Basics of Buying a Property: What You Need to Know
So, you're thinking of buying a house or investment property? Whether it's your first time or you've gone through the process before, there are a lot of things to consider. In this blog post, we'll go over some basics of buying a house: what you need to know about mortgages, inspections, and more. By the time you finish reading this post, you'll be ready to take the next step in purchasing that property you have your eye on!
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1. Get pre-qualified for a mortgage
Don't start house shopping before you prequalify (get preapproved) for a mortgage! You need to know what lenders will be willing to lend to you based on your income, credit score etc.
A mortgage is a loan that you take out to finance the purchase of a home. When you apply for a mortgage, the lender will look at your income, debts, and credit history to determine how much they are willing to lend you. The amount that you borrow will be based on the value of the property you are buying.
2. Get your down payment together
Do some research about how much you need to have for a down payment, because this depends on your location and the type of property you are buying. In Canada, you will need 5% down on a primary residence and 20% down on an investment property. No need to put down more than this (use leverage to your advantage!).
3. Find a real estate agent
A good real estate agent will be familiar with the area you're looking in and can help you find properties that meet your criteria. They'll also be able to negotiate on your behalf and help you navigate the often-complex world of real estate.
Make sure to interview a few, and ask them questions to find out if they are a good fit for you.
Here are some good examples of questions to ask when buying a home for yourself, and here are some when you are buying an investment property.
4. Get a home inspection
Before you commit to a purchase, it's important to have the property inspected by a professional. Sometimes in hot markets or with wholesale deals you have to skip the inspection (we have a few times!), but this is very risky. An inspection will help you identify any potential problems with the home, such as water damage, structural issues, or pest infestations. It'll also help you estimate the costs of repairs if any, which can help you negotiate with the seller.
5. Expect the Closing Costs
When you buy a house, there are a number of costs that are associated with the transaction. These costs can include things like appraisal fees, lender's fees, and title insurance. Be sure to ask your real estate agent about what you can expect in terms of closing costs. For example, in the area we live (Ontario, Canada) closing costs are approximately 1.5% - 4% right now. That means if you buy a $500,000 house you are looking at approximately $7,500 - $20,000.
Now that you know the basics of buying a house, you're ready to start looking for your property! With a little knowledge and preparation, you'll be ready to buy it in no time.
If you want more info on this topic, check out these books:
Rich Dad Poor Dad - Robert Kiyosaki -- The book that gets everyone into real estate investing!
The Book on Rental Property Investing - Brandon Turner -- Written by the very knowledgable former Bigger Pockets Podcast host, this is a great book to get you started with real estate investing.
Buying and Selling a Home For Canadians For Dummies - Douglas Gray & Peter Mitham -- For all my fellow Canadians who are new to all this and want to buy a house, this one's for you!
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We hope this blog post has been helpful. If you have any questions, please feel free to reach out to us. We're always happy to help!