4 Financial Considerations Before Buying a Home
When we’re preparing to buy a new home, our checklists often begin with the obvious: curb appeal, plenty of bedrooms, an ensuite, close to work and the best schools. Of course, all these points are important contributions to the quality of your life in your new space, but there are other equally as important considerations that are sometimes overlooked—the financial kind. When you overburden yourself financially, it might not be long before the ensuite has less value to you and your overall appreciation for the home takes a hit. So, before you put pen to paper, take a moment to mull over 4 not-completely-obvious financial considerations.
1. Getting pre-approved for a mortgage
Getting pre-approved is a great first step for any home buyer to take. While you might have a solid estimate of what you can afford, your bank or mortgage lender will ultimately determine the upper limit of your price range, and it’s important to shop within that range to manage your own expectations. Plus, being pre-approved can make your offer more attractive to sellers! A seller who is considering multiple offers will likely prefer your offer over offers from buyers who aren’t pre-approved, and it’ll save valuable time if you discover the perfect home and need to act fast. Even if you’re not competing with other offers on a home, when a seller sees that you’re pre-approved, they know that you’re serious and it’ll likely make negotiations and meeting conditions easier for them, which translates to a smoother deal.
2. Evaluating necessary repairs or renovations
Sometimes you’ll view a home and everything appears perfect—except for that one important room, or those windows, or maybe the wiring. When a house seems to check all your boxes, it’s easy to imagine that you could live with certain shortcomings for a few years, or you run through the list of handy people you know that you’re sure would do you a favour! Before you let yourself get carried away with thoughts of moving in, really consider whether you have the funds to complete major work, as it can get expensive in a hurry. If the money isn’t there, you’ll have to decide whether it’s a practical decision to take the house as-is, just in case those favours don’t come through.
3. Preparing for the long haul
Whether you’re buying your first home, upgrading to a larger home, or finally moving to that house in the country you’ve always dreamed of, there will be long-term financial considerations to keep in mind. Chances are whatever move you are making will be a big change that will require big modifications to make your home more functional. For some people that might be a furniture upgrade, which is great, that kind of update can wait. But if you need to buy more furniture to fill empty rooms, purchase major appliances the previous homeowners took with them, or even get a second car to help everyone in the household have easy access to the city from the country, it’s important to have funds set aside that aren’t tied up in mortgage payments and monthly bills.
4. Paying closing costs
Before you decide to make an offer, be sure to account for some of the many costs associated with closing a sale, such as appraisal fees, property and land transfer taxes, utility hookups, home insurance, and lawyer’s fees. Generally, closing costs can range from about 1.5% to 4% of your purchase price; so, if you purchase a home for $250,000, your closing costs may range from about $4,000 to $10,000. It’s a great idea to talk about these costs with your financial institution when you’re applying for a mortgage pre-approval. Having this conversation ahead of time will help you be prepared when it comes time to pick up those keys.
Now, go get that home!
When you’re well-informed about the financial obligations of owning a home, you won’t be easily phased during the buying process and you’re ready to have some fun looking. Once you put in an offer, you’ll know that you’re prepared for what’s to come at closing and further down the line, which means you’ll be able to enjoy turning the key to your new home that much more.
Ready to find your dream home? Purplebricks can help.