Breaking into the market: A helpful guide

Forgetting to Budget For Closing Costs

It's important to give yourself a cushion, typically 1.5% to 4% of the purchase price, to ensure that your closing costs are covered. More on that in my previous post, linked here: https://brankomiskovic.ca/blog/buying-your-first-home-this-year-don-t-miss-these-steps

Confusing Your Pre-Approval with an Approval

The pre-approval process verifies your financial situation: your income, debts, and credit score. This gives them and you a ballpark figure to go by before you start looking at properties. As an agent, this is a vital first step before stepping foot into a home. The last thing you want to do is fall in love with a home only to find out it is well above what you can actually afford at that moment. Once you've received a pre-approval and come to an accepted agreement on a home, this is when the lender is notified and given the proper documents to get started on an approval. In 99% of the offers we write, we request a conditional period of 5-7 business days to obtain a mortgage approval that is satisfactory to you. The lender may require an appraisal on the property before being able to approve your mortgage, so it is vitally important to know the current market value of the home. This is where a local realtor/buyer agent is an invaluable asset. 

Shifting Finances Before The Deal Closes

This is a big one! You've found the home of your dreams, your brand new life is soon to start, the mortgage broker has approved you for financing, the universe has shifted and the stars have aligned. It feels good. Great! Exciting times are ahead. It's at this moment where coaching is key, so listen closely: lenders do a final credit and employment check right before releasing your funds on closing day. Do not buy furniture on credit (or any big ticket items), do not finance a new car, and do not change jobs right before closing. These things can potentially revoke your approval, and this leaves you legally liable for breaking the real estate contract. You want to avoid that at all cost. 

Skipping a Home Inspection and Financing Condition to "Win" the House

For a first-time home buyer, a home inspection cannot be recommended enough. It's not only for the obvious reasons like electrical issues, a cracked foundation, a moldy attic, or worn shingles; it is an excellent learning experience for anyone getting into the market. The inspector will let you know what to keep an eye on, how much longer something may last before needing replacement, what needs to be looked into right away, etc. You also may not be familiar with the differences between something like knob-and-tube, aluminum and copper wiring, but having one of those could create great difficulty in getting insurance for your future home. No insurance = no mortgage = no home. 

Blindly Condo Shopping

For condos, the mortgage payment is only a part of the equation. When you receive a pre-approval, you'll notice that you will qualify for less than you would for a freehold home (a property with no monthly fees). The lender will take into account the monthly condo fees (which vary widely depending on type, location, amenities, age of building, and so on) while also factoring in that there is no cap on how much the annual increase can be. Condos boards can also pass "special assessments". These are mandatory fees passed onto the owners of each unit, usually in the thousands of dollars, if the reserve fund threshold is breached by a much needed repair or building issue. When submitting an offer on a condo, we always include a condition for a lawyer to review the Status Certificate. This document tells us how healthy a condo's reserves are, if there are any pending or ongoing lawsuits against the condo corporation, the condo declaration, rules and regulations, and other important pertinent information that your lawyer will sift through to ensure your investment is a sound one. 

Bottom Line: Always include a condition on financing and on home inspection. Give yourself no less than 5 business days for these. Hire an agent you can trust, someone your gut tells you is in your corner and can answer your questions. 

Best,

Branko