Are you trying to enter the real estate market and casually searching properties online? Somehow all the ones
that you can picture yourself living in turn out to be over your budget? The ones with the perfect layouts, big
kitchens and barbecue areas in the backyard are really pricey, and you’re frustrated to the max! Somewhere, there
must be an awesome home in your price range that meets your needs and you’ll fall in love with even if it doesn’t
have a swimming pool or the perfect backyard. You just need a plan and to stay focused on looking more closely
at what is being offered in the market. A tight budget may be a bump in the road, but it can be overcome if you are
determined to find your dream home. Working with a Realtor® to achieve your goals is the best possible decision that
you can make. Collectively, as a team, you and your real estate professional can determine what your true needs are
and whether a potential home is the right home for you. Trying to work with a tight budget and no professional
assistance can lead you to make a purchase that you could well regret very quickly.
Keep reading to find out how you can best approach home buying with the money that you do have available, or the pre-approval amount that you've obtained from a lending source.
Explore Your Financial Options
As a future buyer, you have probably done your own math and have an idea of how much you believe you can afford to spend. You won’t know for certain until you obtain a mortgage pre-approval from your bank or a Mortgage Broker (if not already completed). It is a wise move to engage a real estate professional early on so that you have someone that you can work with throughout the entire process of purchasing a home. Your sales representative or real estate broker is also connected to a network of mortgage brokers that they can recommend for getting your pre-approval completed. Mortgage Brokers are extremely knowledgeable when it comes to understanding any Government-provided incentives that can benefit your cause. There are benefits that are extended to first-time homeowners and seniors. You may have family members, such as your parents, who are prepared to “gift” you with funds that can be used towards a larger down payment. Don’t lose out on every possible advantage that you can gain for yourself by using a Mortgage professional. Very seldom does “going it alone” work in your favour. Since Mortgage lenders don’t charge you for their services, why would you not seek their free advice and guidance in something as huge as a home purchase?
It is always possible that given your overall financial situation, a Mortgage Broker may not be able to obtain an adequate pre-approval from any of their lending sources. If that is the case, then you do have options for improving your situation for the future. Reducing your credit card debt is one of the most important areas that you can focus on. Pay it down as quickly as you can, and if at all possible, always pay more than the minimum payment due. In determining your ability to obtain and carry a mortgage payment, it is not just the outstanding balance that is considered. The credit limit on any card is deemed to be part of your overall debt. As a quick example – let’s assume that you have a Visa with a credit limit of $10,000 but you never have a balance that exceeds $1,000 and you are in good standing with your monthly payments. When calculating your overall debt and including that with your income and other assets and liabilities, the $10,000 limit is used in the debt calculation. Having a high credit limit is not a good thing when it comes to something like obtaining a mortgage.
The best thing you can do to bring yourself into a position where a pre-approval is possible in the future, is to lower the limit on your credit cards. If the highest you ever go is $1000 then make your limit $1500. If you never have more on a credit card than $400, ask the card company to lower your limit to $500. By taking this step, you have greatly reduced how the industry determines your overall debt load. If you are really determined, try giving up dinners out, movies, vacations and other non-necessary expenses so that you can put that money into a savings account and watch it grow towards a significant down payment. When it comes to purchasing a home, you will need to have a minimum 5% of the purchase price as your down payment. It can take some time to get the money accumulated, and it won’t be easy to live in ultra-saving mode for quite some time, but once you have the keys to that home in your hands you will realize it was worth every sacrifice you had to make.
Distinguish Between Wants And Needs
What are the features you must have in your new home? Maybe you are dreaming of a 3 car garage or an inground swimming pool, but it’s way more important to have a functional home that is within your budget. The last thing that you need, and the last thing that your Realtor® wants, is for you to be house poor because you were over-extended.
The footprint of the home is something that you might be able to have changed later. Sometimes you can obtain a by-law approval to either increase the foundation size or to allow you to build up (creating an additional floor). However, the one thing that you cannot change in any home that you select is the location!
Don’t compromise on everything or you will become unhappy with your new home over time. If a small kitchen is something that really upsets you, then make sure that your Realtor® understands that and is focused on showing you houses that have medium-large kitchens. The same goes for the number of bedrooms and bathrooms. If you have a growing family and you must have a minimum of 3 bedrooms and 2 full bathrooms, then don’t compromise on those aspects of a home. The key to finding the home that speaks to you, lies in obtaining an adequate Mortgage pre-approval and working with a dedicated Realtor® who understands your needs and your wants. It is possible, to get everything on your list, if you are realistic and work closely as a team.
See Past The Imperfections
Not all homes that you will view during an Open House or be shown by your Realtor® will be up to your standards. Some sellers take great pride in presenting their homes in a way that buyers will appreciate. But there are also those sellers who don’t go the extra steps to make repairs or perform much needed updates and just want to sell their house “as is”. Be open to change. Repainting the interior of a home is the easiest thing you can do to put your touch and personality into it. Perhaps the carpet is old, you can look into inexpensive laminate or a new carpet. Just remember that under the “make up” there may be a natural beauty. As you’re looking at potential homes, you need to be able to look beyond aesthetic flaws. Focus on the size, the number of rooms, the overall layout and not on the overfilled closets, dusty vanity cabinets or outdated furniture. Your real estate professional will be there to make sure that you understand when a home is a money pit versus a good to great house that might just need some elbow grease and your loving touch.
Be Patient And Be Prepared To Listen
Real estate professionals help first-time homebuyers, repeat buyers and sellers, investors and seniors on a regular basis. They are a wealth of knowledge and can offer you so much assistance that is just based on past experience. Together, you need to form a close relationship where everyone is working towards the same common goal – to find you a home that meets your needs within your budget. The first time around, it most likely won’t be your “dream” home, but it can easily be a huge step to getting you to that point down the road.