You’ve dreamed of owning a Waterloo Region home for as long as you can remember. But lately, your dream of taking the steps needed to buy your first home has been more like a driving force than a twinkling in the eye.
Maybe your friends are all buying homes and pressuring you to do the same. Or your rent just went up again. Whatever the case, you simply can’t wait another year to buy the home that you have wanted for so long.
There’s just one problem: You aren’t quite sure you can afford it.
So how do you know you really are ready to start talking to a real estate agent about taking the leap? Here’s a look at some of the most important considerations.
You’re Relatively Debt-Free and Have an Emergency Fund
An emergency fund, something we like to call an oh dear fund, ensures you can handle any unexpected expenses that might crop up once you own a home. Three to six months of expenses should do the trick.
If you do still have debt to deal with in order to achieve the credit score you need for a mortgage you should work on those first though. Use the debt snowball to knock debts out one by one, working your way up from smallest to largest to build momentum. There’s no better way to free up income for more worthwhile pursuits—like Waterloo Region home ownership
You Have a Good Down Payment
The very best way to buy a home is to pay cash. But that is not an option for most Waterloo Region home buyers and you will almost certainly need to take out a mortgage.
Even with a mortgage you will need to make a downpayment in cash, ideally at least 10%. Of course, 20% will put you in an even better position because you’ll avoid paying private mortgage insurance (PMI).
You Can Pay Your Own Closing Costs
Some home sellers cover closing costs to sweeten the deal—but don’t bank on it. On average, closing costs can range from 2% to 5% of your home’s purchase price. For a $200,000 home, that’s anywhere between $4,000 and $10,000 to cover items like:
- Loan origination fee
Home and pest inspection fees
Prepaid property taxes and mortgage insurance
You should receive your final closing disclosure form at least three days before closing. Review it carefully for unexpected cost differences, and ask your lender to explain any charges you don’t understand.
You Can Afford Moving Expenses
Whether you pay a moving crew hundreds of dollars to pack up and move your belongings or you provide a pizza dinner to your best friends after they help you move, you’re going to have plenty of moving expenses:
Boxes, bubble wrap and other moving supplies
Deposits for utilities
Appliances that aren’t included in your home purchase
Any pre-move-in upgrades like painting, new furniture and closet organization
While you wait for your closing date, get good estimates for what these costs will be—request quotes from moving companies, shop for appliances, etc. Pad your move-in budget a bit so things go as smoothly as possible, and don’t let new-home excitement cause you to overspend on items you don’t need right away.
Still Not Sure? Talk to a Realtor
If you are still not sure that now is the right time to to buy, ask a Realtor. An experienced Waterloo Region real estate professional will be able to look at your situation and offer you solid advice. If you work with Team Pinto you’ll get even more great advice, as Angelica Pinto is also a licensed mortgage agent and can offer extra insight into the financial aspects of a home purchase as they relate to your current situation.