There are several advantages to going from renter to homeowner. However, before taking this route it’s vital to assess your situation. There are a lot of things involved with buying a home, including making some financial adjustments and organization to name a few. So how to know if it’s time for you to become a homeowner? Between renting or buying, it’s not always easy to decide what’s the best for you. This article will help you see things more clearly!
6 steps before going from renter to homeowner
Buying a property comes with its fair share of responsibilities and significant financial commitments. You have to be well prepared for this transition to go peacefully and smoothly. Here are six essential steps to review before finalizing a purchase.
1. Establish good credit
First things first. Do you have a stable financial situation? Solid credit will help you get a mortgage with favourable conditions. To do this, start by paying off all your debts and make sure they’re not going up every month.
If you notice your debts increasing, identify the root causes and try to find solutions. Rigorous budget management will show your financial institution that you’re a reliable potential buyer.
2. Borrowing capacity
To figure out your borrowing capacity, it’s strongly recommended to get mortgage preapproval. This will give you the maximum amount you have access to based on your income, current debts and credit history (the higher your score, the better!). Financial institutions look at your overall debt ratio.
This approval will not only give you a realistic budget to work with, it will also show sellers that you’re serious and have the funds available to get a transaction done.
3. Anticipate all the costs associated with buying a home
You need to properly budget your expenses before submitting an offer to purchase on a home. There are several factors involved, including:
Down payment
The down payment represents a significant percentage of a property’s purchase price and must be provided in advance. In Canada, the minimum down payment is usually 5% of the purchase price for a property under $500,000, but it can be as high as 20% or more to avoid paying mortgage insurance.
Saving for a down payment sometimes requires several years of planning and financial discipline. You can use automatic savings tools, high-interest savings accounts and consider cutting some unnecessary expenses in order to reach your goal faster.
Start-up costs
There are several fees you’ll have to pay upfront so take note of these expenses:
Moving costs Depending on the distance and amount of personal belongings, plan for moving costs to range from a few hundred to thousands of dollars.
Welcome tax This tax varies by province and municipality. For example, in Quebec, it is calculated on a progressive scale based on 0.5% to 1.5% of the purchase price.
Inspection costs This step involves hiring a professional who will identify any defaults and the cost can vary.
Notary fees Last but not least, there’s notary fees to consider for any purchase or sale. They ensure your transaction is legal and the property is registered in your name.
Additional costs
Don’t forget about other costs you may need to shell out for like renovations, if necessary, maintenance fees, as well as those small improvements you want to carry out to feel more comfortable at home.
Renovations to complete before moving day If work is required (kitchen or bathroom upgrade, for example) before actually moving in, you should consider a service like RenoAssistance to help you get reliable quotes.
Maintenance and alterations Set aside some funds for painting, decoration and buying new furniture and appliances.
Home insurance This is a must-have to protect your investment from damages and loss. The amount of insurance varies according to the value of the property, its location and selected coverage.
Other fees may apply for a condo so make sure you’re aware of all the possible costs. To learn more about this topic, browse our article that deals exclusively with the various costs associated with buying a condo (school and municipal taxes, mortgage loan insurance, GST and provincial sales tax associated with new homes, contract fees already assumed by the former owner, etc.).
What are the expenses to anticipate when buying a home?4. Work with a real estate broker
Before you even start to go house hunting, it’s strongly recommended to get in touch with a real estate broker who will accompany you through all the steps and guide your quest from start to finish. Working with a real estate broker recommended by Confia real estate agency will greatly simply the buying process.
These specialists really know the local market and will help you find a property that meets your needs, negotiate the price and help you understand the legal ins and outs of the transaction. They have all the resources and tools at their disposal to support you in the search for your new property.
A real estate broker will also provide you will invaluable information about the neighbourhood, schools, transportation and other amenities around properties you have your eye on, which will help you make your final decision to buy.
Find a real estate broker recommended by Confia5. Identify your needs and preferences
Before starting to look for a property, take the time to clearly establish your needs and search criteria. Consider the size of your future home, number of bedrooms, yard size, whether it’s close to schools, stores and public transportation.
Make a list of your priorities and features that are deal breakers or that you’re willing to compromise on. Think about whether you’re willing to accept a smaller place if it’s conveniently located near your work. You can save yourself a lot of time if you figure these points out beforehand.
6. Check out properties for sale
After clearly defining your criteria, your broker will be able to set alerts so you don’t miss a corresponding property that hits the market. They will recommend properties that meet your needs. Then it’s time for the fun part: home visits!
Take the time to visit more than one property to compare features, general state and price. Your broker will gather all the information you need on a home’s history, renovations carried out and the neighbourhood.
This step in the process revolves around finding the property that best meets all your expectations. If you’re looking for a huge backyard or more spacious interiors, you may need to look further out of the city as property prices are always higher in major urban centres. Again, these are points that your broker can help you better understand.
What are the main advantages of becoming a homeowner?
By exploring all the advantages of buying your own home, you’ll see why so many people dream about going from renter to homeowner.
Being in your own home
By becoming a homeowner, you are finally in your own home. You can customize your little piece of paradise as you like, whether you want to renovate the kitchen, paint the walls in your latest favourite colours or develop your own garden.
You’ll also have the satisfaction of knowing that each improvement you make will increase the value of your property and so directly benefit you and your family – not some other owner or property manager. You could grow your financial independence!
Buy to invest
Your purchase is an investment that will definitely increase in value over the years, especially if you look at the current real estate market. That means you’ll be in a position to not only recoup the initial value of the property, but also realize potential profit in a future resale. This financial leverage is worth considering and shouldn’t be overlooked. Since it will be all yours, you can watch your wealth grow with each monthly payment as your property becomes a tangible investment.
Have more space
It’s worth thinking about buying a new property if your family is expanding and you need more room. That’s not to stay you can’t find a welcoming and safe home to rent.
However, becoming a homeowner gives you an opportunity to shape your environment to your liking, carry out renovations or expansion, and adapt your home to your family’s changing needs. It’s a chance to create memories in a place that belongs to you.
An advisor with the Confia real estate agency can help you get your buying project off the ground. Our team will be there to guide you through each step of the process and provide you with personalized advice that’s adapted to your situation.
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FAQ
What are the costs associated with buying a home?
There are several costs involved with buying a home that a buyer has to consider. There’s mortgage costs, including mortgage insurance (if applicable) and loan interest. Add to that moving costs, taxes, maintenance and repair fees, notary fees, as well as other associated expenses.
What are a homeowner’s responsibilities?
Homeowners often have to pay a mortgage on their property and must ensure to cover the monthly costs of their real estate loan. They also have to pay school and municipal taxes. Maintaining a property is another essential duty because as a homeowner you always have to make sure your dwelling remains in good condition, especially if you want to preserve its value over the long term.
How to choose the right property?
You have to define your aspirations and lifestyle before buying real estate so you don’t get buyer’s remorse. We can’t repeat this enough: the property you choose has to meet your specific needs.
Another crucial factor to consider is location. Take into account how close the house is to schools, public transportation, other amenities.
By working with a real estate broker, you’ll increase your chances of making a decision you can live with. On top of that, you’ll receive personalized support and answers to all your questions.
Are you worried about not getting enough bang for your buck? Your broker has access to information not available to the general public. They’re well positioned to justify the value of a home you’re interested in and provide you with comparable properties. It’s important to emphasize that the final verdict is yours and yours alone!
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