8 Ways to Make Sure You're Ready to Buy

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  • 11/29/2016 www.greatcalgaryrealestate.com/blog/are-you-ready-to-buy-a-home/print.html

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    Are You Ready to Buy a Home? [INFOGRAPHIC]Posted by Joe Samson on Thursday, August 25th, 2016 at 7:44am.

    The idea of buying your first home can be incredibly exciting, especially considering the fact that yourmonthly payments will no longer be lost on rent. However, making this investment requires focus,dedication, and a willingness to learn whats necessary to get through the buying process. With these qualitiesand an eagerness to be a responsible homeowner, youll be on your way to having a much smootherexperience with real estate.

    http://www.greatcalgaryrealestate.com/blog/author/joe-samson/

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    Whether youre just beginning the buying process by searching for homes online or have gone through thesteps to determine your budget, there are many more steps to take before youll be ready to make an offer.First its important to recognize how emotionally and financially ready you really are. Is this just a dream fornow or do you want to make this happen in the near future? If youre ready to make this a reality, take a lookat the housing market.

    One of the best parts about getting involved in real estate right now is the fact that the housing market isstrong. Interest rates are low, and with high rent prices, its often a better financial move to buy. Once youvetaken a closer look at how the market will play a role in buying, the next step is to prepare yourself for thebuying process. Real estate pros recommend looking at the signs below to see if youre prepared to embarkon this journey. With these youll have a much better idea if youre really ready to buy your very first home.

    Do You Plan on Sticking Around?

    Do you have a steady job that you plan on staying at for a long time? If there is theprobability of you relocating in the foreseeable future or arent set on a particularcareer path, then renting may be a much better option for you. Although buyingmight be more appealing than renting, but it can turn out to be more expensive andits more of a long-term commitment.

    For example, if you decide to purchase a home, you will have to pay a commission to your local real estateagent for helping when you decide to sell your home, there could be significant prepayment mortgagepenalties, lawyer fees, home inspection and appraisal fees when buying, and many other costs along the way.The advantage of renting is that you still get a nice place to live without all these expenses and the burdens ofactually owning the property.

    The last thing you want to do is turn your finances upside down just a few short months after you get the keysto your real estate. It is essential to consider what your 5-10 year plan is going to be. What city will you livein? Do you have plans on changing careers in the near future? If you dont have answers to these questions ora 5-10 year plan, then youll only want to invest in a home that is affordable and will be easy to sell quickly ifnecessary.

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    However, short-term home ownership may not offer the investment potential that you may want. Forexample, you still have to pay for the down payment, repairs, upgrades, maintenance, and other expensesrelated to running the home and satisfying the mortgage. Considering those, paying for a home that youreonly going to live in for a few years may end up actually costing you more than renting.

    If you are thinking short therm, the only exception to buy vs. rent is when you are looking for an investmentproperty. Real estate markets go through cycles every 5-7 years and if you are confident that prices are on therise, then you may have a great opportunity at your hands to get a great return for your investments even in afew short years. Your REALTOR should be able to provide you with informative statistics on local real estateprices and trends.

    Are You Aware of What You Can Afford?

    Youre likely aware that buying a home is one of the biggest purchases youll makein your life, which is why you have to carefully consider what you can afford. Justlike youd double check your finances before investing in a new car, you mustknow for certain what your maximum budget for a home is. If you cant find thetime to do this, then you may not be completely ready to make this move. However,if you are on top of your budget and how much you can spend, then thats a good sign you may be ready totake the next steps towards ownership.

    Before meeting with a bank, take a look at your income. On average your mortgage payment (includinginterest, insurance, principal, and property taxes) should be no more than 42% of what you bring in. Ofcourse spending less than this is ideal, as it ensures you have enough room in your budget every month forsavings or unexpected expenses. Not to mention insurance as well as property taxes will increase over time,and if you cant afford a big down payment, then mortgage insurance is going to add up. In addition to this,you should consider the fact that you may have to deal with chaining condo fees, HOA fees, high utility bills,repairs, upgrades, and other household expenses.

    Another aspect of considering what you can afford is thinking about the options you have for loans. Interestrates can vary considerably, depending on whether you get a fixed or variable loan. To put this in perspective,if you had a 2.5% fixed 25-year mortgage for $350,000, your payments would be $1,568 a month. On theother hand, if you had a 2.5% fixed 15-year mortgage for $350,000, your monthly payments would be$2,3320. In the long run the second option actually saves you the most due to the fact that youd save over$50,671 in interest.

    Have You Been Approved for a Mortgage?

    While it would be ideal to pay for your first home in cash, thats not the situationthat most first-time buyers are in. Instead, you have to rely on a mortgage throughone of the many lenders that are out there. Its important to make this your first stepbefore looking at homes, as this will ensure REALTORS take you seriously andyoure able to move quickly on a home that you like.

    To get started, youll need to get pre-approval by answering questions about your income, debt-to-incomeratio, and monthly expenses. In addition to this, youll likely need to have good credit to get the nod to startlooking at homes. There are many options available for home buyers to successfully approve a mortgage.You can choose to visit your favourite bank or talk to a mortgage broker who can advise you about thedifferent mortgage options among banks that have to offer.

    Do You Haven Enough Money Saved?

    http://www.greatcalgaryrealestate.com/blog/calgary-housing-prices.html

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    Once you have pre-approval and know how much you can afford to spend on ahome, it will be time to create a nest egg. This will not only help fund your downpayment but will also ensure you can cover unexpected expenses and moving costs.In addition to this, youll appreciate having some savings when it comes time formaintenance (such as mowing the lawn) and upgrades (such as replacing the roof)on your property. Even with strong do-it-yourself skills youll have to invest in thetools, materials, and other equipment needed to get this type of work done.

    Did You Create a Monthly Budget?

    Budgeting is especially important for first-time buyers as it helps to make sure youcan still have a life while owning your first home. After all, how will you afford totake vacations, have a gym membership, or do leisurely activities that you love ifyou have a mortgage payment at the top of your budget? When making yourbudget, make it a point to give yourself a little bit of wiggle room to do something

    like a hobby or sport. If this results in not being able to get the home that you want, then you will have todecide whether youd rather put your hobby on the back-burner or settle for a more affordable home.

    There are additional home ownership expenses that you have to budget for, including HOA fees. These arecommon with four out of five home purchases, so make sure you know whether or not this is somethingyoull have to deal with in the future. Its also important to consider the fact that the HOA can charge specialassessments and fees that arent covered under this monthly expense.

    Do You Know What You Want to Buy?

    What type of house do you want to live in? Whether you enjoy luxury homes,townhouses,condominiums or detached properties, you should make this decisionbefore you ever start browsing. Fortunately if you have already looked at yourbudget, then you should know which type of home that you can afford. In fact, ifyou know what you can afford then you should also be aware of the area that iswithin your budget as well.

    While these considerations are important, you should also take a look at your lifestyle, your commute, kids(now or in the future), transportation, and even shopping. This will help you narrow down which communitythat you like and if you want to commit to one certain area at the moment. If you arent ready, then you maybe better off leasing rather than buying and losing money in the long run.

    Are Your Expectations Realistic?

    Although home ownership has become increasingl