10 Tips for First Time Home Buyer Success

Buying your first home is a big deal!  Here are 10 Tips for First Time Buyer success, and to make your home purchase a positive and enjoyable experience. There will be a whirlwind of feelings involved from the excitement of getting your house keys to the stress of trying to figure out what exactly is it going to cost. First time home buyers have a lot of questions along the way, and your home buying team should be able to answer each and every one, but reading this list of 10 tips will place you on the road to home ownership, feeling comfortable and confident.

First Time Home Buyer Success


Get Pre-Approved (or better, pre-underwritten)

What is the difference? Recently one of the large banks in Canada ran a marketing campaign of getting pre-approved in 60 seconds. Basically the onus falls on you to fill out the little boxes on their website and voila, you are pre-approved. Not wanting to be too hard on this bank, but the pre-approval is meaningless, because there are many factors missing, such as your credit score, confirmed list of liabilities and indebtedness, and specific personal details, such as how long you have been with your employer and if you are still on probation.

To get yourself pre-underwritten means that you submit all of your personal documents to your lender, who will vet the details and get you a commitment based on the information given to them (pending the quality of the property and passing the scrutiny of the insurer (CMHC, Genworth, or Canadian Guarantee), if at all required by law or  lender.

The worst feeling in the world is finding your dream home, saying “YES! Let’s put in an offer!”, and then swiftly losing the house to someone else, while you are getting a pre-approval or a vetted pre-underwritten commitment. Getting a pre-underwritten commitment long before looking at homes will help you in several ways.  Your mortgage broker can help you figure out how much you qualify for and how much house leaves you with a comfortable payment.  She can also review your credit and offer tips on improving your score (a better credit score equals more lending options, better rates, and lower costs).

Even better, many lenders will get a fully underwriting approval for you before you even find a home!  This gives you a huge advantage over other buyers who only have a pre-approval, especially in a sellers’ market.  You could put in an offer with no financing contingency, and have the same power of a cash buyer!  To learn more about pre-underwriting, give me a phone call and we can discuss the difference between a worthless 60 second mortgage pre-approval and a pre-qualified, pre-underwritten commitment from a lender.


Build Your Credit

As we mentioned above, if you start your pre-approval process early, you’ll have time to maximize your credit score.  This gives you the most loan options along with better rates and terms when compared to lower credit score borrowers.  This can save you money up front, and even more money in the long run, as even small differences in interest rates add up over time.


Organize Your Funds

Lenders will usually require a 90 day history of the assets you’ll be using to buy your home (down payment and closing costs).  This means 90 days of complete statements for things like checking and savings accounts.  If you have many large deposits, money transfers, and cash moving around a lot, this could create a headache in documenting your assets for the lender.

Get your cash together in an account you will be using for the down-payment, and keep it there until the big day. This way, your lender can simply review your statements and call it a day without asking you for additional documentation. Remember the easier you make it for the lender, the faster your mortgage will fund, and the less additional questions and documentation requests you will receive from your mortgage broker and the lender.


Manage Your Credit

Since you were smart and went over your credit together with your mortgage broker before looking for homes, you have had time to get it maximized and to the best possible score.  Now don’t move!  Opening new accounts and applying for credit cards, having people look at your credit, and increasing balances on credit cards can all damage your credit scores, and financing large ticket items like furniture or a new car could sabotage your home buying dreams altogether. You will not believe how many of our clients buy the proverbial large, shiny red truck, before they visit us to apply for a mortgage.

If you must make a financed purchase or open a new account, talk with your mortgage broker first to make sure it won’t have any negative impact on your home buying plans. Remember we are business professionals and have seen just about anything, which eventually hampered or outright cancelled an application, because clients simply did not know on how to manage their credit. If in doubt, call us.


Find a Great Real Estate Agent

Why is this so low on the list?  It is not because it is not one of the most important moves you will make in buying your first home.  A real estate agent’s job is to help you find the right home and guide you through the contract process. But they cannot or will not assist you if you have not done your financial homework first or if you are not in a position to buy a home or are not even close to be prepared.  So we recommend getting well prepared first, but…

We strongly recommended that you use a great real estate agent (emphasis on great).  Sure, your 3rd cousin Eddie may have his real estate license, but if he is not a good agent and is not going to give you a professional level of experience and guidance, it is best to take a hard pass. We are working with realtors, who have firmly established themselves in the market place, have experience and knowledge, and take the time to help you. This will minimize any unpleasant surprises down the road and losing your dream home, because of a technicality. And, we have those realtors work for us on our own personal transactions.

Your real estate agent will help you search, negotiate, and get your offer accepted, but that is only the start – a home buying experience is a paperwork-abundant tornado with multiple people (and their personalities) involved.  When you have a good real estate agent, you have an advocate in your corner, and you will not notice the craziness behind the scenes (well, at least not as much).  Without a good agent, that craziness is guaranteed to keep you awake at night and turn what should be an exciting time into a miserable one.  Trust us on this one – a good real estate agent is worth their weight in gold, especially when buying your first home. 


Consider More Than the House

You may come to hate even the most perfect house if the commute to work is killing you every day.  You may love the space in your master bedroom, but never sleep there because of street or train traffic right outside your window. Do you love the house enough to live there 24/7 because you have no local recreation or entertainment near by?

When buying a home, you need to consider the house, the yard, the neighborhood, and the surrounding areas.  For the best buy, make sure you’re buying a home you love in an area you will enjoy living.


Get Inspections (and a Survey)

When buying your first home, you’ll want to know what kind of shape the house is in, even the parts of the house not shown in listing photos.  A professional inspector will be able to give you the good, the bad, and the ugly on the investment you are about to make.  There is nothing worse than spending a ton of money on a new home, then getting hit with even bigger bills when the home repairs start piling up.  A home inspector can help you avoid that pitfall, and offer up great advice on maintaining your new home. Your realtor or we can recommend bona fide inspectors.

If you’ve got land or property boundaries you will want to have a survey as well. Knowing what land belongs to you is incredibly important when it comes to using your yard, and putting on additions (and knowing what land is yours when your neighbors do additions to “their” property).


Don’t Stretch


If your budget has been set by mortgage broker and lender for up to $300,000, don’t buy a $350,000 house.  A beautiful house means nothing if you cannot enjoy your home.  A mortgage payment that leaves you strapped for cash each and every month is a major mistake, if it means that will not have any room for savings, financial planning, or simply, fun.  Sure, you are going to love your home, but make sure you are buying with enough financial room to enjoy getting away from it from time to time, too.


Keep Reserves and Savings

Though there are positives to putting down a larger down payment, spending too much up front is not always a wise move.  Life happens, so you want to make sure you are leaving room for emergencies.  Having money to address things like a leaky roof or water heater replacement, along with life’s other curve balls, is a smarter move than using up all of your cash reserves into your new home, even if it means putting less than 20% down.

We can guide you through the options, and work with you to determine how you can get the most financially savvy mortgage, while making sure the other areas of your financial life remain in great shape, too. Remember we are consumers as well, and have gone through many of our own real-estate transactions ourselves.


Think Today and Tomorrow

When you are buying a home, how long will you be calling it ‘home’?  You may need to consider short and long term goals in determining your perfect home. Do you plan on having a family within a few years?  Maybe that extra bedroom isn’t a bad idea.  Do you regularly have guests and entertain?  Additional bathrooms and an outdoor entertaining area can make the post-party clean up much more pleasant. Keeping in mind your short term and long term plans and goals will ensure that you enjoy your house today, tomorrow, and however long you call it home.

Buying a home is a big deal, but it does not have to be a stressful process.  If you use our tips and hire good professionals for help with your home search and mortgage, the process can be streamlined, and the road to home ownership can be an easy one to travel.  For questions on the home buying process and help with getting prepared, call us for advice and guidance. We are mortgage professionals and have been in your shoes – although a long time ago.



Content loosely based on a post originally posted at https://www.masonmacblog.com