My husband and I just bought our first condo in Calgary. There was so much that I didn't know when we first started looking for a place. Fortunately, my friend Faez Moukaddem, '08 BSc, '12 BCom, was able to help. Faez is an experienced retail and commercial banking professional.
Based on our experience and Faez's expertise, here are five tips to help first-time homebuyers wade through the murky waters of real estate.
1: Educate yourself
Once you find the home you want, things move very quickly, so learn as much as you can about the process before you start looking for homes. Being educated will help you understand real estate lingo and the steps involved. "Do your due diligence, research and planning in advance," Faez told me. "This mitigates last-minute surprises and minimizes the chances of unexpected situations. Don't assume the professionals you are dealing with have your best interest in mind, so come prepared to ask tough questions."
2: Make a budget
Finding out you cannot afford the perfect place after you have seen it is super disappointing. It's better to make a budget before you start looking at properties and only look at those homes you can actually afford. The best resource I found for understanding the various costs of owning a home comes from the Real Estate Council of Alberta. When you are budgeting, don't forget costs like utilities, Internet, cable, rekeying the doors, repairs, upgrades, new appliances and furniture. Factor in your existing expenses such as car payments and student loans. "First-time homebuyers always get caught off guard by closing fees, such as legal fees," Faez says. "These one-time costs are usually about 1.5 per cent of the purchase price."
3: Get pre-approved
Getting a mortgage pre-approval will give you an idea of what you can afford and make the process of final approval much smoother and quicker. You will undergo a stress test, which tells the lender if you can afford a higher interest rate than you will actually be paying. The Office of the Superintendent of Financial Institutions requires potential borrowers to prove they can make payments that equal either the Bank of Canada's current posted rate or their contracted mortgage rate plus two percent.
4: Include conditions in your offer
This protects you if anything unexpected occurs or the home is not as it seems. A financing condition will nullify your offer if you are unable to secure a mortgage. A condition based on a home inspection will ensure that the home you want to buy is in the condition the seller has claimed. A condo document inspection will tell you the financial state of the condominium corporation you are buying into. You are not legally required to use either of these services but, as another neophyte, I highly recommend you do. If there are any major concerns with either inspection, you will be released from the contract. Service Alberta has a great consumer tip sheet about home inspectors.
5: Give yourself enough time
We had nine business days to carry out the home inspection and document inspection that met our conditions and only six more to gather our finances to close the deal. This was very challenging and stressful. Allow for more time and free up your schedule, because meeting your own conditions requires a lot of time. Also, learn from my mistake: ensure that the money for your down payment isn't tied up in investments. EXTREME STRESS WARNING! Our cash was tied up and wasn't available until the day we had to hand over our down payment. Do not do this to yourself. "Buying a home is usually the most expensive purchase you'll make in your lifetime" Faez says. "Making sure you get it right is critical."
And here's a bonus tip, courtesy of my husband. Make appointments to view the house or condo during the evening and on the weekend. This is likely the time that your prospective neighbours will be at home. It's a good chance to find out if the neighbours love to blast metal music or if they have an enthusiastic trio of barking Dobermans.
In the end, take time to celebrate successful #adulting. And welcome home.
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