If you’re looking for a home you know firsthand how many elements factor into the decision to buy. Before you start your search, consider how you’d answer some of these big questions.
1. HOW MUCH SHOULD I SPEND?
According to the Canada Mortgage and Housing Corporation, your monthly housing costs should not exceed 32% of your gross household monthly income. Add up your total monthly income and multiply by 25% to determine your maximum mortgage payment each month. Doing so will leave room for the many additional costs that come with home ownership, including property taxes and homeowners’ insurance. Staying below the 32% threshold means you should still be able to save for things like retirement and your childrens’ post-secondary education. Your down payment plays a big role here: the more you put down the less you will need to finance. (If you are putting down less than 20% of the purchase price you’ll also need to factor in private mortgage insurance.) Home affordability calculators are readily available online, so take advantage of these tools to understand your finances better!
2. DO I NEED TO GET PRE-APPROVED FOR A MORTGAGE?
First, it’s important to understand the difference between pre-qualified and pre-approved. Pre-qualified is the step before pre-approval. Pre-qualification is more general, based on information that you provide a bank or mortgage broker, including your annual income, credit and debt. It is a suggestion of the amount of mortgage you can afford. Pre-approval, however, is a guarantee in writing that a lender will grant you a loan up to a specific amount. Though not a 100% guarantee you will be approved, it moves you one step closer toward your purchase. The advantage of a pre-approval is it gives you a better idea of what you can afford and makes you look like a serious buyer to lenders! It also helps you take advantage of the best interest rates, so it’s a smart move for prospective home buyers.
3. WHAT ARE CLOSING COSTS AND HOW MUCH WILL I NEED?
It’s a good idea to set aside approximately 4% of the purchase price of your home to cover the estimated closing costs. What do they include? Legal fees, land transfer taxes, title insurance, property evaluation fees, home insurance, home inspection fees, GST/HST and property taxes. Other costs will be covered in this 4%, such as new appliances, utility hook-ups, moving fees and decorating. It’s a good idea to factor this in so you can ensure your new home reflects your personal style and taste!
4. WHAT LOCAL AMENITIES ARE MUST-HAVES FOR ME?
Amenities considered essential will differ for every individual. Most of us, however, would gladly welcome local public transit, quality public schools, a grocery store, bank, pharmacy and medical offices in close proximity. Parks, trails and green space, along with sports and recreation facilities sweeten the deal. Ask yourself what matters most to you and your family and factor in those amenities when house hunting!
5. WILL THIS NEIGHBOURHOOD SUIT MY LIFESTYLE?
Be honest about what will make you happy. Is the home in an urban location but you’re really a suburbanite at heart? What do you know of the area’s demographics? Some prefer homogeneity while others are happiest among a mix of ages and income levels. Commuting time is a key factor, or maybe you work from home? If you prefer to get around on foot most of the time a high walkability score will be important. Also consider your stage of life. Singles may want a neighbourhood rich with restaurants, nightlife and cultural institutions. Families often prioritize daycare options and schools. Seniors will benefit from a robust local transit system, community centres and nearby shopping. Whatever the case, neighbourhood needs are highly individualized based on where you and your family are in life!
6. DOES THIS HOME OFFER GOOD VALUE?
No one wants to overspend on a major purchase, let alone one as substantial as a home. To accurately assess value it helps to consider three major factors. First, find out the builder’s reputation. Look for one who has been in business a while and research their rating given by Tarion, an agency that protects buyers of new homes. For example, Falconcrest Homes has been in business for over 40 years and has a rating of Excellent, the highest awarded. Next, notice the level of craftsmanship and attention to detail. Does the builder offer high quality standard finishes? Are affordable options for upgrades available? Falconcrest Homes’ in-house Interior Designer Anna Jilon has more than 15 years of experience in residential and commercial design. Last, is the home environmentally friendly? Many home buyers are increasingly aware of environmental issues and sustainability, so look for a builder who is forward-thinking and builds green whenever possible.
As a prospective home buyer, you may feel mystified by the process of looking for a home. However, as you can see from our points above, there really is only a few key points you need to consider to find the perfect home for you! Start by considering the advice above and you will be off to a great, informed start. Happy house hunting and don’t forget to follow along on the Falconcrest blog for more home buying tips.Tags: buying a home, Home buyer questions, Savvy Buyer