Buying your first home is an emotionally charged decision no matter where you live. But if you’re buying a home in Canada in 2016, your experience will likely be fraught with some serious emotional turmoil. As home prices soar, particularly in Vancouver and Toronto, millennials are diving headlong into the housing market because they’re afraid of missing out.
But it’s precisely because of these sky-high prices that you shouldn’t let your emotions take over during your search for a home.
I’m no different. I’m about to enter the housing market and although prices in Halifax aren’t as high as in Toronto or Vancouver, demand for starter homes in my ideal neighbourhood is strong. Twice already, I’ve scheduled viewings for homes only to find out they’ve sold before I could even get in the door.
With this strong demand, keeping my emotions in check and making sound, rational decisions that will secure a prosperous financial future is easier said than done.
To minimize the emotional aspect of house hunting and avoid making bad financial decisions, I’ve employed the following strategies:
Attend open houses before you’re ready to buy
Unless you’re one of the first-time homebuyers that receive a financial gift for your down payment, saving for a down payment on a home will be a multi-year endeavour. Before you begin your home search, you should attend open houses.
Going to open houses is an excellent way to determine what you want in a home. By attending a variety of open houses in various neighbourhoods, you’ll realize what you can live with (for example, no backyard) and what is truly a deal breaker (for instance, no parking).
Attending open houses before you’re ready to buy will also you a clear picture of what you can afford.
Finally, going to open houses will desensitize you to the home viewing process. This way, when you start looking at homes with a realtor, you won’t jump the gun and buy the first home you see.
My husband and I have been saving for a down payment for a little over a year. Last summer, we attended a dozen open houses. We kept an open mind and looked at everything from condos, townhomes, and semi-detached homes in our ideal neighbourhoods, to fully detached homes in the country.
The process was incredibly enlightening. We discovered many of our criteria didn’t hold up to scrutiny. For example, my husband was against townhomes but changed his mind after looking at a few. On the other hand, we realized that a backyard is mandatory because we’re avid gardeners and if we bought a home without a yard, we’d want to move after only a few years.
Go to open houses just to look. Figure out what you really want and learn to be a skeptical viewer.
Set an unbreakable price ceiling
Once you’ve saved a sizeable down payment and you’re ready to start looking at homes, the next challenge is to keep your emotions in check during the viewings. The best way to do this is to set a price ceiling before you ever set foot into a home. Here’s how to set a price ceiling:
Create a post-purchase budget. Use a mortgage payment calculator to decide what you can afford each month and don’t forget property taxes, utilities, home insurance, and annual upkeep. Then add in the rest of your living expenses, including car payments, saving for retirement, groceries, and entertainment. Does everything add up? Is your budget balanced?
If so, great! But you’re not done yet. Now you need to put these numbers through multiple scenarios including:
- Interest rates rising back to historical norms
- Parental leave and daycare costs
- Purchasing a new car
If you don’t have a budget already, this process could take time. You can skip it by using Rob Carrick’s downloadable Real Life Ratio spreadsheet instead.
If the numbers still work in these scenarios, use your maximum monthly mortgage payment to come up with your unbreakable price ceiling. When the time comes to get pre-approved for a mortgage, make it clear to your mortgage broker that you don’t intend go over this purchase price and do the same with your realtor. To eliminate temptation, don’t look at homes that are listed above your unbreakable price ceiling.
In my case, my unbreakable price ceiling is $300,000. When I finally buy a home, it won’t (under any circumstances) cost more than $300,000. I chose this price point because if I spend more than that, I won’t be able to balance my budget.
Forget love at first sight
Going to open houses before you’re ready to buy a home should desensitize you to love at first sight when viewing homes. But the time may still come when you’re sure a home is meant to be as soon as you pull up to the curb. Don’t let your feelings cloud your judgment.
Every home, no matter how perfect, is going to have flaws. Your job at every viewing is to find those flaws and decide if you can live with them. If you don’t see any flaws right away, great! But don’t forget to get a complete picture of the home by doing a home inspection and let any shortcomings dictate your final selling price.
Above all, don’t forget that losing out on a home that seems perfect because you’re unwilling to go over your budget or submit an offer without conditions is the smart choice. There will always be more homes, which brings me to my next point.
There will always be another home for you
Right now, fear of missing out (FOMO) is ruling the hottest housing markets. First-time homebuyers are afraid of being priced out, which is leading to an entire generation of over-leveraged homeowners.
This hot real estate market combined with the stress of finding the perfect home might tempt you to throw caution to the wind and buy the first home that seems right. Don’t let this fear get to you. As long as you’re patient, you’ll find the perfect home at the right price.
I’ve been watching my local real estate market for the past four or five years. During this time, I can confidently say I’ve found “the one” at least 10 times. These homes were absolutely perfect for me and if I had just a bit more money for a down payment at the time, my husband and I would’ve been happy homeowners.
I also remember the sadness I felt when these homes sold. Each time, I was sure I’d never find a house as perfect as that one and I was always wrong. One or two or six months later, another perfect home would be listed.
The third or fourth time this happened, I realized that jumping into the real estate market before I was ready wasn’t worth it because the perfect home would come along again. I just had to be patient.
The bottom line
Shopping for a home will always be an inherently emotional process. But by keeping your emotions in check, sticking to your budget, and making patient, financially savvy decisions, you’ll be able to live your dream of home ownership without sacrificing your financial future.
- How I’ll Pay Off My Mortgage 10 Years Early (and You Can Too!)
- First-time Homebuyer Stories: Andrika & Joe
- 5 First-Time Mortgage Experiences
- First-time Homebuyer Stories: Emma & Evan
Flickr: DiAnn L’Roy