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Things to consider when to buy a home.

1) Why are you looking to buy.

  • First ask yourself some fundamental questions about why you are looking to buy or move and see if you can ferret out any unwise motives that lurk at the heart of it. Buying a new home always feels a bit scary but you need to separate what is a normal conflict of emotions, from actual reasons that would make you stumble in the process or regret in the future. Only you know the real answers, evaluate your answers and be honest with yourself.

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  • Examples of good reasons are:

  • For a job relocation. A new job or promotion with a solid company and bright future. Where your partner’s agrees with the impact this move will have on their life as well.

  • Your family has outgrown your one bedroom condo and a new child is on the way

  • Money is not an issue and you have really thought it through for a long time, a year or more, it’s not an impulsive decision.

  • Examples of poor reasons are:

  • You were on a drive one day and saw an open house, you went in for a visit and you were so impressed it made you just want a change in your life.

  • All your friends have much nicer homes and you feel so inadequate.

  • You have some rather serious financial issues that you should deal with first but you are hoping that it will resolve itself over time.

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2) Do you presently own a home or are you a new home buyer.

If you own a home the following thoughts may not be as relevant to you. You may have enough equity in your home to contribute to the purchase. But read through them, then head on over to:

Selling before you buy.

3) Is your financial house in order

  • If you’re already struggling to pay your bills, buying a home will only compound your money woes. Ideally, you’ve saved at least 10% for a down payment – See Guidlines Here – keep in mind you’ll have to pay mortgage insurance  depending on your down payment, Land transfer tax, and that’s in addition to saving for retirement and building an emergency fund.

Visit >  CMHC Are You Ready Financially

 

4) There’s a big initial investment involved.

 

5) Can you handle the debt.

 

6) How's your credit rating

  • In Canada, credit scores range from 300 (just getting started) up to 900 points, which is the best score. According to Trans-Union, 650 is the magic middle number - a score above 650 will likely qualify you for a standard loan while a score under 650 will likely bring difficulty in receiving new credit.

"WARNING DON'T GO AND CHECK YOUR CREDIT RATING YET"

    Let the mortgage broker you use do that, we'll talk about that later.

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7) Are you better off renting.

  • Straight of, in my opinion you are almost always better off buying than renting. It might make sense renting if you are near retirement and have adequate equity to carry you through retirement and wish to avoid the headaches of maintaining a property because you now or soon want to travel. But given that you meet the elements of our discussion here, owning real-estate over the long term has always been great investment.

  • There are times when the value of your home is slow to grow but there are times when it will knock your socks off. There are many times that I have shown starter homes to struggling new home buyers, homes that they can afford but because they have there heart set on their dream home they tell me "We've decided that we are just going to continue to rent and save some more money."  The point is that home prices tend to rise about 5%, to 10% per year. Toronto has had increases of over 20% year over year. On a $700,000 house at 10% they would have to save $70,000 in one year just to buy the very same house I showed them, and all that equity would have been theirs.

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8) Will you be sticking around for a while.

  • The old rule of thumb was that buying made sense if you planned to stay put for at least three to five years. These days, many financial planners are recommending an even longer window. “I say at least seven years because the transaction costs of buying a home are signification,”

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9) Buying decreases ease of mobility. 

 

10) What is the cost of ownership?

  • Taxes utilities, maintenance & mortgage.

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11) And what are the hidden expenses?

  • Leaky roofs; Furnace and A/C repairs; Electrical issues; Plumbing problems; Natural disasters outside of your insurance coverage, Mold,

  • When most people think about home ownership, they think only about the monthly payments, or PITI: principal, interest, taxes and insurance. But maintenance and repair costs will eat up their fair share of your (not-so) disposable income, too. Mortgage lenders won't factor this into their equations when determining a loan amount, but you should. Before you buy, make sure you're prepared for the true cost of your castle.

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12) What’s happening in my market.

  • Are prices moving away from you or are they cooling off, visit:  > Market Report

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