Sage Advice For The First Time Homebuyer
Inevitably, there will come a day - either as a solo act or a family person - that you will desire a home for yourself.
Just remember the 6 principles of investing a property described earlier in the acronym LADIES:
- Equity; and
Also, it’s about the numbers - keep the emotion out of the purchase. The numbers have to work for both you and the people lending you the money to acquire the property.
In calculating those figures you need to understand the cost of ownership, in particular your monthly “nut”:
- Shared Costs (condos/homeowner associations);
- Insurance; and
On the topic of utility costs then you’ll want a 3 year breakdown BY MONTH. Real estate listing information often show an averaged value but for homes heated by electricity or oil but, then you might find there are peak months that are many times the “average” cost. You need to know when these costs spike to manage your budget effectively.
Shared costs are another concern. Condo owners contribute to pool of money that is used to maintain and update the property on a regular basis. These rates are often under the control of the board of directors and can be increased at their discretion. Similarly, you might buy into a community that has an active homeowners association requiring a monthly contribution.
Your licensed real estate practitioner has the expertise and tools to gather all of the facts and figures you need to make an informed decision - you them to your advantage.
You Don’t Always Own The Land On Which Your Home Is Built
Alternative home ownership programs are often introduced to combat the problem of people not being able to afford to get into the real estate market.
Condos are generally freehold - you have title to the unit that you live in. Cooperatives, on the other hand, are owned by a corporation for which you own a share in.
There’s another model out there, too, where you lease the land underneath a structure that you own. This is often used in retirement/adult-only communities that helps minimize the cost of home ownership for retirees. That said, there are commune-style communities for all ages if you look for them.
The first step is building an advisory team to help guide you through the decision making process. Start by developing a working partnering with a licensed real estate practitioner with a specialty in first-time homebuyers. Why? Because they have a network of experts waiting to help you with information about government and banking programs to ease the pressure of financing the property. They also have relationships with skilled trades and home inspectors who you can trust to provide accurate, reliable information about the condition of the property that you’re considering with real budget figures needed to maintain and upgrade it during the next 5-10 years.
The second step is getting prequalified for a mortgage. Your trusted real estate advisor will assist you in putting your financial profile together and presenting it to banks and mortgages brokers.
It’s important to understand that prequalification DOES NOT equate to a commitment - you have to be wary that you and your choice of property will still have to go through a formal approval process once you have put an offer in on the property. Your trusted real estate advisor will help you and guide you - they’ve done this many times before and know the fastest route with the least resistance for your particular situation.
Finally, it’s time to find a property that suits your needs - one that you can be proud of and afford. Remember, though, that the numbers have to work, first!
As far as features - look at your life over a five year timeline. What will you need in terms of space for yourself, your spouse and your kids? How many cars? Will there be a boat or trailer in the backyard? Do you need a workshop - in the house or out in the backyard? Will there be a garden? Do you need a fence for security and/or privacy? Does it have to be close to schools? On the bus route.
There are a hundred questions that have to be answered and analyzed and that’s where your trusted real estate practitioner makes your life easier in that moment - they know what questions to ask and they know how to weight the answers to help you reduce the problem of what house to buy down to one last question, “will this property work for us?”
If yes, then you put in an offer.