Text by Deborah Hiebert
If you are making the transmission from renter to homeowner, you’re not alone. In 2004, 40 percent of homebuyers were purchasing for the first time, according to “The 2004 National Association of REALTORS® Profile of Home Buyers and Sellers.”
With interest rates at all-time lows and a booming real estate market, now’s a good time to purchase real estate. However with the prospect of making one of the largest investments you’ll ever make in your life, you can easily become overwhelmed. Some of the questions you may be asking are: Will I be able to afford the home of my dreams? Do I have enough money for a down payment? Will I make smart enough home buying decisions? If you go into the process prepared, your first purchase can be a good experience.
Resources—Before starting out, educate yourself on the process. Check your library or local newspaper to find a homebuyer seminar that you can attend. It has a list of common questions of first-time homebuyers, information on mortgage and home-buying programs, access to housing counselors, downloadable tools such as a wish list and home-shopping checklist and tips on selecting a real estate professional. Other informative sites to check out are www.ginniemae.gov and www.realtor.com or the website of a real estate company you know and trust.
Your real estate professional is also a great resource. Don’t hesitate to let him or her know that you are new to the process. They will expect you to have questions at each step-from house hunting, to making an offer to the closing costs to think about.
Affordability—By looking at your income and debt ratio, your sales professional can help you calculate out how much you will be able to pay each month in mortgage payments. But before determining your price range, you should also take into consideration other factors that will affect your monthly budget once you are a homeowner, such as property taxes, insurance, utilities, and maintenance. And if your down payment is less than 20 percent of the cost of the home, you will be responsible for private mortgage insurance, more commonly referred to as PMI.
Mortgage Payment—Fear of being rejected for a home loan is one of the main concerns for first-time homebuyers. To lessen the stress, you may want to get pre-approved for a loan before looking at prospective homes. This will not only help you feel more confident, it will also give you an advantage where there are multiple offers for a specific property. In addition, the fact that your loan has already been approved is of great value to the seller because it shortens the purchasing process, and there is less of a chance that the buyer will back out of a sale. If you don’t have a specific mortgage lender in mind, ask your sales professional for a recommendation.
Down Payment—The down payment amount varies depending on the value of the home you choose and your mortgage lender. And in some cases, first-time homebuyers can purchase a home with no money down. Although it varies from province to province, most offer government-funded programs for first-time buyers that help people buy a home with no down payment. Your real estate professional will be able to explain the different options available to you.
Making offers—Don’t feel pressured into making an offer on the first home you see. This is a common mistake of many first-time homebuyers. Make sure you view different homes to get a feel for the marketplace. When you decide on a home to make a bid on, work with your real estate professional to get all of your questions answered before making an offer. But don’t wait too long to make an offer. The longer you wait, the greater the chance other prospective buyers may place offers, making it harder for you to negotiate a good deal.
Above all, remember there are no silly questions. Make sure you understand and are comfortable with every aspect of the transaction. Your real estate professional can be an invaluable asset in helping you make educated decisions so that your first home purchase is a rewarding experience.