First time home buyer in Edmonton - Don't make these mistakes
Buying a property in Edmonton can be something of a minefield. Thankfully, with a little care and our help you can spot many of those potential mines before you start crossing. Here's a list of the definite don'ts that you'll want to be avoiding.
Not accurately calculating how much you can afford - This is the most crucial mistake of all. You must know precisely how much of your income can be spent on property costs. You should write down the exact salary (after all taxes) that your household will bring in each month. Calculate how much you spend on food and travel, and also take into account utilities bills and any additional debt payments, such as personal loans. You'll then need to estimate how much you'll spend per month on luxuries - going out, clothes, drink etc. While this is an area where you can skimp if needed, the chances are that you won't, so do be realistic when creating this figure. If you're spending more than you have coming in, you may quickly start to run up credit card bills, and that's a fast route to ruin.
The amount that you're left with should be the sum that you can devote towards property costs. You'll also need to budget for moving costs, and for the price of improvements to the property once you move in. Even new paint comes at a cost, and more significant alterations will likely have a dramatic effect on your working capital. Ideally, you'll still leave yourself some leeway so that you can cope with unexpected expenses - a leaking roof, or car repairs, for instance. If you think you're in line for a bigger pay check in the near future, you might be able to run a little closer to your limits, but this is risky.
It's important not to push yourself to the edge. You really want to be spending no more than 20-25% of your after-tax income on mortgage repayments and other housing costs, so be careful if you're going beyond that percentage. In theory, lenders won't advance you money they don't think you can pay back. However, don't assume that just because your finance has been okayed, that means you'll be able to make the payments. Money lenders don't always probe as deeply as they should, especially during times of plenty, so it's up to you to ensure the math adds up.
Not taking into account all taxes and insurance - These are easily forgotten about, particularly by real estate greenhorns, and can turn the perfect property into little more than a pipedream. Lawyer fees, land transfer taxes and other property fees, and utility adjustments are amongst the hidden dangers you'll need to make yourself aware of. Ensure you know *all* the costs before jumping in. Otherwise, your stay could be a short and brutal one.
Getting carried away while bidding - Once you've established your limit, stick to it. Edmonton Property trading is the one time when you're likely to be dealing with sums of money that, ordinarily, would make your eyes water. When large five- and six-figure increments are being casually bandied about, it's easy to get carried away. If you're talking about a purchase costing several hundred thousand, will an extra 10K or 20K really matter that much? Well, yes, it most certainly could. Once you've set the maximum amount you can go to, don't go beyond it. Not knowing how you're going to pay the next month's bills is one of the worst feelings you can be subjected to, so don't put yourself in that position.
Not having your mortgage in place - Locking in your mortgage before jumping in is an excellent way of setting in stone your house budget. You don't want to find your dream house, only to have it ripped away because you weren't able to secure the finance. Talk to a lender, and get your finance preapproved. If you have your money in place already, you'll also have an extra bargaining chip you can use when convincing the seller to choose you - if there's one thing sellers don't like, it's buyers who may not be able to come up with the finance.
Settling for the first mortgage you find - The internet has some great comparison sites that will allow you to run the rule over all available sources of finance. Look for good rates, and mortgages that have few restrictions on them. If the bank will cover fees like appraisals, and the mortgage comes with few penalties, those are also significant bonuses.
Providing too small a down payment - While you can get away with laying down a small percentage of the purchase price as a down payment, it's better to go bigger here. Tiny down payments could leave you sitting on a loss (after expenses) if you have to sell the property in a hurry. It could also cost you a packet in private mortgage insurance (PMI) - generally, a mortgage is deemed a risk if its value exceeds 80% of the property value. Choosing properties where you need a mortgage for less than 80% of the value will help your payments in the longer term.
Not having the house checked out by a professional - Sellers can be a wriggly bunch, so you don't want to be taking their statements at face value. Get an independent inspector to come round and look at the house - this may be required of you in any case, but if it isn't, get one in anyway. They can identify those little problems that could turn into gaping great holes in your bank balance, so it's well worth paying a little to avoid future heartbreak. If issues should come up, you should be able to use these to negotiate a lower asking price, or to force the buyer to fix the problems at their expense before you move in.
Not agreeing everything with the buyer in writing - It's amazing what sellers will be prepared to rip out of the property before they leave. Even items as large as kitchen appliances would seem to be guaranteed stayers, but don't assume it - get it in writing. Drapes and other easily detachable items will be more straightforward to replace, but their portability also makes it more likely that they'll be leaving with the seller. If you're expecting to have fully fitted drapes, make sure you get written confirmation of this.
Not being self-reliant - If you've been renting up to now, you've probably been pretty cossetted. Any time the faucet leaks, the roof needs maintenance, or you find a door hanging off its hinges, you've probably been right onto the phone to your landlord. But if you're buying, all of that stops. Right now. Be prepared to get to know your screwdrivers and wrenches pretty well, and learn how to tackle plumbing, heating, and other aspects of your home. If you're not prepared to get your hands dirty, you'll have to adjust your budget to allow for emergency call-outs.