26 Tips To Buy Your Dream Home With Confidence

Buying Your Dream Home
 

When I was conducting my research for the “10 passionate Canadian personal finance bloggers to follow in 2017” post, I came across a few interesting/disturbing real estate posts from other blogs related to purchasing properties. As a Realtor, I was curious about how other non-real estate bloggers view the real estate industry and what their readers’ feedback were. To my surprise, the majority of the blog posts and comments on those posts projected a very negative view of the industry and its participants’ practices and in some cases, the projected images were outright disturbing. I won’t go into details of how disturbing those posts were. However, I will use what I had learned through personal experiences and from those posts to create a thorough checklist to guide home buyers when they shop for their properties. Instead of trying to fix the industry issues, I think that there is a better way to overcome it – prevent it from happening in the first place. The best way to do that is through education and awareness. So, I’ve composed a list of things that you can do to save money and protect yourself from an unnecessary financial loss when you are planning to purchase your dream home. This list is categorized into three sections: before you shop, when you are shopping and after you have bought.

Before You Shop

In today’s information age, there are a lot of resources on the Internet and lots of ways for people to do their research when they are shopping for items such as a flat-screen TV or a laptop or a smartphone, or a pair of shoes. People are spending more and more time doing their research before they purchased their everyday items. So why not do the same research for one of the largest purchase that you’re going to make during your lifetime? The list in this category will be focused on the research part of your purchasing experience – Before you shop for your dream home.

 
Credit Score

1) Check Your Credit Score

One of the most important thing that you can do before you start your search for a new home is to check your credit score and report. By knowing your credit history, you can contact the credit bureau such as Equifax or TransUnion to fix any mistakes that may affect your credit score. A low credit score can either cost you thousands of dollars in extra interest payments or disqualify you from obtaining a mortgage. To find out how to obtain free credit reports or to improve your financial health, check out my two-part series on how to improve your financial health.

2) Prepare Your Finance

Another import preparation step is to prepare your finance before you start shopping. Are you targeting to put down a 20% down payment so you don’t have to pay for mortgage insurance? Or you’ll be asking the bank of mom and pop to lend you a few pretty pennies that will make up the difference between the 20% down payment and your savings? Or you have some savings in your Registered Retirement Savings Plan (RRSP) that you can borrow up to $25,000 (per purchaser) to purchase your primary residence? Regardless of the method that you use to come up with the required down payment, having a rough estimate will lower the financial risk when you buy and it’ll make the mortgage qualification process a lot more efficient.

3) Get A Pre-Approved Mortgage

To ensure that buyers are able to purchase the home of their dream, the majority of home buyers will most likely have to obtain a mortgage. By getting a pre-approved mortgage, you will be able to figure out the top range of your shopping budget. Just because you’ve got a pre-approved mortgage does not guarantee that the financial institution that qualified you will lend you the money. However, if your financial situation did not change drastically from the qualification period and the signing of the purchase and sales agreement, your chances of obtaining a mortgage amount that you were pre-approved for is pretty good.

 
Set Your Shopping Budget

4) Set Your Shopping Budget

Just because you have the 20% down payment and a lender is willing to lend you 80% of the purchase price doesn’t mean that you should use that number as your max budget. To ensure that you provide yourself some breathing room, you should set your max budget at 90% of total down payment and pre-approved loan. The reason behind it is to have some of your down payments leftover to pay for closing costs. Remember, you have to have extra money to pay for: lawyer fees, land transfer taxes, home insurance and moving costs, just to name a few expenses. The mortgage loan does not include closing costs.

5) Search For Your Ideal Realtor

Once you’ve had financially prepared yourself, it’s time to search for your ideal Realtor to assist you with your search. You don’t necessary have to work with a Realtor. However, I belong to the Toronto Real Estate Board (TREB) and the norm for commission payment is the seller paying for both the buyer and seller agent’s commission. So, if you as a buyer are not paying for a Realtor’s service, why wouldn’t you enlist a Realtor to be a part of your buying team? Check out one of my previous posts to assist you with your search for your ideal Realtor.

6) Review The Buyer’s Representation Agreement

Once you have met with a few Realtors, (you did meet with more than one, didn’t you?) and have decided to enlist one of them to assist you, I wouldn’t recommend that you sign the buyer’s representation agreement right away. Until you have worked with that Realtor for a while and are satisfied with the services provided, then you should review the buyer’s representation agreement with your Realtor. Ensure that you fully understand the agreement and ask any questions that you may have to clarify any misinterpretations. One thing that I am strictly against is a client signing a multiple representation agreement (this type of agreement benefit the Realtor more than it’s benefiting the clients). You can read about why it’s not beneficial for buyers or sellers to sign a multiple representation agreement in my questionaires for realtors.

Communicate Your Requirements

7) Communicate Your Shopping Requirements

Realtors are not mind readers nor do they have a secret method to identify the perfect characteristics and requirements for their clients’ dream homes. Every client is different and they come from all walks of life. To ensure that buyers maximize the skill sets of their Realtors, it’s best for buyers to communicate as much information to their Realtor as possible. The more information that a Realtor has, the more efficient the Realtor can use that information to screen suitable properties to show their clients. Information such as availability of public transit, proximity to public schools, community centers, place of worship and grocery chains can benefit both the Realtors and the buyers.

8) Analyze Market Data

To ensure that my clients are well informed about the current market condition, I always provide current market information in the form of recently sold, comparative analysis and current listings reports. This way, I can set my clients’ expectations and provide them with an overview of what may occur when the time comes for them to make an offer on a property. I strongly believe that a Realtor’s primary duty is not only restricted to assisting their client finding their dream home, but it also includes providing education and awareness of the industry to their clients. Hence, the more information that I can provide to my clients, the better they are equipped to make decisions and manage financial risks.

When You Are Shopping

For me, the fun part of being a Realtor is spending time with clients to search for their dream home. Whether we are viewing one property a week or twelve properties over a weekend, the search is often exciting and interesting every time. Every property that I have visited is different and there are always something new to learn. For example, I have learned a lot about home decor, design, and space usage, and use that knowledge to make my own property better. At the same time, I often use my showing appointments to educate my clients on what to pay close attention to, what not to do when renovating, what will increase a property’s value and take note of what they like and what they don’t. I truly believe that shopping for a dream home is a rare opportunity that most people only get to do it a few times in their lives and it’s best to enjoy the process as much as possible.

 
Build Your Buying Team

9) Build Your Buying Team

Many first time home buyers get the impression that they only need a Realtor to assist them to purchase their dream home. In reality, there are many more professionals that will be involved in the process depending on where in the buying process the buyers are at. A resourceful Realtor will be able to provide a list of professionals to their clients to work with as needed. I’ve created a resource section on my site to assist anyone who’s interested in building a real estate buying team. The more prepared you are, the better your shopping experience will be. Having a list of reputable real estate lawyers, mortgage brokers, insurance brokers, home inspectors, movers and contractors will greatly decrease your stress level and make your shopping experience much more leisure.

10 Have A Battle Plan

After working with many clients for more than five years, I noticed that people quite often use their hearts to buy a property rather than their heads. I too was guilty of that once upon a time and there is nothing wrong with that. After all, you should only buy a home that you’ll love to live in, otherwise, why buy it? With a great Realtor on your team, that Realtor will act as the head to your heart. Your Realtor will work out a battle plan with you for different situations to ensure that you stick to your plan and not let your emotion interfere with the process. Without a battle plan, some buyers may fall in love with the wrong property and they will definitely overpay for the property or go over their max budget, or get into financial trouble. So always have a battle plan ready, regardless if you think you’ll need it or not.

 
Ask Questions

11) Ask Questions

Once again, Realtors are just ordinary people and not mind readers. They don’t know what you don’t know. So if you have a question, always ask. There is no such thing as asking a silly question. For example, if you see something that is out of place in a property, it’s worth asking your Realtor. Who knows what that question will lead to. Sometimes, a single question can save you thousands of dollars in the long run. Quite often, people will place a carpet over an area of a floor to cover up issues with the floor. By being inquisitive, you may save yourself a few pennies or thousands in future renovation costs.

12) Manage Your Financial Risks

As a Certified Project Management Professional (PMP), I always have risk management on my mind no matter what I do. Hence, one of my top priorities, when I work with clients, is to manage and mitigate their financial risks. It’s best to be safe than sorry. For any transactions, if it doesn’t make financial sense to me if I am in my client’s situation, I would communicate to my clients that I would not proceed with the transaction if I were them. Ultimately, the decisions are theirs to make. However, I also have to make sure that they think twice or thrice before making important decisions.

 
Protect Your Finance

13) Protect Your Finance

Last summer, one of my wife’s relatives from oversea was trying to purchase a property through a private deal and asked me to tag along to help review the purchase and sales agreement. To my surprise, the Realtor that claimed to represent both the buyer (my wife’s relative) and seller drafted a horrible agreement. My wife’s relative’s deposit for the agreement was entrusted to a third party that was neither a real estate broker or lawyer with a trust account. Suffice to say, I recommended my wife’s relative not to sign on the dotted line. In addition, I also provided a few more pointers to him to never give deposit cheques to an individual or a brokerage without a trust account, not to close a real estate transaction within less than a month, and to always do a home inspection if possible.

14) Managing Your Offers

In an industry where unethical practice regarding offers does happen from time to time. It’s best to manage your offers prudently. For example, I have encountered a few times when I tried to make an offer on a property that was listed on the market for a couple of months and suddenly there was a multiple offer situation when I submitted my offer. Chances were, some of the multiple offers were manufactured and my spider sense signaled cautious when that happened. If an offer situation does not feel right, we need to know when to walk away. Furthermore, it’s best not to make offers that last more than 24 hours or make unnecessary offers if you don’t really love the property. These types of offers do not benefit the buyer and it’s best to avoid it.

 
Take Notes

15) Take Notes

Sometimes, the home buying process can be a long and tedious process. Buyers may view quite a few homes before finding a home that they feel comfortable to make an offer on. During this viewing process, it’s recommended that buyers take note of features that they like or don’t like about certain properties and provide those feedback to their Realtors. This will allow the Realtor to better screen properties to make the showings more productive.

16) Reassess Your Requirements

When I started to search for my first property, I went from low-rise to high-rise and back to low-rise again. I changed the locations of my search multiple times. Whether it’s the neighborhood, or the daily commute, or the privacy of the property or access to transit, it’s best to reassess your requirements if you have been searching for a while and have don’t have any success. The worst thing that can happen is you buying a property and having buyer’s remorse shortly after the purchase.

17) Evaluate Your Realtor’s Service

Most Realtors don’t like this tip. However, if the working relationship is not productive or there’s a conflicting view in terms of the process, it’s time for the buyer to evaluate the Realtor’s service. For me, I take pride in the services that I provide to my clients and I don’t settle for second best. If my clients are unsatisfied with my service, I’d ask them what I can do to achieve their desired satisfaction level. Alternatively, we can always agree to mutually terminate the relationship if the service provided is not up to the clients’ standards.

 
After Buying Your Home

After You Have Bought

Finally, you’ve made an offer for a property and after hours of negotiation, the purchase and sales agreement was signed. You’re a homeowner. Well, not yet. Signing the purchase and sales agreement is only half of the journey. The other half of the journey is to complete the necessary administrative tasks to get you the keys to your dream home. These steps may not be fun, but if you do it right, it can save you thousands of dollars after everything is said and done.

18) Buy Home Insurance

When you make an offer for any property, it’s always prudent to include three conditional clauses in your offer: insurance, home inspection, and financing. After your purchase and sales agreement is finalized, one of the tasks is to buy home insurance for your new home. For a list of insurers, check out the resource section of my site. To ensure that you are only paying for the required coverage such as flood, tornado or sewer damage, always research the natural disaster risks in your area. Also, to save money, you can always bundle your home insurance with your car insurance or raise your deductible.

19) Checkup On Your Property

In the schedule section the purchase and sales agreement, there should be a clause that allows the buyer to view the property at least two more times before the closing date. These viewings are exclusive of the home inspection/insurance appraisal/mortgage appraisal appointments. Normally, these appointments are used to ensure that the property and appliances are in good working condition. It’s best to save one of the viewing appointments for one or two days before the closing date to do a final checkup on the property.

 
Calculate Your Closing Costs

20) Calculate Your Estimated Closing Costs

As mentioned earlier, there are quite a few costs at closing that are not part of your mortgage loan and you need to cover these costs with your own funds. Depending on the area that your future home is located and the purchase price, the land transfer tax can cost you thousands of dollars. You’ll also need to account for insurance cost, moving cost, lawyer cost, property appraisal fees and furniture costs once you close. By having a close approximation of the true costs will ensure that can close without any issues and avoid unnecessary legal actions from the seller if you can’t close on time.

21) Hire Contractors

Even though the home that you are buying is a dream home for you, it may be far from a perfect home. The best time to renovate you home (depending on your financial situation) is usually before you move in. You may want to paint the whole house or update the outdated kitchen or replaced the old carpet with hardwood floors. Great general contractors usually have projects lined up in advance and to ensure that you hire the right contractors for the job, it’s best to book them a couple of months in advance.

 
Daily Life Test Run

22) Do A Daily Life Test Run

One of the crucial tasks that buyers tend to forget is to do is a daily life test run of their new home. The best way to do this is to take a weekday and do a test run to see what life is like in your new home. This test run will allow buyers to evaluate their daily work commute and get a feel for the traffic flow to adjust to their daily routine. This test run can lower your future stress level significantly.

23) Prepare For The Move

Depending on if you are moving from your parent’s basement or your current home, there may be a lot of things to move. Buyers can prepare themselves by packing their belonging that they won’t be using for a while ahead of time. To ensure that the packed items get moved to the correct location in your new home, it’s best to label the room that those items will be moved to in your future home. If necessary, hire movers if you have large and heavy items.

 
Update Your Mailing Addresses

24) Update Your Mailing Address

One of the most tedious tasks, before you move, is to update your mailing address, cancel/migrate utility services at your current home and register services for your new home. Here is a list of some important bills to change your address: utility/hydro bills, cable, internet, phone, credit card, bank statements, investments statements, subscriptions, insurance, etc. In addition, if you have kids, you’ll also need to transfer your kids to the new school in your new home’s area.

25) Apply For Tax Rebates

If you are a first time home buyer, then you can check out the first time home buyer’s tax credit from the government of Canada to see if you qualify for any tax credit or not. Depending on which province that you live in, you may also qualify for a provincial first time home buyers’ program like the one offered in British Columbia, or the land transfer tax refunds for first-time home buyers offered in Ontario. If you qualify, then you should definitely apply.

 
Celebrate

26) Celebrate

Congratulation, you are now a new homeowner. After such a lengthy search process with all the administration work on top of that, you’ve finally got a castle of your own. What better ways to enjoy this new home than to host a house warming party for family and friends? Go ahead, celebrate a little and share the love.

 

My Two Cents

Every industry has its pros and cons. Every industry has a few bad apples that either doesn’t follow the rules or don’t act ethically. The best way to protect oneself is to be armed with industry knowledge and be aware of unethical practices. With these 26 tips, I hope that your knowledge of the real estate buying process has been strengthened and you’ll be able to buy with confidence. Speaking of confidence, let me end this post with my real estate confidence by doing a little bit of shameless self-promotion with my slogan:

 

Buy confidentLy.
Sell quickLy.
Guiding you is Leo T. Ly.

 

Leo T. Ly, Canadian Personal Finance Blogger/Enthusiast and a Realtor Living in the Markam, Ontario, CanadaAbout Leo
I am a Canadian personal finance blogger/enthusiast and a Realtor living in Markham, Ontario, Canada. I built a net worth of a million dollars over a ten year period. I did it by being a disciplined saver, taking advantage of income tax rules and borrowing money to invest rather than for consumption. I am often excited to take advantage of free money from employers and governments in addition to building more passive income sources. After accumulating my first million dollars, I am now embarking on a second journey towards achieving financial independence. On this journey, I will strive to increase my net worth to two million dollars and retire by the age of 48 - Freedom 48. Come along and follow my journey on Facebook, Twitter or Google Plus.



There are 55 opinions expressed on this post.

  1. Nice work Leo and quite the comprehensive list. I’m curious why you said not to close within the month? Just to hectic? Good to hear a agents prespective that you like to go from house to house looking. I think we looked at 6 before we decided on this house. Anyways nice work
    Cheers
    Passivecanadianincome recently posted… Tax-Free Savings Account (TFSA)My Profile

    1. @PassiveCanadianIncome, one of the reasons to not close so quickly is to provide your lawyer time to conduct research. The first is to ensure that the proper title search is being conducted so that you are actually buying the right property. Secondly, your lawyer needs time to thoroughly search any liens on the property and the seller(s), to ensure that the property and owner(s) are cleared of judgement.

  2. This is a great list Leo!!! I had a negotiations teacher say never to fall in love with a property. That you lose all leverage and oftentimes your mind and money 🙂 He suggested finding two or three suitable homes and then bidding them against each other. Especially in off-peak months, around the holidays to get the best deal. I thought it was interesting to say the least 🙂
    Mustard Seed Money recently posted… Are Collectibles A Wise Investment?My Profile

    1. @MSM, never fall in love with a property is a great advice. As for when to purchase a property, it really depends on the state of the market. Your chance of getting a good deal during the holiday is only good if you’re in a buyer’s market. However, the market that I server (Greater Toronto Area), we are in a seller’s market for the last couple of years and buyers are lucky if they are not in a bidding war for a property.

        1. @MSM, it’s great to be a homeowner in a city where the real estate market is going bonkers. However, it’s not so great for people who’s trying to get their feet in the door. Having the down payment is one thing, winning the bidding war without breaking your bank account is another.

    1. @Emily, You’ve hit the nail on the head. Many first time home buyers get very overwhelmed of all the things that need to be done. Hopefully, with this post, they will be able to enhance their knowledge and feel confident that they have the information that they need to purchase their dream home.

  3. This is a really comprehensive list! It’ll definitely help me once I’ve decided to purchase a home. *bookmarked* Can’t wait for the day when I can finally cross off point 26 😉

  4. Owning a dream house and be prepare in term of financial is important. a good tips for new buyer / investor as a reference.

    1. @Jia, Staying within budget is important as you don’t want to buy too much house than you need. You may feel financially and emotionally stressed if a huge chunk of your income goes into servicing and house and leave you with little money to spend on other things in live.

    1. @Mhownai, everyone gotta start somewhere. However, you don’t need to follow the steps in those particular order as long as you done all those steps, you’ll be fine.

    1. @Zayani, One scenario that I think takes a lot of courage is to be able to walk away from a property that you fell in love with. Some people may not be able to do that and end up paying a arm and a leg for the wrong property.

  5. Yes yes! I’m in the process of purchasing a house right now. Option pending as of right now! I kinda jumped in head first, but luckily, everything worked out well! This is a very helpful post for anyone looking into purchasing a home!

    1. @Thi, I am glad that things worked out well for you. Don’t forget to celebrate when everything is said and done. Nothing beats the feeling of being the king/queen of your own castle.

  6. If ever we decide to buy a house, we will definitely come back for your advice. At this point in our lives it is the last thing we want to be doing. I will however pass you article onto my friends who are in the process of looking. Thank you for your awesome times!

  7. These are all excellent tips. I try my best to do a lot of research before investing my money into anything. There are untrustworthy businesses that we will just waste our time and money. Be careful always.

  8. Great post as this really gives an A-Z on home buying. It does not just mention a couple things but pretty much everything you need to do as a prospective home buyer.

    1. @Rosey, this post was intended to provide as much information as possible for first time buyers. I feel that there are quite a few people out there that had a pretty bad experience when it comes to buying their house. With this post, we can all mitigate those bad practices and hopefully we can all enjoy the shopping experience.

    1. @Miera, I feel bad for you when you are being a good sport by putting your financial reputation on the line for another person and the may not have done their best to ensure that they don’t put your finance in jeopardy. Hopefully, you can rebuild your credit history and get rid of the bad credit in 7 years.

    1. @ohmummymia, Oh how jealous I am of you. I always want to build my own house on a large piece of land and preferably beside a body of water. I need to work harder to make this dream come true.

  9. This is an awesome and detailed list and no shortcuts. I should check my credit scores too if it will fit enough and could sustain the mortgage.

    1. @Blair, I will take short cuts in some of the things that I do, but when it comes to my finances, it’s best to take the long route. It’s a good idea, to just inquire so that you can have a picture of your financial health. You’ll also have a good idea of what the bank will lend you.

  10. These are great tips! I really need to work on my credit report and to make it better, I was a little reckless when I just got out of high school. MY husband and I really want to buy a house one day and we are going to use these tips!

    1. @Krysten, your credit history is with you for life. So better the report is, the better the score will be and you’ll eventually save money when you improve your score. The good news is, even if you have some bad history, those will go away after 7 years. It’s best to try to keep your credit history clean.

    1. @Erik, I am glad that you loved my slogan. I actually did read up on the Skyscraper method when composing my posts for SEO. I am not trying for it as I would probably need 10,000 tips instead of just 26. I like to chose 26 because it’s my favourite number.

  11. This a lengthy but informative post.Getting your dream house is indeed a tedious and draining milestone in life. But once you’ve done it right, you will surely reap all the satisfaction that you achieve. I hope I’ll be able to keep all this in my mind. I am very terrible in managing my money. 🙁

    1. @Stacey, More importantly, you’ll be spending hundreds of thousands of dollars to purchase a new home. Having a trusted Realtor to guide you through the buying process and help you build your buying team can save you thousands of dollars. I don’t recommend anyone settling for an average Realtor if he/she doesn’t feel 100% comfortable working with that Realtor.

  12. Great list! Buying your first home can be very daunting, and having a list to check off like this can help ease the stress of first time buyers. Thanks for sharing!

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