By Lindsay Smith/Columnist
I met with two separate buyers over the past week and both showed different levels of knowledge and an understanding of how buying a home might happen.
The first buyer called about a home we have for sale and said they wanted to find a home prior to getting pre-approved, feeling they knew what they could afford. The second buyer called on the same property and shared that they had been to a lender and were fully pre-approved and ready to start the process. One thing they both shared, after a few inquiries, was they had little understanding about how the detailed process of buying a home worked. Let’s dig into that question for a better understanding.
Creating a timeline of gathering information when a buyer decides on purchasing a home is instrumental. Before a buyer walks through their first potential home, a checklist for gathering information
will help to streamline the process. Similar to a checklist a pilot would use prior to take off, it ensures that a smooth “flight” will get them from a dream to moving day. It would look something like this:
– Meet with a mortgage broker and/or lender and get fully pre-approved.
– Review your finances to determine access to enough funds for a down payment and closing costs. Also, determine what time frame you would like to move.
– Create and review a budget of your living expenses, adding to them a mortgage payment, property taxes, utilities and insurance.
– Research areas to determine which offer the amenities that best suite your lifestyle. Proximity to work, shopping, schools, entertainment and families (sometimes the further the better).
– Create a dream list. A list of dreams, wants, needs, must haves and deal breakers.
– Discuss level/levelling up.
– Research home styles and sizes to gather information on which ones are appealing.
– Have a frank discussion about the process of buying a home in a seller’s market.
The one buyer I met with who had been pre-approved had started the process, however, was left with so many questions about the ‘how to” process. The advice I would offer is to start by sitting down with a full time real estate broker. They can help guide you through the process and help create your checklist. I would approach the process with these steps.
1) Meet with the buyers and refer them to a mortgage broker to determine exactly what they qualify to buy. Next, go over a budget to determine if what the bank will lend is realistic. Many times, a lender will lend far more than a buyer can realistically afford. Budgeting paying a mortgage, utility bills, and insurance along with home repairs will be a new experience for a first time buyer.
2) Help buyers with their finances and do a line-by-line breakdown of the costs involved in purchasing. In Oshawa, the average detached home is $665,000. The minimum down payment would be $33,000. Land transfer tax and lawyer would be about $12,000. The cash needed to buy would be in the range of $45,000.
3) Determine the appealing areas, then look at the areas through a lens of affordability. In our area, Oshawa has the lowest average home prices, and inside the city, some areas will offer better value than others. This requires a “timmies double-double” and a road trip to feel out which areas feel right, offer the amenities you are looking for, and if you have children, which areas have the schools you feel comfortable having your kids attend.
4) Help create a dream list: a list of features you want, desire, must have and what you can live without. The clearer your vision the easier it will be to find a suitable home. Along with this, look at the many different styles of homes available and determine which ones you like best. Along with style, I find it important to consider the position of the home on the lot. You may be a sun lover and an east-facing rear yard would not be the best for “tanning.”
5) Level/ level up. What this means is dreaming a few years into the future. Once you have your wish list, it is best to do a little future planning. Buying a home that you will need to sell in a few years due to family changes can be expensive. I find it beneficial to vision where you will be a few years from today and see if it may be worthwhile stretching a bit to get features you will quickly outgrow causing a costly move. If you are newly married and are planning children, buying a one-bedroom condo might not be a perfect long term fit. A different strategy might be to research something with two bedrooms to allow your family to grow into a home rather than to outgrow the property.
Buying a home is similar to taking on a new, complex project. There are many moving parts. Mistakes can be costly, not just in money, but they can also cost you the dream home you have focused on.
Surrounding yourself with full time professionals, realtors, mortgage brokers, home inspectors and lawyers help you to avoid errors and they become your professional support group. Rather than putting the “cart in front of the horse,” a successful buying process begins with solid advice from a mortgage broker, and a competent realtor to be the “project manager” helping move you forward with confidence.
On a weekly basis, I see different buyers and sellers that are successful and some that end up with lessons learned. Ensure your circle of professionals are experienced and are as perfect a match as moving day is to champagne.
If you have any questions about the above information, or can see a real estate emergency on the horizon, I can be reached at email@example.com.
Keller Williams Energy Brokerage