If you’re a first-time homebuyer going through this process all by yourself or with a partner who is also a first-time buyer, we have a few things you should do to ensure your home buying process is as smooth as possible.
Not everyone has access to help or guidance from a trusted friend or family member when they’re going through one of the most significant purchases in their life, so we’ve compiled some tips and red flags that you should be aware of when purchasing your first home. Think of us as your trusted resource for all things real estate.
Tip #1: Always hire a Real Estate Lawyer.
This will be one of the most significant transactions of your life; you’ll want sound legal advice from a professional you trust.
Most realtors and mortgage brokers will have real estate lawyers they frequently work with and recommend to their clients; this is helpful when you don’t have anywhere to start your search for a lawyer. However, it shouldn’t be your only resource.
As much as we’d love to think that every realtor, mortgage broker and lawyer has your best interests at heart, that’s not always the case. Hiring the first person you meet can put you in a situation where you feel stuck and clueless. As annoying as it may be to meet with multiple lawyers, it’s definitely of benefit to you.
When you interact with multiple professionals, you’ll see patterns or protocols that each follow, making it easier to spot crooks or scammers.
A good real estate lawyer will be organized, available, and provide you with step-by-step instructions and updates. As a first-time buyer, you want to ensure that the lawyer you work with is willing and able to explain all steps of the process to you when you initially meet with them. They should also be transparent about their fees from the very beginning.
Tip #2: Always get a second opinion on financing.
Financing your new home will be one of the most challenging and complicated steps in the home buying process. Understanding what you can realistically afford and be approved for can be extremely confusing, even with the power of Google at your fingertips.
Our number one piece of advice regarding financing is: ALWAYS shop the market.
The difference between mortgage approval amounts at various institutions can be quite large. Typically speaking, mortgage brokers have more negotiating power when shopping the market for you, but that doesn’t mean you should rely on them exclusively.
We recommend talking to a financial advisor and/or mortgage advisor at your current financial institution to explore the process and get a run-through of how the financing process works, then speak to mortgage brokers.
One thing to keep in mind is that even at banks or credit unions, professionals can lack the knowledge and insight that will be key to your success. That’s why we always recommend speaking with multiple people before making any decisions.
Again, speaking with multiple people gives you a sense of proper protocols and steps that need to be taken. You’ll also find yourself in the best position to get the best rate possible.
Be wary of any financial institution or mortgage broker that claims they can provide you with significantly lower interest rates or a higher purchase price. If two out of three places give you similar answers and the third is drastically different, that could be a sign of some suspicious activity.
Tip #3: Lay the groundwork when it comes to budgeting.
No one knows what you’re comfortable spending better than you do. You know your income, your spending habits, your lifestyle, etc. Taking the time to really think about what you could afford for the down payment, closing costs, and monthly payments will go a long way in preparing you for the home buying process.
You’ll likely run into situations where you’re either approved for a higher purchase price than you initially thought, or you feel like you have to add to your offer to get your dream home. Beware that as the home buying process goes on, your emotions will get more involved, and you’ll lose a sense of control in some ways. In the heat of the moment, you could decide to increase your budget to get that property that you’ve always dreamed of.
When you spend the time in the beginning, either by yourself or with your partner, to land on a concrete budget, you’ll feel much better when it comes time to offer a property. You’ll know what you can afford and feel less pressure to go above that.
Also, be aware that you’ll find some real estate agents and mortgage brokers who will try to convince you to purchase a property at the very top of your budget. If you’re not comfortable with that, do not do it. Remember that these are commission-based professions; for some, that takes priority over your best interests.
Tip #4: Don’t make decisions off of someone’s word.
Don’t take someone’s word for it – if you’re putting in a legally binding offer that requires you to secure a mortgage, DO NOT offer until you have a guaranteed pre-approval letter.
Many first-time buyers make a mistake by putting their complete trust in their mortgage broker or advisor’s word. Having a mortgage professional verbally tell you a ballpark price range and having a pre-approval letter in hand are two very different things.
Do not start offering on properties until you have a pre-approval letter from a trusted financial institution. When you submit an offer on a property, you are entering into a legally binding contract with the seller if they choose to accept the offer. If you do not have your financing secured, you need to have a conditional offer than includes a financing contingency.
The best way to avoid defaulting on an offer and potentially losing your deposit, being sued and paying damages to the seller is to secure your financing before submitting any offers. Pre-approvals typically last anywhere from 90-120 days, so there’s no reason to delay locking in your rate.
In the simplest terms, submitting an offer is like saying to the seller, “I 100% guarantee I will pay you this amount.” You wouldn’t say that unless you also had documentation from your lender saying, “I will 100% give you this money.” This transaction involves many people and steps, so before you put yourself and your money on the line, make sure someone’s got your back.
Tip #5: Not all Real Estate Agents are created equal.
As a real estate brokerage, we know you’ll take everything we say with a grain of salt (as you should), but just like with real estate lawyers and mortgage brokers, you should always get a second opinion regarding your realtor.
Of course, we’d love it if you came to our office, met one of our agents and felt 100% confident that we were the brokerage for you, but that doesn’t mean that’s the best course of action for you.
Take the time to find someone that truly makes you feel comfortable and who you have no doubt will have your best interest at heart. Many factors go into finding the right agent, so don’t feel pressured to make a decision after one consultation.
Your realtor should:
- make you feel confident in their abilities and market knowledge
- have an in-depth understanding of the area in which you are looking to purchase in
- provide guidance through every step of the process, even after an offer has been accepted
- be responsive and available to you throughout the entire process
Your realtor should not:
- pressure you into signing a buyers agreement right away
- show you properties that will sell outside of your agreed-upon budget
- leave you high and dry after your offer has been accepted
- pressure you into waiving clauses that you are not comfortable waiving
Ultimately, buying a home is an equally scary and exciting process that can be made substantially less stressful by working with the right professionals and putting in some time to educate yourself.
We hope this article has provided you with support and guidance as you embark on this journey. If you are looking to buy in the Ottawa market, please contact us! Our team takes pride in putting your well-being & interests first. We have over 20 years of experience working with buyers and would love to walk you through the process.