Whether you are a first time buyer or an experienced buyer, you will need to do a lot of prep work before buying a home. You will have to do a lot of research to find the right location and the right home. However, with an abundance of Toronto homes for sale on the market today, that shouldn't be much of a problem. A home costs a considerable amount of money (an entire life's savings, in the case of many people!) and the important thing is to get your finances in line so you can afford your dream home. So here are the 5 things you need to know before taking the plunge and buying a house:
- Improve your credit score: Nobody likes a bad credit score; least of all your intended mortgage lenders. Unless you have enough money to pay a lump sum, you will need to borrow from a bank or other lenders in order to purchase a house. But the best you can do with a bad credit score is a loan with a higher than normal interest rate. Also, the lower your credit score, the higher your down payment and monthly payment. So the first thing you should do before you buy a home is to improve your credit score. Work on settling any debts, spend your money frugally, pay your bills on time and don’t take on any new credit for at least a year before applying for mortgage financing.
- Build up a healthy bank balance: You can't buy a home without some money of your own. Banks and other lenders will not finance your home purchase if you do not have enough money to make the minimum required down payment. So start saving for your new home early, and plan ahead for closing costs, lawyer's fees and Realtor fees.
- Get a second opinion on your chosen home: You don't want to buy a home now only to regret it later. Buying a home is not just about finding the right neighborhood, the right size and the right price; it's also about matching it with the taste, convenience and requirements of your family. You must also get an opinion from an experienced home inspector who can point out any potential issues with your chosen home and advise you of any repairs that will have to be done immediately or in the future. Your real estate agent can recommend a home inspector who will make sure you home is safe.
- Compare the available mortgage options: Your first impulse may be to get a mortgage loan from your bank. But that is a mistake because there may be other lenders who can give you a lower interest rate, a better term, and other attractive incentives. So research and compare all the available options in your area. Hire a good and experienced mortgage broker if you don't know much about mortgages. They can usually find the best mortgage deal available in the market for their clients.
- Get your mortgage preapproved: One of the most disappointing things during the process of buying a home is to learn at the last moment that that lender has decided not to approve your application or that you are qualified for much less than you have applied for. This puts your entire plan in jeopardy. Since the recent economic crisis, mortgage approval has become harder and a much lengthier process. So get your mortgage preapproved before buying a home to make sure that nothing will go wrong at the last moment.
Want more advice for buying your perfect home? Feel free to contact me. I can guide you through the home buying process and advise you on what to do even before you start looking at homes.