Buying your first home is exciting. You’re finally getting your foot on the property ladder. No more annoying landlords. The rent won’t suddenly go up. You can decorate the place in whatever way you want. And it’s just entirely yours.
But before you get the keys to that magical new door, there’s also the realization that it’s one of the most important financial decisions you’ll ever make. You’ll be writing the biggest cheque with your name on it. Then it dawns on you: how do you actually do it? In this guide, we’ll give the lowdown on how to buy your first home.
Are You Ready?
Look, we don’t mean to ruin the party before it’s even started. But it’s worth asking yourself: am I actually ready to buy my first home? These are a few key identifiers of someone who is not:
- You have a lot of credit card debt. If you still have a high-interest loan to pay back, such as a credit card, it may not be a good idea to buy just yet. Clear that debt first.
- You’re not sure if you want to live there long-term. Depending on the location and the state of the property market, it may not be the easiest thing in the world to sell. If you’re not willing to stick around for at least a few years, continue renting.
- Your credit isn’t the best. Room to improve your credit in the short term? Do it. It’s the path to an improved mortgage deal, which can save you thousands of dollars.
- Your emergency fund = 0. You should not use all of your money as a downpayment on a house. Having a buffer for a rainy day should be part of the equation.
Look for the Right Home Loan
Big mistake 1: stick with your usual bank for your home loan. There are hundreds of banks out there who are potential lenders. While the sheer number of them can be a little daunting, it does give you a little bit of power. Remember: banks are competing for your business.
Big mistake 2: buying based on the ‘sticker price’ (i.e. the advertised interest rate) without looking under the hood. When it comes to getting the right mortgage, there are a bunch of home loan variables you need to know about. We’re talking ARMs, PMI (private mortgage insurance), fixed rate, all that jargon. It’ll seem like a foreign language at first (and you may have to dust off your math books from high school!), but it’s worth doing your research.
Get a Decent Realtor
Having a realtor that has connections and your best interests at heart is a rare combination. But they’re out there. It’ll take some effort to cut through the hype and sales spiel, but it’s possible to find a decent real estate agent. It’ll take a bit of work, though.
For example, have a look at online reviews. Check Facebook groups for recommendations. Get intel from friends and family. Ask if you can get in touch with recent clients. Make sure there are no issues with their license or disciplinary actions. Awards from recognized bodies are also a good way of filtering out the duds.
Home Inspection is a Must!
You’ve found the home of your dreams. Or have you? Before you decide to spend your life savings, pay for a thorough home inspection. This is different from an appraisal, so be 100% sure you do both.
Home inspections will find hidden issues, such as foundation problems, pest infestations (termites, for example), necessary roof repairs, as well as a range of other issues that are not visible to the untrained eye. We recommend going for an independent inspector, not one through a realtor or lender.
Keep Doing Your Research
Finally, caveat emptor (a fancy phrase for ‘buyer beware’!). We’ve given you the heads up on the most important points you need to be aware of before signing on the dotted line, but this list isn’t exhaustive. You can write an essay on each point that we’ve listed.
There’s a lot of ground you can cover when it comes to property, so our top recommendation is to continue doing your research to the point of near exhaustion. Trust us, when it comes to buying your first home, there’s no such thing as knowing too much.