Insights For The Savvy First Time Home Buyer
Updated: Jan 15
I have learned the most successful projects begin with thorough preparation, and that rushing to the end goal often results in less than desirable outcomes.
Buying a Home is no different. You want to avoid that whole Buyer's Remorse thing.
Are you ready to buy a Home? Renting vs Owning.
Renting has it's perks. Generally speaking, you aren't responsible for the maintenance and upkeep of the building or the grounds since you don't own the property. The same holds true for the maintenance of your suite, so when something breaks, you just call your Landlord. If you want to go on a holiday you just lock up and go [don't forget to empty the fridge, toss the coffee maker filter, and take out the garbage :)]. Finally, if you don't like your neighbors you can give notice and move quite easily.
Home Ownership puts you in control. You decide what get's fixed, and when. It's entirely your choice if you want to paint the kitchen purple. If you don't want to hear your neighbors yelling at each other through paper thin walls, then you make that choice when you buy a Single Family Home. You no longer bankroll someone else, putting your hard-earned cash in their pocket. Last but not least, you have Pride of Ownership.
Buying a Home and Owning a Home, is costly. You need to be prepared for the closing costs you'll incur in the Home buying process, mortgage payment, property taxes, home insurance, monthly utility bills, maintenance, repairs, and any upgrades you may want to do.
The amount of money you will need to buy a home is typically 5% of the purchase price for the Down Payment and 1.5% of the purchase price for other Closing Costs such as a Home Inspection, Legal Fees, and Moving. You can find more on closing costs Here. A Mortgage Payment is based on the amount of the Mortgage, the Amortization of the loan, the Term of the loan, and the Interest Rate. Here is a Mortgage Calculator to have some fun exploring Mortgage Payments. The Mortgage Specialist that you choose to work with will crunch numbers based on your Income and Debt Load to determine the amount you will qualify for and how much money you will need to save. The amount you qualify for and how much you'll need to save can change depending on factors such as the Institution's Policy, Interest Rates, and Options they may or may not provide, so shopping around for a mortgage is an excellent plan. You will also get the low down on any First Time Home Buyer Incentives or Purchase Plus Improvement Programs that may be available to you. Here is a Mortgage Affordability Calculator from CMHC to get an idea of where you're at.
Property Taxes are based on Mill Rate which is assessed by SAMA every 4 years. Property Taxes can vary dramatically depending on the area the Home is Located. Be sure to factor in the Property Taxes of any home you are interested in. Check out the City of Saskatoon Property Tax page for more information.
Home Insurance isn't an option, the Mortgage Funds won't be advanced without it. Shop around for the best Home Insurance Packages ahead of time, so you know the cost and you'll be ready when it comes time to sign on the dotted line.
Your Monthly Utility Bills may not change that much depending on what you are responsible for now. Obviously you'll have Gas, Electricity, Water, and Sewer but you may choose to opt out of other monthly expenses such as a Land Line [I haven't had one for years] and Cable [which can be frustrating to stream, but much cheaper].
Maintenance such as yearly Duct Cleaning and Furnace Inspections are necessary. Not only does it ensure your mechanical equipment is up to snuff but down the road should you ever decide to sell, the potential Buyers will be checking this record. A Home that's been well maintained shows, a thought to keep in mind should the time come that you decide to sell.
Repairs can, and often do, come as a big surprise such as a pipe bursting or the sewer backing up. Difficult to forecast and a potential financial crisis. Start a savings account so you have some cash on hand should problems come up.
Upgrades can snowball. If you are a D.I.Y.'er and taking on the project yourself expect to spend more than you budgeted (I typically add about 20% to my projected total cost for any of the bigger projects). If you're hiring it out, it's a good idea to get a minimum of three quotes. Even still, contractors can run into unexpected issues that need to be repaired/installed before the work can continue.
What You Need vs What You Want
Another important distinction to try to make before you start shopping is what you "Need" and what you "Want" in your ideal Home. It can be difficult to define, and there are so many variables. Ultimately though, if you've spent time on this before you start shopping then you can be confident in a quickly executed Offer on the Right Home
Start with your Budget. It usually dictates quite a bit but maybe you've been qualified for $380,000 yet know the expenses for a Home in this price range are too much for you (which can happen if you "forgot" to include the $200/month that you spend on, say, the lottery). Whatever the case, shopping for Homes over your budget can result in unnecessary disappointment. Set up a Home Search that only sends you listings within your budget. Out of Sight, Out of Mind.
How long are you planning on staying in the Home and will you have time to build equity? As you pay down your Mortgage you build Equity in your Home. The longer you own it, the more Equity you'll have. If you know you're staying for a good long while and you Love the Home that happens to be the highest priced Home in that area, you'll have time to build equity. If you have time to build equity by paying down the Mortgage, then buying the highest priced Home in that neighborhood may not be a concern. On the flip side, if you know you're only staying for a year or two it might be wise to rule out the highest priced homes in the area you want, and stick to Homes priced in the low to mid range. Then you can consider building up some sweat equity that you benefit from, by doing some updates yourself.
Do you want a Single Family Dwelling or are you interested in purchasing a Condo. Condo's come with Monthly Condo Fees that are assessed based on a 5 Year Reserve Fund Study. In a new Condo, the monthly condo fee may only be $200 but down the road a few years it may be increased to $400. You will want to have your Lawyer weigh in on the Estoppel, but in the mean time, here is a link to CMHC's Condominium Buyer's Guide.
Location ... So many factors play into this. Is Resale a concern; Are the Area Demographics suitable; Do you want to live in a newer area; Would you like Mature Trees; Is the Distance to Work a concern; Do you need Transit Services; Is there a particular Elementary School you'd like your kids to attend; Is Community Involvement high on your priority list; Where is the nearest Grocery Store; What's the Crime Rate like; Are there any Negative Influences close by like Freeway Traffic Noise or Train Tracks; Doing some research on Location will not be time wasted. You can find Links to a Crime Map and Neighborhood Information under my Buyers Page Here.
Age of the Home: I'm on the fence on this one but I am a D.I.Y.'er so I see the potential in any room, no matter how old it is. Here is where the Want vs Need can be tough. You may Want a New Home but your budget gets you only so far. My unsolicited advice is don't rule out a Home because it's older. The money you save on the purchase could be used in renovations and you may end up with something more beautiful than you expected.
What Architectural Style of Home would you like? A Bungalow has fewer stairs to contend with than a 2 Story Home but a 2 Story Home typically gets you more House for the money because the price/square foot to build it is typically less than a Bungalow.
Next to consider is the number of Bedrooms and Bathrooms you Want vs Need. Do you want all the kids on the same floor; If you don't have kids but are planning to start a family, how many rooms will you need; Is one Bathroom on the main floor and one upstairs or in the basement good, or do you want an En-suite.
Whether or not a Home has a Garage, attached or otherwise, can be a deal breaker. Is this a Want or a Need?
Fully Fenced Backyards that will contain your four legged fur babies is something to keep your eye out for. Replacing a fence can be costly, and likely an expense you won't appreciate as a new Home Owner.
What Upgrades have been done and how much of a priority are they? A Home that's been refreshed with some paint and new flooring will be enticing because it looks nice. Painting and Flooring really aren't that expensive or difficult to do, and they do help a Home sell. You might put this Home at the top of your list. What if you find another similar Home that needs paint and flooring yet has a brand new roof, windows replaced, or the mechanical system has been updated? Knowing where you stand on this ahead of time should help when it comes down to choosing the Home that is right for you.
Features are items such as a Fireplace, a Home Office, a Basement Suite, or an additional Family Room. Some features can be more grief than they are worth, like a Swimming Pool. Some will cost you extra on your insurance like a Wood Burning Fireplace or Wood Stove. Think about which, if any, really matter to you and put them on your list.
That about does it for this post. You can find a complete run down on the Home Buying Process from Home Search to Possession Day under my Buyers Page Here. You can also find information on different Home Search Options under my Buyers Page Here.
Signed off in Saskatoon, Saskatchewan