Buying a Home Here's What You Need To know
Here's What You Need To Know About Buying A Home
When you think of owning a home, you often think of adulthood, responsibility, growing a family, or at least creating special memories in a place that you associate with being safe and warm. The Canadian Dream right?
There’s no doubt that buying a home can offer all of the above – However, if it’s not handled correctly, that “dream” can soon evolve into a nightmare.
There are 3 essential pieces of advice I give to those shopping for a new home:
1. Find Out How Much You Can Afford
Many homebuyers shop backward, and it causes headaches at best, and pure panic at worse… How? Well, think of it this way. Most homebuyers shop for weeks, and even months looking at dozens of homes before they find the right one. You’re looking for that combination of a good neighborhood, low crime, good school districts, easy access to shopping, food, transit and highways, etc. etc. etc.
So what happens after you invest all that time researching and looking, and you finally stumble across “that one”?
Well, you want to make an offer right? But, if the home is in a good area, and ticks all the right boxes, what are the chances that you are the only one? More often than not, the seller is going to receive more than one offer – And they’re not willing to entertain offers from buyers who don’t have proof that they can get financing. (Prudent – Would you want to enter into a contract without knowing the other party could actually afford to buy your home?)
So this is where “panic-mode” hits. I see it all the time! Homebuyers call me up demanding a pre-qualification letter to send to the seller – And they need it “right now or else I might not get the home”! Unfortunately, it’s not always as simple as that. We’re going to need to get the paperwork going, discuss finances, as well as credit history and more… Why put yourself under such stress when you could just get a pre-qualified buyer analysis or pre-approval performed up front?
Besides, my second tip expands on why this is so darn important these days.
2. Get A Full Credit Analysis
I know this particular advice is going to sound self-serving… However, the bottom-line is that without a full credit analysis prior to shopping for your next home, you are taking a risk. A risk that isn’t really a good bet considering that statistically speaking the odds are against you. See, more than 50% of credit reports in Canada have errors on them. More than half. As you know, the mortgage you qualify for, as well as the terms, interest rate, and amount heavily rely on your credit.
If there is an error on your credit that is artificially dragging your score down, then you really need to address that ASAP – Especially since fixing mistakes on credit can sometimes take 4 – 8 weeks or longer. Again this circles back to making things more stressful than they need to be by shopping for a home without dotting the I’s and crossing the T’s first. A self-pulled credit report does not show the same level of detail as a professional grade credit report viewed by an underwriter. This is why it’s best to just let a mortgage professional do what he/she does best and analyze your credit before you invest much time and energy into your house hunting.
3. Suspend Any Unusual Spending
This advice might seem a bit weird to verbalize in the “information age” but you’d be shocked at how often I have to pass on bad news to clients who didn’t follow the advice, and now are either no longer qualified for a mortgage, or at the least have to change the terms of the loan.
Think about it from the lenders’ standpoint. You were approved based on certain criteria. If you change those parameters by making changes to your financial situation, then you the lender will need to re-run numbers and make sure the risk factors are still the same/similar. In other words, don’t make any changes until your loan has closed and funded!
- Don’t open any new loans
- Don’t open any new credit cards
- Don’t make any large purchases
- Don’t make big changes to your bank account
- Don’t quit your job, or change titles
- Don’t co-sign for anyone else on anything
- Don’t buy a car or furniture
These are the most common mistakes I see being made, so now I simply tell my clients to just pretend they’re in a holding pattern for the time being, and if you feel there’s something you must do that you’re uncertain of, well, it’s best to just call me first and ask! Better safe than sorry right? Now, how about it? Are you ready to get tips 1 and 2 hammered out right now? Let’s chat: Click Here For Free 20 Minute Mortgage Strategy Session
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