Step 1: Credit Score
Having a good credit score can make the difference between a high or low fees on your mortgage or whether you need to set aside more capital on your down payment.
Scores below 700 tend to lead to more fees and a larger down payment.
700 – 750 will get you a good deal while 750 and above will give you the best rates on the market.
There are plenty of companies offering credit scores for you to see where you stand and what approach to take to increase your score and secure a better deal on your property.
Step 2: Start Your Research Early
Having plenty of time on deciding the right home, location & mortgage makes the sometimes daunting task that much easier. The internet is probably your best bet for research while newspapers & magazines can also be helpful. Creating a bookmarks folder where you can save all properties that interest you is a great way to compare on your choices. How long a property is on the market for may help you negotiate on prices.
Step 3: How much can you afford
Mortgage brokers have a rule of thumb not to spend more that 3-5 times the annual salary of the total household income, that is when a 20% down payment is made. Knowing your budget and sticking to it is something that should be followed. It is all too easy to go over the budget and make repayments that much harder to make. Every person has a different financial situation, there are plenty of affordability calculators out there which are free to use to keep you on track.
Step 4: Pre Approved credit for your mortgage
Before you start your search for your new home, it is always best to speak to your mortgage broker and find out how much credit you can afford. When you have pre approved credit, you will be in the best place to ensure you don’t lose out on a property while you are waiting for approval. This is easier than you may think, typically your lender will need you to provide some financial information such as your income, savings & investments. With the prequalified approval you will know what price range to look for and not have any expectations that can’t be met financially.
Step 5: Find the Right Real Estate Agent
Choosing the right real estate agent is one of the most critical aspects of the home buying process. Finding the right real estate agent will give you access to the best unlisted or coming soon properties in a neighborhood and provide you with information on homes and specific neighborhoods that isn’t easily known to the public. The right real estate agent will provide you with years’ of experience on a given market and bring valuable negotiating skills which can save you tens of thousands of dollars on your ultimate dream home purchase. Choosing the right buyer’s agent will also not cost you a dime! Buyer’s agents are always compensated on the seller’s side so you should always choose the agent with the best skillset.
Step 6: Open houses and offers
There is nothing better than seeing a property with your own eyes and really getting a feel for the neighbourhood. It is important to stick to your budget and only visit potentials in and around your price range. You will see a lot of houses, be sure to take photos and videos to remind you of each one, it can all become a blur when you are so busy organising all that is to be done when buying a property. Simple checks on the house can also be done while viewing including;
- A plumbing check which can literally entail turning on a tap or a shower to get a sense of the water pressure and seeing how long it takes for the water to heat.
- Flip a switch or two and be sure there is no clear issues with the wiring of the property.
- Windows and doors can be expensive to replace and reduce your overall house efficiency if gone unchecked. By opening doors and windows in different rooms, you may be able to spot something that otherwise would have gone unnoticed.
Take as much time as needed when finding the right property. Work with you realtor agent to get a fair price based on the value of surrounding homes in the neighbourhood. Here are some simple questions you can ask yourself;
- Is the street busy with traffic?
- How would your daily commute be affected by the move?
- Is there places of interest nearby such as schools, shopping malls, pharmacies, public transport, parks & recreational activities?
Step 7: Choosing the right term for your loan
Depending on your desired monthly installments a 30 year loan or a 15 year loan could be your best option. Reducing your monthly payments with a 30 year plan could be suitable for you if you have a large family with other sizable monthly bills like your car payments or insurance. If you plan to invest the extra cash flow from a 30 year loan plan, it could be advantageous to do so.
Some people prefer not to be tied up for a long period and pay higher monthly installments knowing they will pay the least interest and be debt free sooner. If this is you, we recommend a shorter term such as 15 years.