I love looking at real estate listings.
I could spend hours looking at houses online. It’s fun to see what’s for sale in my neighbourhood, what’s for sale downtown, and what I could buy if I were a millionaire.
Actually buying a house, though? That’s stressful.
There’s so much to worry about, like the expense of moving, getting a mortgage and finding a home that meets all of your needs.
With a little planning, however, you can make sure you’re well prepared for your homebuying journey.
Your home is the biggest single investment you’ll make in your life, so it’s natural to be concerned about the cost. Saving up in advance can make your home purchase go a lot smoother.
The biggest reason you’ll want to save up before buying a house is for your down payment. In Canada, the minimum down payment for a home under $500,000 is 5% of the purchase price. On the average home sale of $475,000 that’s $23,750 just for the down payment.
You can reduce your monthly mortgage payments by saving a bigger down payment, so think of the 5% as a starting place rather than the ultimate goal.
You’ll also want cash on hand for a deposit when you make an offer. Then there are expenses like the home inspection, lawyer’s fees, and other surprises that will (almost definitely) come up. Budget 1.5% of the purchase price over and above the down payment for these kinds of costs.
To help you save in the short-term, get a high interest savings account. These bank accounts pay a much higher interest rate than regular bank savings accounts, and keep your cash easily accessible for when you make your purchase.
You can also take advantage of the RRSP home buyers’ plan. This government program lets you save money in your RRSP, get a tax refund for the contribution, and then withdraw the money tax-free when you buy a home. However, you have to pay the money back into your RRSP over the next 15 years and there are lots of rules to be aware of with this one.
If you’ve ever wondered “how much mortgage can I afford?”, this is the way to get an answer.
Online mortgage calculators can do a good job of estimating what you can afford to spend on a mortgage when buying a house. But being pre-approved gives you confidence that you’ll be able to get a mortgage for the amount you want.
The professional you want to talk to for your mortgage pre-approval is a mortgage broker. Similar to insurance brokers, mortgage brokers have access to mortgage products from a wide variety of lenders – including some you may never have even heard of.
A pre-approval also takes into account the mortgage stress test, which forces you to qualify for a mortgage at a much higher rate than you would actually pay.
Another benefit to a mortgage pre-approval is the chance to hold a mortgage rate. Your mortgage broker should be able to guarantee a fixed mortgage rate for around 90-120 days to give you time to find the perfect home. If rates go down during that time, you’ll get the better deal. If rates go up, you’ll still get the rate you were pre-approved for.
When you’re shopping for a home, you need someone on your side who knows the ins and outs of the business.
But there’s more to a realtor than just having someone to help you do paperwork. Especially when the housing market is particularly hot or cold, you need someone who can stay on top of things for you. The best realtors have great knowledge of the local market, sharp negotiation skills, and the right temperament to keep you focused and calm when you’re making huge decisions.
Finding a great realtor could take some work. Try visiting open houses, calling around to local brokerages, or visiting real estate websites like Zoocasa.
Some realtors might ask you to commit to using their services at your first meeting. That’s not a great way to reduce stress. There’s no harm in interviewing multiple realtors or even going for a few trial showings to make sure you’re hiring the right person.
A little bit of upfront work can take the stress out of the process of buying a house.
Saving up ahead of time can help you afford a bigger down payment, which gives you more options and can reduce your monthly mortgage payments. Using the right tools can make saving easier.
Getting pre-approved for a mortgage gives you confidence in exactly what you can spend. And your pre-approval letter could be a helpful bargaining tool if you find yourself negotiating with nervous sellers.
And having the right realtor on your side can make the homebuying process fun and effective.
When it’s time to stop dreaming and start shopping, doing these few things can make buying a home almost as carefree as window shopping for them online.