You've set your sights on homeownership and you've been tucking money aside for months. You're dreaming of a place to call you own, where you can host dinner parties, put your legs up after a long day and create new memories and traditions. In your mind, you've already picked the wall colours and chosen the furniture. But, before you embark on what will most likely be the largest financial purchase of your life, here are the top six questions to ask yourself before buying a home:
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What's your household budget?
We don't want to burst your bubble, but this one's a biggy. Well before you start shopping for a new home, you need to know what you can afford. And how much of a mortgage you'll qualify for. When qualifying you for a home loan, Lenders rely on two standard measures of a borrower's (that's you) ability to repay their mortgage. Depending on a number of conditions and variables*, including things like credit history and qualification rate, they'll want to confirm that:
- your housing-connected expenses (e.g. mortgage, property taxes, heat, condo fees) do not exceed 35% to 39%* of your monthly income
- your total financial obligations (less everyday expenses) don't exceed 42% to 44%*.
Lenders don't take into account your everyday expenses like child care, groceries, recreational spending or your cell phone bill, so regardless, of the mortgage amount you are approved for, it's important that you consider all of the expenses listed in your monthly budget to ensure that the mortgage payment that you're taking on is actually doable.
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Where do you want to live?
Before the fun of house hunting begins, you need to consider which neighbourhoods you want to live in. For example, how far you are willing to commute, will you need to buy a car, is there public transportation available. Understanding where you want to live can have an impact on the type of house available to you; as well as the price. You might also want to consider researching the schools in the areas that you are considering. Schools and their locations are key drivers of real estate value.
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Are you thinking 5 years ahead?
Once you have pinpointed an area or two, take a look around with an eye toward resale value. Even if you think this will be your “forever home”, it is important to keep resale in mind. As you move into different stages of life, you may find that your needs will change. Look at thing like: neighboring homes, the cars outside, the noise in the area, proximity to highways, train tracks or commercial buildings. Always look at what the future buyer of your new home might look for and take that into consideration before you buy.
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What is the condition of the property?
Once you have found the right home, you'll want to know its workings both inside and out. Even though the home may be beautiful you'll want to have an inspector take a look to uncover any ugly things that may be hiding. In most traditional real estate transactions you'll have the right to have the house inspected after a seller has accepted your offer to purchase.
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Does the home fit your lifestyle?
No matter what type of housing you choose, be sure to have a clear idea of your needs today, as well as your possible future needs. Do you like doing yard work? If not, that beautiful, sprawling lawn and backyard garden are not going to be beautiful much longer. And sooner or later, the charm of that 100 year old house will give way to a list of required improvements that may see you spending your weekends renovating. Be realistic about the amount of time and effort needed to maintain your selected home and whether or not this will fit into your lifestyle…not just now but in the future.
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Who can you rely on to answer your questions?
Even if this is not your first home buying experience, you will want to get help from a team of experienced, knowledgeable professionals for guidance and to answer your questions with reliable information. Some people to think about including in this group are: Realtor, Lender or Mortgage Broker, Lawyer or Notary, Insurance Broker, Home Inspector, Appraiser, Land Surveyor, Builder or Contractor.
As you can see, we're passionate about helping people save. Providing simple and safe ways to help our members achieve their financial goals is what we love to do.