Unless you’ve been living under the proverbial rock, you know prospective homebuyers are facing some new challenges if they’re on a quest to buy in 2018.
Mortgage stress testing means the government is trying to keep you from getting in over your head, and except for a few minor wobbles last year, we’re still in the throes of seemingly ever-rising prices that make affordability challenging for anyone.
But my core belief about homeownership hasn’t changed. Buy the house you can afford when you’re ready to buy it.
It sounds simple, and it is. But it’s still easy to get carried away. Instead of telling yourself you’re going to cut out Starbucks or get back into your high school jeans, if you’re planning to buy in the near future, embrace a few resolutions that will actually help keep you out of trouble.
Resolve not to get hung up on perfection
Years ago, it wasn’t unusual to view a home and find the homeowner splayed over a Barcalounger in the basement under a heap of homemade afghans, smoking a ciggie and petting one of her three cats.
In the last few years, that has completely changed. Houses showing now are pristine, staged to within an inch of an HGTV premiere and devoid of not just persons but personality. Get over it. Renovated houses in established neighbourhoods will always go for a premium and may tempt you into a bidding war.
There are still sellers out there who would rather take a (likely minor) price hit than paint and polish every baseboard. Look beyond décor, make friends with the dust bunnies, and consider neighbourhoods that are still in transition. Turnkey is nice. Not overpaying in the heat of a moment is better.
Resolve not to enter a bidding war
If you do fall in love and are one of those whose better judgment can be compromised by such a state, keep your most heartless friend on speed dial. Go into any negotiation with a firm and final price in mind and if you’re tempted to go over, get someone to talk you down.
Once you factor in closing costs and interest, as well as the cost of upkeep over the years (from 1% to 3% of its value annually by most estimates), remember that your new home will actually cost you several times the purchase price.
If you’re buying a condo, you’ll need to think about maintenance fees, and if it’s brand new, you may have interim occupancy and other costs to consider as well. A newly built single-family home may involve a few hundred extra dollars just to plant a tree on the strip of grass between the sidewalk and the street beyond your front lawn.
Get someone who’s good with numbers to have a handle on it all, even if you’re a math whiz yourself; they won’t be surging with adrenaline even if you are. Rely on a leveller head to help keep you out of trouble.
If you find a home you want, be ready. Your best shot to not pay too much is with a seller who is accepting offers anytime. If they’re holding all offers for a week, you’re already on the slippery slope towards an anticipated bidding war.
If you do find such a seller, make sure your down payment is in the bank, your mortgage is lined up, and your home inspector, if you dare, is on call. You may not have the luxury of sleeping on it.
Don’t be tempted to lowball a first offer. If the seller is accepting bids anytime, go in with a meaningful, realistic offer that won’t tempt the seller to find another buyer to compete with you. If the house is newly listed, don’t expect it to go for much less than asking.
Resolve to go look even if the weather is frightful
If you’re a hardy sort, it may seem strange that the weather can affect the market, but many people don’t like to project their imagined new lives onto a house buried in dirty snow in a neighbourhood buffeted by record-setting wind. There may be fewer listings this time of year, but there are also fewer buyers. Get out and look before spring heats up the market again.
Resolve to resist other temptations
It can be tempting when you’re anticipating the glory of new surroundings to up the ante with a new bedroom suite to do it justice. Don’t. Avoid making any other major purchases and avoid taking on any new debt while you’re in the market for a new place to live.
Even if you don’t have to make a payment on your new couch for a year, your debt to income ratio can affect the interest rate you get. Don’t just wait until move-in day before splurging either. Give yourself a few months of mortgage payments, maintenance fees, utilities and taxes before you spend.
Resolve to keep an eye on your credit score
It’s free and easy to monitor your credit score online these days. Don’t take it for granted that yours is everything you think it should be. I had a friend who discovered years later that he’d been carrying around on his credit report a pair of shoes he neglected to pay for at Eatons after they went bankrupt. Check it, and make sure you address any errors and clean up old messes.
Resolve to address your bad habits
If you’ve never been much good with money, start now to change some of your wicked ways. Talk to a credit counselor about debt management and budgeting. Get your more-responsible sibling to open a two-signature savings account with you. Melt your high-interest department store credit cards into jewelry. Block Amazon on your mobile. Take whatever steps you have to to help yourself.
Resolve to enjoy the process
Look at homebuying as an adventure. It can be disheartening and difficult, but ultimately it’s a fascinating process you should do your best to enjoy. You will get through it. And with a little resolve, it will be one of the most rewarding experiences of your life.