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Owning your own home is a dream shared by almost everyone. The excitement that comes with being handed the key to your first home for the first-time is a feeling that cannot be matched. However, the process of getting there can be frightening, but it does not have to be.
Before anything else, take a deep breath. While buying your first home can seem overwhelming, there are countless resources out there to help you make the process a smooth and painless one. If you take the time to do your research and utilize the supports available to you, the buying process will fly by.
Before we dive into the full process of how to buy your first home, click the link below to book a free strategy call with our team at LendCity to learn about how buying your first home can be your first step to a lifetime of real estate investing success.
What is a Mortgage?
Buying a first home without a mortgage is like going shopping with an empty bank account, you usually will not be able to get much. (Especially on your first try.)
So, what is a mortgage? In short, a mortgage is a legal agreement between you (the borrower) and a lender to allow you to take out a loan to buy a property without having all the cash up front. This loan is secured against the property, meaning if you fail to meet the terms of the agreement, the lender can repossess the property, but there are plenty measures in place to avoid getting to this point.
Before you go out shopping for your first home, it is highly recommended you start by getting pre-approved for your mortgage. This allows you to know exactly what size of loan you qualify for. Additionally, it allows you to lock in the lowest available interest rates ahead of time. Typically, a pre-approval is good for 90 days, so even if you are not ready to buy yet, it can be worth it to secure a pre-approval if you are planning to buy soon.
Your down payment is the first major payment you will make towards your first home. The minimum down payment you will need is going to be 5% for a home purchased under $500,000, but if you are looking to buy a home without requiring mortgage insurance, you will need at lease 20% of the final price of the property.
These funds can be accumulated over time prior to shopping for a home or given as a gift from a family member. If you receive your down payment as a gift, the family member giving the gift needs to provide a letter stating their name, relationship to you and the funds provided.
Choosing the Right Realtor
There are tons of realtors out there, each with their own experience and expertise. So, when you are looking for an agent to take you out shopping for your first home, it is important you do your research and pick the one whose experience best aligns with your needs.
Typically, your first home will not be a massive multi-million-dollar chalet, so luxury realtors may not be your best bet. The same goes for new constructions and property flips, both are expensive purchases that are not always the best bet for a first home.
However, a realtor who sells a lot of affordable single-family residences will have a strong understanding of what it is you need and where to start looking.
Discover How To Apply For An Investment Property Mortgages With This Step By Step Guide
Finding the Right First Home
After you have your pre-approval and found a realtor who is right for you, it is time to start shopping.
While searching for a home, it is important to make a list of everything you want your home to have, as well as everything you need to have. This will help you as the buyer to determine where to look, as well as where you have room to compromise later. After all, if you need a three-bedroom house, a single-bedroom condo will not be worth your time visiting.
Perhaps you would like to find a house with a pool in the backyard. A pool is not going to be a necessity. So, if you find a house that meets all your individual needs, but lacks the luxury of a pool, it may be time to consider giving up on that want to secure a home that is otherwise perfect. Additionally, after you buy a home, it is yours to work with. That means if the property has enough room in the backyard for a pool to be installed later, you will be free to do that.
The property’s location is also a key factor when looking to make a purchase. Some neighbourhoods have a ton of potential for property values to grow. So, by buying a house that may not have everything you want, but is in a good area, you allow yourself the chance for the home to increase in value over the next few years. After it has increased in value, you can sell it and use the profit you’ve made to buy a home that has more of the features you wanted.
Preparing to Make an Offer on Your First Home
Once you have zeroed in on a property you would like to buy, you may feel ready to jump the gun and make an offer immediately. However, there are a few more things you should do before rushing a close.
First, you should have the home properly inspected and appraised, this allows you to know that the house is in working order and is being listed at a reasonable price. Then, try to negotiate with the seller, especially if the property has noticeable problems that will fall onto you as the new owner. You may be able to get the home at a lower price or gain the opportunity to connect with the seller and increase the likelihood your offer will be accepted.
After that, feel free to make an offer and hope for the call telling you it has been accepted. Just remember that on average about 60% of people end up making multiple offers before getting accepted. So, if your first offer is not accepted or a bidding war starts, do not be discouraged, just make another offer.
Closing the Deal
After your offer has been accepted, you will need to pay closing costs on the property. These can be rolled into the price of the mortgage, but by doing so you will increase interest rates or mortgage payments and may end up spending more overall than you would have spent on closing. Instead, it is recommended you save between 1.5% and 4% of the purchase price of the home to cover costs such as, lawyer fees, land transfer taxes, insurance, etc.
To begin the process of buying your first home, get started with a pre-approval from experienced lenders who are ready to help you succeed by visiting LendCity.ca Alternatively, click the link below to book a free strategy call with our team today.