When first starting out, the prospect of purchasing a first home can seem daunting. However, crossing your very own threshold is a dream that can come true, if you take the right steps.
The key is to think ahead, says Tina Tehranchian, a Certified Financial Planner® professional and senior financial planner with Assante Capital Management in Richmond Hill, Ontario.
Taking these important first steps—before venturing out to view what’s available for sale—will help ensure a smoother path to home ownership.
Weigh renting versus buying: There is a great deal of emotional attachment to the idea of owning a home. However, it is not always feasible or beneficial to do so. Do the math first to determine if it makes better sense, logistically and financially, to buy or rent.
Consider cash flow: If buying makes sense, check your household budget and cash flow to determine how much you can afford to save for a down payment each month. It will also help identify how much of a mortgage is reasonable (be sure to factor in the possibility of interest rate increases).
Get pre-approved: Once you know how much you can afford, shop around for the best financing solution. Then get a written mortgage pre-approval that outlines all the details, including whether it is fixed or variable, payment schedules, and any special conditions.
Consider all the costs: Saving for a down payment and paying a mortgage are usually top of mind when looking to purchase a home. Additional one-time costs are often overlooked and may include home inspection and legal fees, land transfer taxes, moving costs and HST on some new homes.
Build a good team: Buying a house is a big investment—likely the largest of your life. Work with a team of trusted experts including a realtor, lawyer and home inspector to avoid potential pitfalls. A CFP professional can help guide you every step along the way.
“A CFP professional can help you crunch the numbers, plan to save for a down payment, evaluate financing options and plan for the future,” says Tina. “Then as time and circumstances change, we can revisit your plan to ensure financial arrangements, including mortgage rates and investment options, continue to give you the best bang for your buck.”
Importantly, a professional financial planner can consider your financial big picture, identifying the long-term implications of owning a home to help ensure that you can still reach other goals like sending children to university, living life comfortably and retiring with financial security, she says.
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For more on achieving financial goals like home ownership, read Live your bucket list: 8 ways to turn goals into reality and 6 ways to balance your financial priorities.