So you’ve been wanting to become a homeowner for a while now. You’ve watched Netflix every weekend for months to save a few more dollars every week. And now that you have your down payment, your savings, and a solid career going for yourself, you’re ready to take the next step.
Before you start booking walkthroughs and having lengthy conversations with your real estate agent, it’s important to think about what you’re looking for in your future home. After all, the payment period on your mortgage period will likely go for 20 to 30 years.
On that note, here are four questions that you may wish to ask yourself as you prepare yourself mentally for homeownership.
Question #1: Is My Credit Score Where I Need It to Be?
As a general rule, your credit score affects your home buying journey in two ways:
First, it can determine whether the lender approves your application. In Canada, your credit score needs to reach a certain level for your mortgage application to have a solid chance.
And second, because it can also affect your offered interest rate. According to The Balance, a credit score in the 620 to 639 range would result in interest payments of $177,237 while a homeowner with a credit score of 760 to 850 would only have to pay $111,337.
As you can see, a lower credit score can cost you thousands of dollars in interest over the course of a multi-decade mortgage. For these reasons and more, it’s important to make sure that your credit score is in a good place by the time you start making your application.
Question #2: How Do I Feel About This Location?
For some people, the house is all that matters. However, after you’ve spent a certain amount of time living there, your views can quickly start to change.
Are you someone who likes to have autonomy over your property? A neighborhood with an HOA may drive you crazy. If you’re looking at purchasing a waterfront property, are you prepared to overlook the potential for a history of flooding?
And sometimes, the issue isn’t just with sorting out property value. Are there amenities nearby? Is buying groceries a full-day affair simply because of the commute?
Sometimes you fall in love with a house and you have to follow your heart. But even when you’ve found a place that you’re 99.9% sure is going to be your future home, it’s still a good idea to weigh the pros and cons before taking that next step.
Question #3: Does the House Need Any Serious Repairs?
More often than not, the seller will make an honest effort to put your house’s metaphorical best foot forward. If you’re buying your next full-time residence, chances are that you won’t be hearing the seller’s agent leading with things like “And this is where the electrical wiring shorted last week.”.
Is there mildew or early signs of water damage? Are there any clear signs that you may need to raise funds to replace your fridge sooner than expected?
These are the types of considerations you’ll have to weigh. For these reasons, among others, if you’re not well-versed in home remodeling and construction, you may need to hire a home inspector to get to the bottom of it.
Question #4: What Are the Total Costs I’ll Be Paying?
When you’re planning to buy a house, it’s easy to get so focused on the big price tag attached to the mortgage that you forget about all the smaller and larger costs that will also be eating into your bottom line every month.
In Canada, closing costs can add up to over 4% of the purchase price. On top of the actual mortgage amount, however, you’ll also have to pay for mortgage insurance, home insurance, and property taxes among other regular expenses.
The sad truth, however, is that these costs are often enough to take a house from “Yes I can afford this.” to “This is putting a strain on my finances.”.
Everybody says that it’s important to budget and plan when you’re making a purchase as big as a house. But you just can’t do that well until you have a solid understanding of how much the house is going to cost.
The truth is that buying a house doesn’t just come down to the final transaction where you’re signing the loan agreement and making mortgage payments. It’s a series of decisions. Your home buying journey may have twists and turns, but the sooner you can find answers to these questions, the more clarity you’ll have throughout your house hunt.
Are there any other questions that you should add to the list?