From Renting to Home Ownership

There are several factors at play that affect our real estate market. These factors contribute to the fact that, in spite of rising prices, more first time buyers can afford to move from rented to owned residence.

Interest rates are at their historical low, lowering the real cost of purchasing real estate. Our dollar is high, giving us an increased purchasing power, and inflation is low, thus applying little pressure on interest rates.

If you are planning to enter the real estate market for the first time, this article should be helpful. I listed hereunder eight steps that you should take to ensure that your "house hunting" will proceed smoothly and without surprises.

1.  Make sure your credit is clean.
Once you decide to start shopping for your own home, you should make sure that you qualify for mortgage financing. During the pre-qualifying process you will be told if there are any potential problems with your credit rating. It is extremely important to be honest and up-front with the mortgage professional, otherwise you may encounter problems when it come to closing your purchase. If your credit rating is less than desired, your mortgage broker may be able to help you with your problem. Starting this process early will ensure that you are ready when the time comes to make an offer to purchase.

2.  Find a Realtor in whom you have confidence.
Belief that one can do better by not using services of a Realtor is a common mistake among both sellers and buyers. "For Sale By Owner" properties are often priced above market value. Using services of the Listing Agent means you are either treated as a "customer" (like in a car dealership), or both the seller and you are represented by the same person, which leads to a difficult situation, bordering on a conflict of interest. You are in a better position having a Realtor who represents only your interests.

When "shopping" for a Realtor, consider asking your friends about their experiences. You will also meet Realtors when visiting Open Houses". Do not forget to check the Internet. Bear in mind that while experience and professionalism are extremely important, you have to feel comfortable with your Realtor. Therefore your personalities should be compatible. Pick a professional who is genuinely interested in helping you, and ask for references.

3.  Pick a good mortgage broker.
A good mortgage professional is an important member of your "home buying team". Ask your Realtor and your friends for names. Visit banks, credit unions and mortgage brokers. Shop for a professional that is trustworthy and knowledgeable. Ask for references from past clients and check them. This is an extremely important step - you don't want to find yourself in a position of not being able to close your purchase.

4.  Get pre-qualified for a mortgage.
Before you start looking for a home get pre-qualified by a mortgage professional. It is a simple process, free of charge. You will have the advantage of knowing what you can afford at an interest rate capped for 60, 90, and sometimes even 120 days. Pre-qualification gives you an assurance, but does not commit you to getting the mortgage from that institution or mortgage broker. You are free to keep shopping for the best mortgage deal.

5.  Compare available mortgage terms
When deciding on an appropriate mortgage product, compare not only interest rates, but various fees charged by lenders, as well as other terms. There are payment schedules, pre-payment priviledges, length of mortgage term, penalties if discharging before the term is up, possibility to transfer the mortgage or port it to another property. Do your homework before you buy. Once you find your "dream home" you might be pressed for time.

6.  Research and choose neighbourhoods
With the help of your Realtor compare neighbourhoods that offer homes priced within your budget, and make your choices. It is important to consider items like the distance from your workplace, public transportation, schools , parks and recreation, and, of course, shopping.

7.  Decide which home features are a "must", and which will be a "bonus".
To enter the home search with a clear understanding of your requirements, it is wise to make a list of "needs" and "wants". Buying your first home is sometimes confusing. There are very few homes that could be considered "perfect". Having a list of features that are a "must" will help you to re-focus on what is really important. You should keep in mind that your first home is just that: a step in a right direction. It is more important to pick a good location than to get a "perfect" first house. In a few years time you will probably be ready to look for a larger home.

8.  Keep your finances stable while shopping for your first home.
While looking for your home you should avoid making large purchases (like a new car). Remember that one of the criteria for getting a mortgage is the ratio of your income to current debt. The mortgage institution will also require proof that you have enough money saved for your downpayment.

Following these eight steps with a help of a professional Realtor will ensure that your "house hunting" will be a pleasant and stress-free experience.

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416-481-6137

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Marisha Robinsky, REALTOR
276 Merton Street
Toronto ON M4S 1N9
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