Q & A Series – Part 4
Q: Where should a first-time home buyer start their home search? – Jordan
A: Hi Jordan,
The first time home buying search is a topic I get asked about on a regular basis. I’ve found the best way to answer this question is through a story I was told when I first started in real estate.
The Case of Stolen Identity
I was speaking with a mortgage broker and he was telling me the story of a couple who couldn’t close on their home because their mortgage was denied due to the husband’s poor credit. It wasn’t massive unpaid bills or anything like that – it was a case of stolen identity. I know what you’re thinking, “meh, that won’t happen to me”. Believe me, I always thought those stories were bogus, but when you hear it from someone you work closely with, you realize that it does and can happen to you.
The couple ended up losing their $10K deposit because they hadn’t checked their credit before purchasing a home (they waived the financing conditioning and hadn’t gone through a proper preapproval process insisting there were no financial issues). That left them no time to rectify the mistake or build credit back up before closing.
This sounds like a case of bad luck, but it happens more often than you’d think. The moral of the story is that in order for you to achieve your ultimate goal of homeownership, you have to ensure that all financial issues are in order before setting out to find that dream home. So to answer the question specifically the first step should be to arrange a consultation with your bank or a mortgage broker and work through your financial details to give you a better understanding of what you can afford before you inevitably venture off to the Internet to look at upgraded kitchens and hardwood floors on Realtor.ca until your eyes are bleeding at 3am every night.
The Second Step
Once you’ve had the first consultation with the bank/mortgage broker, they will go to work on your pre-approval. This will give you an idea of how much you can afford. One thing to note is that this amount may not be one that you’re entirely comfortable spending, so you’ll want to work with your mortgage agent to craft an idea of the kind of lifestyle you want to be able to maintain on top of owning a mortgage.
Once you’ve received the pre-approval (it only takes a day or two to complete) it’s time to sit down, interview and choose your realtor. Once you feel comfortable with your chosen representative and they have taken you through the necessary educational steps, now it’s finally time to do the part everyone loves – the house hunt!
There are definitely more steps between searching for, finding, and closing on your first home, but your first step should always be to determine your financial capabilities. If you’d like to learn more about the entire homebuying process, please contact me and I’ll set you up with my First-Time Home Buyers Guide.