The Top 3 Things You Should Know Before Buying a Home

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Buying a home is one of the most significant decisions you will ever make. Before going hunting for the home of your dreams, it’s essential to take the proper steps to ensure that you are financially and personally ready. This guide will help you understand the process and know what to expect once entering the market. Read on to discover the top three things anyone should know before buying a home. 

Your Wants and Needs 

Before heading out to look at houses, think about what you want in your new home. Cover major considerations like location, size, access, and style but also consider more minute details like atmosphere and storage. Do you want a yard? Is the commute important to you? Do you need a garage or an additional source of income? Dig deep and discover what’s most important in your ideal home and what specific features you require to function daily. 

An excellent place to start would be determining what type of home you want. The type of home you want will significantly affect the neighbourhoods you look at and potentially the homes you view. Since the pandemic, many people’s needs in a home have shifted. We used to see people flock to the city for an urban lifestyle, but now we see people migrating north to opt for more outdoor space. Your ideal home will always revolve around your life values, so make sure you know what they are! 

To be confident on your journey to buying a home, here are some essential questions to ask yourself before searching: 

• Why do I want to purchase my first home? 

• Am I ready to be a homeowner? 

• Do I have money saved for my first home? 

• Do I understand the process of buying my first home? 

Your Credit Score 

Before you buy a house, it's essential to make sure your credit is in good shape. You can check your credit score for free with Borrowell or other companies. With Borrowell, you can also download your full Equifax credit report for free. Once you do that, you should review your report and see if any errors that might be hurting your score. Errors you might find include:

• Personal info errors, such as an incorrect name, phone number, mailing address, or date of birth 

• Incorrect payment statuses, such as on-time payments for credit cards or loans showing as late

• Closed accounts reported as open

• Duplicate account listings, especially in the case of delinquent accounts or accounts in collections

• Negative credit info that’s older than seven years, such as delinquencies and consumer proposals

• Mixed accounts, or accounts belonging to another person with the same name

• Incorrect accounts resulting from identity theft

If you see something off, ask the creditor to remove the error or dispute the credit report error with the bureau directly. 

If your credit score is low, try getting caught up on any behind payments as soon as possible. Even after all debts are settled, your credit score will take time to improve. The earlier you start improving it, the faster you’ll be able to get approved for a mortgage and into your new home. 

Here’s are some tips to help you improve your credit score: 

• If you're tempted to close a credit card once you pay it off, don't—it could hurt your credit score if it's been open for an extended period of time. 

• If you have a lot of available credit, you might benefit from closing some of those lines of credit so that creditors don't worry about your potential to run up a lot of debt in the future. 

• Be careful of making payments on old debts or even contacting lenders or collection agencies. You don't want your actions to turn an old debt into a ‘new’ debt since the latter hurts your credit score a lot more. Instead, contact your financial institutions to guide you on how to best proceed. 

Your Budget 

Determine your budget before you start looking at homes. Ideally, you should spend no more than 30% of your gross monthly income on housing costs. This percentage includes mortgage payments, insurance, property taxes and any homeowners’ association fees. Don’t forget to include the cost of utilities, transportation, and food. You don’t want to find a home that’s just outside your budget only to find that the cost of living is too high. 

A great place to start when considering your budget is using a mortgage affordability calculator. These calculators generate a mortgage estimate based on your ideal price range, along with mortgage details. You can plug in different price ranges to see how mortgage costs are broken down monthly and what you can afford. 

Some substantial home-buying costs you’ll need to add to your budget are:

• Closing costs: A combination of various legal or administration fees. 

• Taxes: Applicable taxes will vary depending on the conditions of the sale and the legislation in your province or territory. For example, if you’re buying a newly built home, you’ll have to pay either GST or HST when you purchase it, depending on where the home will be located. 

• Full home inspection: Once you find a home, you’ll want to have it professionally inspected for any potential issues. Inspection costs vary by location and size of the home. 

Are You Ready To Buy a Home? 

Buying a home can be a stressful process for first-time buyers. It's essential to be comfortable with your decision because many more minor details can have significant effects down the line. But don't worry, we've got you covered! 

If you've followed these steps, you're now ready to start your search for a new home. Find a knowledgeable real estate agent with experience in the neighbourhoods you're looking in and make a list of what you want in a home. With a concrete checklist of your favourite features, a stellar estate agent by your side and these steps to guide you, you should be all set to find your next home!