10 Must-Do Tasks When Preparing to Buy a Home
- January 20, 2021
- By Cody Battershill
Set Yourself Up for a Successful Home Purchase with these 10 Tips
Are you thinking about buying a home sometime in the near future? Whether you're a first-time home buyer or seasoned real estate veteran, here’s nine steps that will help you prepare for buying a home in the best way possible.
#1 - Decide what kind of home you want
Before you get started, establish what is it about your current living situation that needs to change. Perhaps you need more space, a better location, something more affordable - or maybe all of the above?
Some factors that may influence your decision:
- Style or appearance of a home
- When the home was constructed
- Materials used in construction
- Floor plan, features and finishings
- Neighbourhood and amenities
Keep in mind that your lender may be the deciding factor on what home you end up buying. Getting pre-approval for a mortgage is essential before beginning your property search on the MLS®. Read on further to learn more.
#2 – Check your credit score
Buying a home is not a cheap endeavor. Unless you have hundreds of thousands of dollars laying around in a bank account (which not many of us do), then you’ll need to qualify for a loan. Ensuring you have a good credit score will help you obtain that loan.
If you have anything in your credit history that might prevent you from getting a mortgage approval, then it is paramount that you contact a Canadian credit union to resolve any of those “black marks” on your record.
How to check your credit:
- Call an agency such as Equifax, Experian or TransUnion
- Check your credit card, financial institution or loan statement
- Use a credit score service or free credit scoring website
Good credit means better potential for successfully getting pre-approved for a mortgage amount you would prefer.
#3 - Save your money
Once you know what you want in a home and have checked up on your credit, it's time to start saving money – as much as possible, that is. Being able to put some cold hard cash down on expenses associated with buying a home will help streamline the process and reduce stress involved (if any) when the time to move is near.
How to save money:
- Reduce expenses wherever possible
- Siphon off a certain amount of each paycheque into a savings account
- Try to get a side hustle or second job
- Put away any bonus income you receive
- Avoid accumulating any new debt
You’ll also want to secure and maintain steady income so that you don't risk financial ruin by losing a job while having a mortgage to pay. Hence, job security is paramount at this point in preparing to buy a home, and trust us, your lender couldn’t agree more.
#4 – Pay off your debts
Debt works against your ability to loan cash from the bank. The more debt you have, the less likely you’ll get pre-approved for a mortgage in a higher price range - or if at all.
Lenders evaluate something called your “debt-to-income” ratio as part of your pre-mortgage approval process. Simply put, your “DTI” ratio compares your current debt to your income and determines how much you could technically afford per month for a mortgage payment.
How to lower your debt-to-income ratio:
- Reduce your monthly recurring debt load
- Increase your grossly monthly income
- Find a second job
- Work more hours at your current job
- Ask for a pay raise
- Get a higher education and better paying job
Most banks will not approve you for a mortgage if your DTI ratio is 36 per cent or higher. In most cases, a DTI ratio of 43 per cent will prevent you from getting approved for a loan whatsoever.
#5 – Get a mortgage pre-approval
Once your credit score and finances are in order, now is the time to get pre-approved for a mortgage. The importance of getting a mortgage pre-approval cannot be stressed enough. Not only will you know what kind of home you can afford, but you’ll also be taken much more serious by both home sellers and real estate agents alike.
Without a mortgage pre-approval:
#1 – You don’t know for sure if you can afford that home… pre-approval clearly indicates what your maximum allowable mortgage limit is
#2 – You will have to get pre-approved before making your own offer… another buyer could purchase that home in the meantime
#3 – You may feel stressed out due to time constraints… pre-approval makes searching for a home the way it should be: enjoyable and exciting
Not all lenders offer the same rates. Make sure you do your due diligence and find a bank that will give you the best rate possible as a few percentage points could translate to thousands, if not tens of thousands more in interest payments over the mortgage term.
#6 – Hire a Realtor®
Before browsing online listings, it’s in your best interests to hire a Realtor®. A real estate agent with a Realtor® designation typically means that they help people buy and sell properties for a full-time living and have in-depth knowledge and meaningful insights about the residential market that should exceed your expectations.
Realtors also have special tools that help assist you in your property search. Automated systems allow them to input the type of home you want, the price range and features, which then send out email notifications to your inbox with those properties.
Not sure what Realtor® you should use? See our complete interview guide:
#7 - Browse online listings
Chances are you’ve already been browsing online for your dream home by this point, and that’s perfectly okay. But with a mortgage pre-approval and Realtor® at your side, now comes the fun part.
Browsing homes online will help you get a better idea of what type of property you want and which part of the city you want to live in, especially now with a defined price range in mind.
If you’re unsure of a certain community, it never hurts to go scope it out. Getting a feel for a neighbourhood before making a home purchase in the area is always a good idea.
#8 – Begin showings with your agent
It's always a good idea to become intimately acquainted with the things you're interested in, and house shopping is no different! Visiting listings in-person helps you gain familiarity with the layout and specs, as well as the surrounding community and any conveniences offered such as parks and amenities.
Ask your Realtor® if there are any known developments nearby as well. Inner city homes, for example, may be located near a future condo development which could block out sunlight and any potential views if built.
#9 – Negotiate with the seller
Realtors® know their stuff when it comes to the negotiation process. Trust their advice.
Consider making an offer based off the advice your Realtor® gives you once you find the right property that fits your wants, needs, and budget as closely as possible. Listings that have gone on and off market multiple times in a buyers’ market, for example, means they are in low demand and a seller may be desperate to get rid of such a property for a variety of reasons.
Combine ideal market conditions with sage advice from an experienced real estate agent / Realtor® and you may get a killer deal!
#10 – Get a home inspection
Nothing is more important than a home inspection when preparing to buy a property. Typically, a home inspection is a condition on any offer to ensure that there isn’t anything wrong with the property before a buyer and seller agree to move forward and close the sale.
Your Realtor® should arrange a home inspection for you within a few days of your offer being accepted by a seller. Both you and the seller will receive a report detailing the home inspector’s findings. At that point, you can then ask the seller to fix anything else before closing the sale, or decide to back out of the deal all together given it was a condition on the sale.
Preparing to Buy a Home in Calgary?
Performing these 10 tasks in a similar delineated fashion as shown above will help set up you up for a successful home purchase every time. However, if you are going to forgo a few steps, getting mortgage pre-approval and hiring a Realtor® are the most important.
Cody Battershill and Jordan Helwerda, experienced Realtors® in Calgary with RE/MAX House of Real Estate, would love to help guide you towards a successful home purchase or sale. Contact them anytime at 403.370.4008 to discuss your real estate goals!