Spring home hunt: 7 steps to buying a home

There are many people who get a sense of pride and freedom when they become homeowners which can’t be matched by renting. When you own your own home, you are not restricted by your landlord’s rules, and your mortgage payments are going toward building equity.

Buying a home is a big step. Here are some things to consider in advance.

1. How long will you live there?

The transaction costs of buying a home include legal fees, appraisals (if required), inspection fees, moving expenses, etc. If you don’t plan to live in your new home for at least three to five years, you may not gain enough equity to make selling worthwhile. In that case, you are probably better off not buying in the first place.

2. How much home do you need?

Buying a cheaper, smaller home can end up costing you extra if you have to sell right away due to a growing family. On the other hand, buying more home than you need incurs extra maintenance, energy and tax costs.

3. How’s your credit rating?

The higher your credit score, the lower your mortgage rate will be and the more you will qualify for. If needed, spend some time working on improving your credit. Check your credit report and correct any errors, don’t apply for any new credit, stay well below credit limits and pay your bills on time.

4. Don’t forget about closing costs

Your lender will require you to have at least 1.5 per cent of the purchase price for closing costs.

5. What can you afford?

Talk to a mortgage expert to analyze your financial situation before you start shopping. You’ll get an idea on what you can afford. To test how comfortable those payments will be, start saving that amount every month (less what you are paying now in rent). Not only will that simulate ownership, it also helps you save for a down payment!

6. Get pre-approved for a mortgage

This is really the first step in the buying process, and tells you exactly how much you can spend before you start looking for your new home.

7. Use a real estate agent

This professional can help focus your search, find the right home, save time and protect your interests. There’s no cost to the buyer to use their services.