If you’re dreaming of achieving homeowner status, but don’t even really know what a mortgage is (and if you don’t, you’re not alone), take a read through some super-introductory pointers from a single lady who recently became a first-time homeowner”and totally nailed it. Kara is a Brantford-based elementary school teacher (and also my sister), who found, bought and happily lives in a now totally Pinterest-worthy gem of a home, solo.
On making the most financially savvy choice
Doing the math to find out if it’s smarter to rent or buy should be your very first move before you start looking. The answer to this was a no-brainer for Kara: “I was tired of renting and renting costs were going up”you couldn’t get a two-bedroom apartment for less than $1,000 in Brantford. I knew that if I could find a house for $180,000 or less, my mortgage would be under $900 a month. At 2.5% financing, that’d be cheaper than renting.” For someone setting down roots in a city with a housing market with prices that work for them, buying is smart.
If you live in Toronto, you might have seen Metro’s coverage of the study that showed how much you’d need to buy a home in the GTA”a six-figure household income, with the exception of “a couple of pockets of Durham where, if you’re earning a little less than $100,000 a year, you can still find a starter nest.” So: this doesn’t mean that if you’re buying, you shouldn’t look in the GTA at all. Prices vary, and a home is a big investment that could yield a big return, after all, but it’s a reminder to think seriously and think long term. Is it a better option for you to rent or buy? And if you don’t like the answer, are you willing to relocate? Use this online calculator to measure your options.
On finding a realtor
It’s your realtor’s job to understand what you’re looking for and to help you find it. You want to trust them to have the knowledge, experience and understanding to guide you through the housing market in your city. Get a referral, if you can. “I found my realtor through friends. She was thorough when we looked around homes and knowledgeable of the neighborhoods. I got the sense she wanted to help me find a great place for me, and there was no pressure,” Kara says. You don’t pay your realtor for their service, they get paid a percentage by the seller when a house is sold. Feeling no pressure is key in this relationship.
On spotting and finding red flags
Be ready to be alert to red flags when you look at homes and do trust your gut, from the visuals to the stuff you can’t see. “I walked through so many houses that just weren’t clean and tidy, and it just made me wonder other things the previous owners neglected to do to maintain the place. Some houses reeked of smoke, basements that had electrical wire hanging down from the ceiling, cigarette burns on the bedroom floors.” Ask your realtor if you can move the furniture and rugs to see underneath, how old the property is and how new the drains, gutters and boiler are, and bring someone to check out places with you.
On how much money you should really have before you take out a mortgage
For your down payment (what you pay upfront toward the purchase of the home), the rule of thumb is paying 20% the overall worth of the house. Many first time buyers can get away with 5%, but if you do this, your mortgage payments will be higher, so it’s not necessarily a great idea. When you first buy a home you want to be confident in your financial situation. Kara says, “I typically try to have a few extra mortgage payments set aside in case something goes wrong. I’d say even consider opening a line of credit”even if you don’t use it. I started keeping a spread sheet of all of my bills since day one”it’s really helped to see what areas I can work to cut back on.” Your first home is definitely an invitation to start adulting your finances.
On getting a home inspection
Getting a certified home inspector to come check out a place is optional, but many people wouldn’t dream of buying a home without having it inspected, basement-to-roof first. Kara says, “I paid for a home inspection, and the inspector said to me, ‘it’s not my job to tell you whether or not you should buy this house”it’s my job to tell you what needs to be fixed in the near future, next year and what can wait for years down the road.” Every house is going to need something. I didn’t feel so bad that the furnace was pretty old. That, to me, was an easy fix.”
On finding “the one”
There is no typical number of homes people see before they buy”some people look for years, some people see one and fall in love. Kara looked at seven homes before making a commitment. “I remember opening the front door and I just thought ‘I don’t care if this house is falling apart I have to have it.’ It fit my mental image perfectly. The furnace is old, the windows needed to be replaced, but none of those things mattered to me. And I never felt anxiety about the whole process. I just knew that I couldn’t let anyone else have it.” Just like you’ll know when you walk into a place that it’s got a bad vibe, you’ll know once you walk into a place that it’s got a good or a great one. Trust your gut.