong Resale Value
If you are a first time homebuyer, resale value may be the last thing on your mind. However, the one thing that you can depend on in life is change: If you are single, you may get married then a long comes a child or two. What about room for an elderly parent? There is also the possibility of promotions and new jobs that require moving. Many people these days live in a home for no more than five years. So no matter what stage of life you are in, it is a good idea to consider the resale value of a potential home.
Location
We all know that the number one selling point of any property is always location, location, location. This is the most important aspect of a new home to keep in mind. You may not have a problem with living in the flight path of the airport if the price is right, but what about the next potential buyer? Quiet locations in clean areas that are near shopping, schools and close to public transportation or accessible by major highways may be more likely to entice potential buyers. Consider the overall area. Is it a family neighbourhood? Then you probably want a house that is in a good school district, close to parks with a backyard and plenty of bedrooms. If you purchase a smaller house that might be a good retirement home, is it close to the grocery store, restaurants and medical care? If the area has many new houses in construction and old houses being restored and remodelled, chances are the neighbourhood will continue to improve and buyers will look favourably on the area in the future as well.
Curb Appeal
A house that photographs well and looks great on a drive by is more likely to sell. Excellent lighting, attractive gardens and lawns, as well as driveways and garages can be very appealing to folks just taking a quick look from the outside. You have to make a good first impression, so buying a house that's attractive at first glance can mean that resale is easier.
Features
You will of course want to buy a house that has features that appeal to you, but make sure you purchase a home that has features with universal appeal. For example, that spiral staircase may be gorgeous, but it will quickly turn off potential elderly buyers, buyers with children and those that worry about guests injuring themselves. Hardwood floors however, are a classic feature that is attractive and appeals to most all buyers. There are some features that will be highly likely to increase resale, such as fireplaces, large master bedrooms with an attached bathroom and an open floor plan. If you have a choice, consider homes with these extras.
Build your own or buy a new home?
If you are certain that you will be selling your home within a few years, you may be wondering if it makes more sense to buy an older home or a newly built home. Many homeowners are building their own homes so that they can get the exact house they are hoping for, but this may not necessarily make good re-sale sense. Consider all the aspects that make an older home appealing when buying or building a brand new home. It's fun to get to choose cabinets, countertops and landscaping, but if your choices are trendy, potential buyers may find them outdated when it comes time to sell your home. Make choices that are classic and neutral and you will be more likely to resell.
What about renovations?
There are certain projects that can raise the value of your home, as well as the likelihood of resale, such as kitchen and bathroom renovations. However, even smart remodels may not give you a complete return in the investment. If you are frugal with the money involved in the renovation and make improvements that increase curb appeal, bathroom or kitchen areas, it may be worth the effort and expense.
It is difficult to predict the housing market and what particular details will be popular, but if you make careful consideration to the most important features you will be more likely to have a home with excellent resale value. And when you're ready to move and take on a new mortgage, our Mortgage Brokers can help.
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Your Credit Rating and Buying a Home
If you are looking at purchasing a home, the first thing you need to do is look at your credit report and find out what your credit rating is.
You credit score, also known as your FICO, is really the key to your financial life - it will partially dictate whether or not you can qualify for a loan and it will determine the interest rate you'll get.
FICOs range from 300 to 900 and basically tell lenders what kind of credit risk you are. At rating of 750 and up indicates you're reliable and responsible with debt - you're more likely to get the best rates. A score of less than 620 puts you in the high-risk category. Your score is based on the following five attributes:
- Payment history 35%
- Amounts owed 30%
- Length of credit history 15%
- Types of credit used 10%
- New Credit 10%
If your score could use a little improvement, you can increase it by being aware of what makes credit agencies consider you a risk and lower your score. Manage your finances carefully and increase your score by:
Paying Your Bills on Time
Your biggest concern should be your payment history. It shows how you repaid debt in the past and the score takes into account past behavior to predict long-term behavior. In other words, don't make late payments if you don't want your score to plummet. In fact, the best way to get your score to climb is to pay everything on time and do this consistently. It makes you look like a model citizen who is likely to make their loan payments.
Taking Care How Much Revolving Credit You Have
Avoid opening numerous new credit accounts at once. All those cards with great interest rates may look fantastic, but if you apply for a few at once, your credit score will drop. Increased activity like this is read as a person that may be in financial trouble. The cards that you do have should have balances well below the limits. Credit cards that are all but maxed out also look like the sign of someone about to find themselves in financial difficulty. Surprisingly, it is also a bad idea to pay off all your credit cards at once. The elimination of a bunch of accounts will lower your score, especially if you close them. Part of your score is dependent on your credit history and closing down the cards you've had the longest can adversely affect the length of your history.
Rebuilding Credit
If your credit is in such bad shape that you can't even get a credit card, you can still rebuild it. The process will just take longer. Start with a secured credit card, a card that is backed up by a savings account. The information involving your timely payment will get reported to the credit agencies just like a normal credit card and your credit score will begin to increase. Always take tremendous care that you make your payments on time and keep your balances low so that you keep yourself out of trouble.
Track your credit score annually and be aware of your score
If you are careful to make financial decisions that will increase your credit your score will shape up fairly quickly. Our Mortgage Brokers can help you address a less-than-stellar credit situation and get you into the house you want faster.
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Don't Forget Closing Costs
While the purchase price of your new home is the biggest cost you'll face on closing day, it's not the only one. It's important to set aside funds for other major closing fees, including:
- Survey Charges
- Land Transfer Taxes
- Attorney Fees and Disbursements
- Garbage Disposal Fees
- Title Insurance
- Fire Insurance
- Added taxes that vary according to province and municipality.
As a rule of thumb, it's recommended you budget up to 1.5% of the purchase price of your home for closing costs.
Our Mortgage Brokers can help assure you have the money set aside to cover all closing costs.
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The Real (Monthly) Costs of Owning a Home
Home ownership is exciting and rewarding but it also comes with ongoing financial responsibilities.
Monthly expenses include:
The Mortgage Payment
For most homebuyers, this is the largest monthly expense. The actual amount of the mortgage payment can vary widely since it is based on a number of variables, such as mortgage term or amortization.
Property Taxes
Property tax can be paid in two ways-remitted directly to the municipality by you, in which case you may be required to periodically show proof of payment to your financial institution; or paid as part of your monthly mortgage payment.
School Taxes
In some municipalities, these taxes are integrated into the property taxes. In others, they are collected separately and are payable in a single lump sum, usually due at the end of the current school year.
Utilities
As a homeowner, you will be responsible for all utility bills including heating, gas, electricity, water, telephone, and cable.
Maintenance and Upkeep
You will also have to cover the cost of painting, roof repairs, electrical and plumbing, walks and driveway, lawn care and snow removal. A well-maintained property helps to preserve your home's market value, enhances the neighbourhood and, depending on the kind of renovations you make could add to the worth of your property.
A Mortgage Broker can help you prepare for the costs associated with home ownership.
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Prepping Your Home for Selling
If you are selling your home you've probably already heard about "curb appeal." It's that magic that gets a potential buyer to slow down and take a look at your home. Of course, curb appeal is not the most important selling point of a home. Most buyers are ultimately looking for a sound investment and won't buy a money pit even if it does look pretty from the outside. However, if you are competing with a neighbourhood full of homes that are all fairly new, curb appeal and some other inside touches may be what ultimately gets the buyer inside and seals the deal.
Outside
Buyers are going to form a first impression of your home in the first 15 seconds. This means landscaping can make all the difference. Splurge on colourful flowers. Then take the time to mow, weed and pick up any trash that has blown into your yard. A well-groomed garden is mostly going to cost you in time spent. If you don't want to manage plants however, you can also put in an appealing rock garden with a nice water feature or two. Don't forget your fencing either. If it's falling down or needs a coat of paint, take care of it. Get your landscaping ship-shape and you'll get the buyers to your door.
Touch up the paint on your eves and windowsills. If the exterior of your house is an odd color or the paint is fading, it's worth painting the entire house. Choose neutral and elegant colors that are likely to appeal to most anyone. Consider the lighting outside as well. Over-lit houses look garish and under-lit homes look spooky. A few well-placed lights to highlight the more beautiful aspects of your house can make a dramatic effect when the sun goes down.
Inside
Clear the inside of your home of extra clutter and items that are too personal. If you have a hallway full of family pictures, it's a good idea to take them down and put up some more neutral art. Clear the collection of beer bottles off your shelves and replace them with a couple of plants. Maybe even put a couple pieces of furniture in storage if a room looks too cluttered. You want your home to look inviting, airy, but not empty. The goal is to help the potential buyer imagine your house as their new home.
There are some other small things that you do inside to add to the appeal as well. Consider replacing the faucet in the kitchen with a fancy one. Patch any holes and repaint the walls in neutral shades. Caulking sinks and the bathtub is another inexpensive and quick way to make things look new. Then buy fluffy towels for the bathroom and add scented candles and fresh flowers around the house.
It's the little things that add up and make a home stand out on the market. So take the time to really spruce your place up. As the market cools, curb appeal and ambience will make all the difference between a house that sits on the market for months and one that is snapped up right away.
If buying a new home is part of your plan, our Mortgage Brokers can help.
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