It goes without saying that buying a house is a major milestone for anyone and that it certainly isn’t a process to be taken lightly. You must be prepared. With that in mind, we have put together a simple home buyer checklist that covers the basics of getting ready for the homeowning experience.
✔Calculate Your Budget
We all want to buy our dream home, but financial limitations cannot be ignored. You must take a hard look at your finances to get a clear-eyed view of what you can reasonably afford. Among other things, this means calculating your debt-to-income ratio—that is, how much you owe (including payments on your new house) compared with how much money you bring in. The ratio shouldn’t be over 35% or so.
If you’re over that threshold, then you’ll probably have to scale back your house-buying plans. In addition, you should bear in mind that you should expect to be able to lay out a 20 percent down payment on any home you might be looking for.
In addition, if you’re a first-time prospective homeowner, you must brace yourself for the varied expenses that come with having your own house. People who are used to renting apartments will now have to pay for any repairs and renovations to their property.
Here are some other expenses that may apply:
- Appraisal fee
- Land registration fee
- Home inspection fee
- Mortgage broker fee
- Property insurance
- Property taxes
- Title insurance
✔Check Your Credit
Your credit is a huge factor in your ability to secure a mortgage and obtain a favorable interest rate. Before you do anything else, you should check your credit score. You can do this by ordering a credit report from each of Canada’s credit reporting agencies: Equifax & TransUnion.
It’s possible to order a report from just one agency, but this is a good opportunity to compare the two reports to see whether a discrepancy exists. Don’t worry—despite what you may have heard, requesting your own credit report is classified as a “soft inquiry,” and it doesn’t affect your score.
If your credit isn’t in good shape, you may wish to fix it as best you can prior to moving forward in your homeowning journey. A bad credit score may lock you out of a good interest rate—or it may keep you from buying a home altogether.
✔Determine What Kind of Home You Need
What do you want in a home? What do you need in a home? This is where you have to make some tough decisions. If you have children, or may be planning on having more, then you need to ensure that you have enough bedrooms. You also have to decide whether you can do without amenities like swimming pools and other nice features, or whether your budget can accommodate a few indulgences of this nature.
✔Find a Mortgage Lender
If you can’t qualify for a mortgage, then your house-hunting adventure may get terminated early. A mortgage lender will be able to determine whether you can obtain a mortgage with acceptable terms. A key step in the process is getting a mortgage pre-approval, which demonstrates your financial solvency and assures sellers that you’re capable of going through with a deal.
To get pre-approved, you must allow the lender to analyze your finances in detail, which means letting them examine your tax returns, bank statements, income statements, and related paperwork attesting to your assets. It may seem like a hassle, but it’s certainly worth it.
✔Find a Real Estate Agent
A good agent is an invaluable ally in your search for the right home. A lot of people ask family and friends for referrals. If this isn’t an option, then you should contact some agents directly—but don’t just settle on the first name you find. Ask your prospective agent how much experience they have, particularly with the area where you’d like to buy a house, and try to get a sense of how helpful they’ll be. Are they full-time or part-time? Do they work alone or with others? Your agent should be forthcoming in answering these questions.
✔Determine What Kind of Neighborhood You Want to Live In
Houses don’t exist in a vacuum; each one is part of a neighborhood with its own unique qualities. If you have children of school age, you should find out how close you’ll be to the nearest school and whether it’s the kind of facility you’re comfortable with when it comes to fulfilling your kids’ educational needs.
On a related note, how far will you be from your workplace? How do you feel about the local entertainment and cultural establishments (e.g., sports arenas, museums)? Be sure to take a trip through the neighborhood and do a little research before you decide to purchase a house.