Buying a home is likely the largest purchase you’ll make in your life. But there are ways of reducing the stress.
By Mark Weisleder, Toronto Star
Buying a home for the first time can be one of the most stressful experiences for anyone, whether you are single, a couple or family.
It is likely the largest contract you have ever signed up to this point, with resulting financial obligations that can last for many years. It is also about finding the right place to create lasting memories. Being properly prepared for this process can save you from making a costly mistake.
For buyers, here are the top five things to consider when buying your first home:
1. What can you afford?
First, make sure to check your credit score, as this is what lenders look at. If you can raise your score by paying off or cancelling credit cards first, then do that. Visit a professional mortgage broker to make sure you know what you can comfortably afford, based on your income.
As a general rule, 30 per cent of your gross monthly income should pay for your mortgage, insurance and taxes. Do not participate in any bidding war if it means going over what you can comfortably afford.
If you are renting for $1,500 a month and you figure that it will cost $2,000 for your house payment, start saving $500 a month to make sure that you will be able to afford your home as well as your other living expenses. If you need the income from a basement apartment to make your payments, make sure it is legal.
You should also make a commitment to live in your home for at least a few years.
2. Narrow your priorities
What is most important to you when buying your first home? Is it the size of the home or the neighbourhood? A condominium that is closer to your work may be preferable to a larger home with a longer commute. How close are you to schools, entertainment, daycare facilities? Do you want to be next to a park or next to a power station?
You can do much of this research on the Internet in advance. Walk the neighbourhoods you are interested in and talk to the people in the area. Go to city hall to see if there are any developments planned for this area. (It could mean more traffic.)
3. Conduct a detailed home inspection
The home inspection is a critical part of the process, so do your research. Ask for referrals about home-inspection companies and call the buyers that have used them in the past. There are now additional special inspections that you can pay for to check for mould, termites, video-camera inspections of the drainage system and even infrared scanners that can check whether there is sufficient insulation or moisture or perhaps even electrical problems that may lie behind walls. It will cost more for this but should result in fewer problems after closing
4. Ask the seller hard questions
Ask the sellers or their agent if they have had basement flooding problems or mould or roof leaks, even if the leaks have been repaired. Ask about any adverse neighbourhood conditions. Ask whether the owners have made any insurance claims since they owned the home. Watch how they answer. Most sellers will now refuse to sign property-disclosure statements, but they are required to respond truthfully to these questions if you ask them directly. If the seller refuses to answer or acts suspiciously, then you need to discuss this with your home inspector and your real estate agent and either adjust your purchase offer or walk away.
5. Buy after-sale warranties
There are now many products available for buyers that will provide after-sale warranty protection on your home heating, air conditioning, wiring, plumbing and major appliances. Most sellers will not warrant anything after closing. Check out and ask questions about the exclusions and the deductibles associated with each policy as many of them are different. This can save you in costly repair bills after closing.
By following these tips, you should be better protected whenever you buy a home.
Mark Weisleder is a Toronto real estate lawyer.