Deciding to buy
Working with a REALTOR®
A blog cannot deal with all aspects of a subject and is not intended to replace professional advice. It's purpose is to highlight information and identify areas of possible interest. Anyone wishing to discuss this blog or to make any comments or suggestions about this blog is invited to do so by either posting comments or emailing me directly.
August 5, 2011
Buying a Home for the First-Time
With today's low interest rates and wide variety of housing options and prices, buying your first home may be one of the very best long-term investments you'll ever make. But before taking the big jump into home ownership, it is important to consider your personal needs and financial situation very carefully.
Owning a home is not for everyone. It's a very big responsibility that may require some sacrifices and possibly a lowering of expectations. Unless you have a significant down payment readily available, it is important to keep in mind that double car garages, gas fireplaces, family rooms, powder rooms, walk-in closets, ensuite bathrooms, finished basements and over-sized lots all add dollars to the price of any home. Prime neighbourhoods - regardless of a particular home's negative features - also command premium prices.
For most people, their first home is a very modest structure in a pleasant rather than prime neighbourhood, and it may need some cleaning or fixing up. It may take a number of trade-ins over a period of many years to build up equity and allow most to eventually realize their ultimate dream home.
Deciding to buy
One of the easiest ways to evaluate your decision to buy is to ask yourself, "If all else were equal, would I rather rent or own my own home?" It's safe to say that most of us would opt to own our own home.
But how do you make that choice financially? A good way is to look into the future and consider what you will have to show from monthly rental payments (just a stack of receipts) versus mortgage payments (building significant equity in a home). When all is said and done, buying a home is a sound investment in your financial future since you and your family need shelter either way.
For most first-time buyers, the key to home ownership is in the initial down payment. This is the part of the purchase price you have to put down as cash. This is usually 20 per cent of the purchase price for a conventional mortgage. However, it is possible to get a high-ratio mortgage for up to 95 per cent of the purchase price which is what many people do. This type of mortgage is insured by the government and the insurance premium - anywhere from .65 per cent for just less than 20 per cent down to 2.75 per cent for 5 per cent down - is added to the mortgage principal. This premium insures the lender and allows them to lend the money to you.
One of the best ways to save for a down payment is by taking advantage of several government programs available to first-time buyers: Using your RRSPs for a down payment, using your tax-free savings account. Enlist the services of a real estate professional to help you understand how these programs work and other ways to help you save for the highest down payment possible. This professional, a Calgary area REALTOR®, will also help you understand and choose the housing options and neighbourhoods that will best serve your pocketbook and desired lifestyle.
Working with a REALTOR®
Once you have a good idea of how much you can afford and the income you have available for all your housing costs, you can start to zero in on the home you want to buy. This is where the value of having a fully-trained and experienced REALTOR® on your team becomes clear.
Many REALTORS® have considerable knowledge of market values, properties available in your price range and homes that will match your individual needs. He or she will meet with you to review your list of needs and wants and help you determine the price range of homes you can consider in a variety of neighbourhoods. They will then assist you with getting in touch with a mortgage professional that will help ensure that you're fully approved by a lending institution for a mortgage loan.
Once you decide on a particular REALTOR® to work with exclusively, they can provide you access to their premium website so that you get first view of all the homes that meet your criteria that hit the market each day. You will see all the details, like floor plans, room sizes, virtual tours, quality photos and the full property addresses. You can select the ones you wish to see, and drive by them at your convenience at different day parts. Then, contact your REALTOR® to help you determine the market price of the homes you'd like to personally see the inside of.
A REALTOR® can also preview properties for you and show you only those homes that match your budget and what you have told them are your needs; he or she will also explain the various financing alternatives available and provide you with up-to-date information on interest rates and mortgage options. They will also help you make sure you are ready to make an offer on a home, before you do.
When you decide on a particular home, your REALTOR® will assist you with all the details required to negotiate and complete this complex business transaction: Including drawing up an "Offer to Purchase", negotiating with the Seller and Seller's Agent on your behalf, managing the contingencies, and overseeing the hundreds of details from contract to possession and beyond. Your own REALTOR® will also assist the other professionals required in the real estate transaction: appraisers, home inspectors, insurers, mortgage professionals, lenders, real estate lawyers and other REALTORS®.
The value of your own real estate professional - a REALTOR® - who represents you and advocates on your behalf is not expensive, it's priceless. The services of a REALTOR® are not free; but in all but in the rarest of cases, the Seller has already agreed to pay the full cost of your REALTOR® to work for you through their own contract. This is not an additional fee, but is included in the standard listing contract and is how more than 90 per cent of real estate is done - between two REALTORS® at two competing Brokerages. This is what is called the "MLS® System": The sharing of MLS® listings with advocates (the REALTORS®) for each party (the Buyer and Seller) negotiating to get their party the best deal they possibly can. Both advocates are then fully and adequately compensated for their work.
Experienced REALTORS® will also show you - and negotiate against - unrepresented Sellers, and sales persons at new construction. The REALTOR® is fully paid for by those parties, and in the rare case that their fees are not fully paid by those parties, they work on your behalf so that you don't overpay for a home and their fees that are normally included in the sale price.
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