Are you overwhelmed by the Fraser Valley housing market but still interested in purchasing your first home? Here are some of my tips for first time home buyers to get into this real estate market without breaking the bank.
1. Get pre-approved for a mortgage.
Getting pre-approval is an important first step in the home purchasing process, particularly for first-time buyers. What you can afford to spend is determined by your pre-approval. Getting pre-approved for your first mortgage also marks you as a serious buyer and lets you jump on putting in an offer without waiting for your pre-approval to come through. For more information on pre-approval check out my article Are You Ready to Quality as a First Time Home Buyer?
2. Hire a local Realtor® you are comfortable working with.
A professional Realtor® is an invaluable asset to finding the right home for you. From their wealth of knowledge of neighborhoods to helping you write a competitive offer that works in your favor, a Realtor® will save you time and money in the long run. A Realtor® also has a network of individuals like insurance agents, credit counselors, and home inspectors that can make the entire home purchasing process a smooth, relatively easy experience.
3. Sit down and develop a realistic monthly budget.
Identify all sources of revenue and expenses, as well as the new expenses of home ownership including mortgage payments, property taxes, insurance premiums, strata fees, and so on. Is there enough money left at the end of the month for you to sleep at night?
4. Make sure your budget and lifestyle match.
Lifestyle is an important consideration when purchasing a home, particularly the cost of your current lifestyle. Owning a home could mean that your social relationships (such as a dinner out with friends) may no longer fit into your budget as frequently as you might like.
5. Remember to use First Time Home Buyers incentives to stretch your dollar.
There are a number of first time home buyer benefits you should know of. The CHMC first time home buyers tax credit offers up to $750 in federal tax relief. The Home Buyers’ Plan (HBP) also allows you to take up to $25,000 from your RRSP savings to purchase or build a home. You may also avoid having to pay CMHC mortgage loan insurance by having a down payment of 20% or more.
6. Know your mortgage options.
Play around with your numbers and watch your mortgage get paid off sooner by switching to bi-weekly payments rather than monthly payments, shortening your amortization period, or even just bumping up your mortgage payment by $20 a month.
7. Make your house hunt a priority and be ready to make an offer.
In such a fast paced real estate market (April 2016 was the fourth month in a row of record-setting real estate) where you are competing against multiple other prospective buyers you need to make your search a priority. This may mean taking a few days off work to view properties and being ready to write an offer fairly quickly after viewing a property.
8. Stay open minded and look past cosmetic eyesores.
During your search for the perfect house, you will more than likely come across ugly wallpaper, outdated cabinetry, and tacky window coverings. Try to look past these eyesores and appreciate the layout and size of the home. Ensuring that the condition of the hot water tank, the plumbing, the electrical, and the roofing are in order should be your first priorities.
9. Remember that your first house probably won’t be your forever home.
Did you know that seven to ten years is the average length of time that people live in their first two homes? The house may not be exactly what you want, but statistically, your starter home is just that. A place to begin your home ownership journey.
10. Don’t let your emotions get the best of you.
Use your head and think about your purchase. Don’t use your heart when viewing a listing. Is the house centrally located? Could you live in the home for 5 years? If this purchase just a make-do situation until something better comes along, then think about why you are considering the purchase at all. Don’t get caught up in loving a home that is outside your budget.
11. Avoid making large expenditures beforehand.
Financing a car or spending a significant amount of your savings before applying for a pre-approved mortgage are not good ideas. Unfavorable bank loan terms, or flat out mortgage rejection, could burst your home ownership bubble.
12. Budget for closing costs.
Canada Mortgage and Housing Corporation (CMHC) recommends setting aside 1.5% to 4% of purchase price to cover these costs. And try to save some money for those unexpected circumstances that may arise, such as hot water tank failure.
As a Sutton Realtor® in Surrey and White Rock, BC I work with first time home buyers all the time. I can walk you through all the considerations for first-time home ownership and make the process as easy as possible for you. Call our office a 778-316-4290 or contact us to set up a time to meet with our real estate agents!