Prepping for a first home purchase for next year - Questions!

[cycosis]

First time home buyer, most likely looking seriously next winter/spring.

Aside from a good budget, ensuring there is a proper inspection, what else should I be concerned with?

Looking to buy a house, not a condo.

I have read a lot about closing costs but I have not found any ballpark figures to ad to my budget.

Have no debt, no car payments, will have about 60-80k for a deposit by next year (not including my rrsps/tfsa).

Tricky thing is I need to keep in mind the lady will most likely be leaving the workforce in 2-3 years to start our family so our monthly fixed income drops by almost half to $4,500 before tax. Variable is paid out 6 months after fiscal year end (run a business with the old man, my salary is not expected to grow due to conservative cash flow strategies) and is largely dependent on sales of the business.

What would be a safe bet for a total purchase range? I am a complete newb to this.

[killramos]

Only you can decide what mortgage payment you are comfortable with, esp with the volatility you are talking about. From there i would retain a mortgage broker ( esp on a first home purchase) about what that monthly payment would give you for a borrowing amount based on your credit etc.

From there contact a lawyer to determine a rate for legal costs. As a buyer you will not need to pay real estate agent which is good.

From there you should have a good idea of what your budget is. And I would hire a realtor to find you something that meets all your criteria. I recommend Jordan.

[A790]

What are all your expenses, including car payments/food/etc?

I believe in living within your means. About 17% of our net pay goes to the mortgage. With property tax and utilities included, that percentage jumps to 23%. We find that gives us plenty of room to afford cars, toys, and other lifestyle items.

Closing costs are usually legal fees, property inspection fees, any balance on the property taxes, etc. I budget around $2,500 for this, though that may be higher depending on the cost of the property. 1% of the property value is probably a safe bet.

One thing I look for in an area is the ratio of tenants/homeowners. I prefer areas that have more owners than tenants (by a margin) as, generally, an owner is more inclined to take care of their property/sidewalk/etc.

Also, consider the age of the property. If it's in the 10 year range you'll likely be looking at potentially servicing or replacing your hot water heater, furnace, humidifier, etc. Also look at your roof and weatherproofing.

A newer home is unlikely to have any of those problems, but things like sod/deck/garage/etc. can add up fast.

:)

Good luck and congrats in advance!

[Mitsu3000gt]

So in 2-3 years your total expected guaranteed monthly income will be around $3000 after tax? (I think that's the 32% tax bracket). Mortgage, gas, water, power, insurance, etc. is going to eat away at that mighty fast and you probably don't want to be house poor with a family on the way. You still need enough left over for the basics (groceries) + baby stuff, entertainment, savings, RRSP contributions, unplanned expenses or emergencies, etc.

Your bank will give you a mortgage based on your current situation though, since they don't need to know about your family plans. I'd just ask one of the mortgage brokers on this forum, they are very helpful. They could probably give you a better idea of what price range you should look at than the average beyonder. Also, any credit cards or lines of credit you may have will be assumed to be maxed out in their calculations, even if your balance is zero.

Are you not in Calgary though?

[cycosis]

Yea I am in Calgary, just havnt edited my user info in a long time.

I figured it was a risk averse idea to get a mortgage based on my fixed income, and leave out the variable as it has the potential to be quite volatile. Those potential income streams will be used to max out RRSPs and TFSAs as I have always done.

Both our cars are owned out right. Food between the two of us is about 700.

Baby Stuff is easy :) I am a partial owner in a baby gear store so everything is significantly less than what the average family is faced with when gearing up to bring in a kid into the equation. I most likely will get gifted most items from suppliers/distributors :D (happy dance)

[tpurcell4]

Based on your income alone, our guidelines say you could afford monthly mortgage payment, Heat, and Tax of $1,575 (35% of your gross monthly earnings). This could be pushed higher if you have a strong credit score to 39% of your earnings.

For example, a $300,000 mortgage at 3.00% interest (not sure where rates will be next year), would be a mortgage payment of $1,420, plus $100 for heat, and $185 for property taxes. This puts your total monthly payment at $1,705. So should your credit score be high enough this would fit into the 39% of gross income range for qualifying. Given your estimated down payment, you are looking at a purchase price of roughly $380,000 in this example.

That said, what you could qualify for and what you believe you can afford are very different, and as was mentioned by the other comments, you need to determine what your monthly budget needs to be. If you want to purchase higher, then while both you and your wife are working put as much aside as possible until she is able to start working again for all of the other expenses that may come up.

I may also recommend looking at lender options that may come with payment holidays for making extra payments. Let's say for example, your purchase and qualify for the house now, with both of your incomes, if you can qualify just on your income, and make lump sums or make doubled up payments with the extra income you have from both jobs. If you were to double every other payment for a year, while you are both working then you will have banked 6 months worth of payments once you do start your family, or if you do this for 2 years after buying the house, then you will have a year of payments pre-paid while you adjust to the new schedule and household budget from your growing family. And then, if you do not need to take advantage of the payment holiday's, you have paid a large chunk of your mortgage down, which means you would be refinancing a much smaller mortgage.

I hope this gives you some insight, and I would love the opportunity to work with you when you are ready to move forward!

Sincerely,

Todd

[TimLacroix]

Originally posted by cycosis
First time home buyer, most likely looking seriously next winter/spring.

Aside from a good budget, ensuring there is a proper inspection, what else should I be concerned with?

Looking to buy a house, not a condo.

I have read a lot about closing costs but I have not found any ballpark figures to ad to my budget.

Have no debt, no car payments, will have about 60-80k for a deposit by next year (not including my rrsps/tfsa).

Tricky thing is I need to keep in mind the lady will most likely be leaving the workforce in 2-3 years to start our family so our monthly fixed income drops by almost half to $4,500 before tax. Variable is paid out 6 months after fiscal year end (run a business with the old man, my salary is not expected to grow due to conservative cash flow strategies) and is largely dependent on sales of the business.

What would be a safe bet for a total purchase range? I am a complete newb to this.

The rule of thumb for closing costs that lenders use is 1.5% of purchase price. Typically this is high but it depends on your expenses that you might incur (home inspection, appraisals, legal, title registrations, moving expenes, etc...).

As for what is a good purchase price, this is where you would meet with a mortgage specialist and go through the scenarios with both incomes and with one income in the future... we would be able to look at standard guidlines and discuss otpions that might suit the changes in life...

Good luck and feel free to reach out if you have questions or would like to chat more. Cheers ~ Tim

[A790]

Originally posted by cycosis
Yea I am in Calgary, just havnt edited my user info in a long time.

I figured it was a risk averse idea to get a mortgage based on my fixed income, and leave out the variable as it has the potential to be quite volatile. Those potential income streams will be used to max out RRSPs and TFSAs as I have always done.

Both our cars are owned out right. Food between the two of us is about 700.

Baby Stuff is easy :) I am a partial owner in a baby gear store so everything is significantly less than what the average family is faced with when gearing up to bring in a kid into the equation. I most likely will get gifted most items from suppliers/distributors :D (happy dance)
Well, on a variable you can always "lock it down" at any time with the lenders available fixed rates.

However, with fixed rates being as low as they are right now...

[cycosis]

Thx for the great advice. Got some planning to do with the lady :)

[A790]

Originally posted by cycosis
Thx for the great advice. Got some planning to do with the lady :)
Good idea.

We just moved forward with a 3 year fixed @ 2.34%. Not the lowest rate, but the right product for what we need at the moment.

Give Todd a call and he'll walk you through all that. :)

[tpurcell4]

^^
Thank you!

[oz388]

Originally posted by A790


We just moved forward with a 3 year fixed @ 2.34%. Not the lowest rate, but the right product for what we need at the moment.

Give Todd a call and he'll walk you through all that. :)

I borrowed money from my parents and in-laws and I'm paying them 3% interest, I have enough line of credit to pay them back at any time when they need the cash; this way i make my family rich rather than benefit to the banks! :clap:

[sabad66]

Originally posted by oz388


I borrowed money from my parents and in-laws and I'm paying them 3% interest, I have enough line of credit to pay them back at any time when they need the cash; this way i make my family rich rather than benefit to the banks! :clap:
Must be nice to have family that will lend you that much cash

But also I would almost say you're screwing both of you over that way. You can get lower than 3% and they can also earn more than 3% investing in other ways :poosie:

[A790]

Originally posted by sabad66

Must be nice to have family that will lend you that much cash

But also I would almost say you're screwing both of you over that way. You can get lower than 3% and they can also earn more than 3% investing in other ways :poosie:
I was kind of thinking the same thing, but, there's also something to be said for a "safe" investment.

[oz388]

Originally posted by sabad66

Must be nice to have family that will lend you that much cash

But also I would almost say you're screwing both of you over that way. You can get lower than 3% and they can also earn more than 3% investing in other ways :poosie:

ppl often get confused when thinking of interest rate, the percentage is not the most important in my opinion but overall cost of borrowing is. Bank often offer ppl lower interest rate mortgages but with payment restrictions and leads to a much larger interest payment of the term. Therefore i like to use line of credit even the rate is a bit higher; i can payoff the principal much faster than a regular mortgage and save huge on the cost of borrowing.

since i have my line of credit backing up my finance my family could lend me money with zero risk; and 3% is 10x more than the bank's saving account interest rate so ppl from my family were fighting to lend me the money lol. For me 3% is still less than my line of credit rate (3.5%) and dealing with family is a lot more enjoyable.

trust me there is no better investment than the risk free investment, especially for older ppl like mom and dad.

overall i think my strategy is win win :clap:

[killramos]

i know a guy who did this. Moved to Calgary for work and bought his first house on a HELOC off his parents house. he just makes the payments against it. Actually a reasonably smart idea and it doesnt involve his parents giving him their own money.

Much more flexible than a mortgage though i imagine the system doesn't help his or his parents credit at all. ( large revolving balance on the HELOC and the fact that he isn't technically borrowing anything)

[Dumbass17]

Originally posted by Mitsu3000gt
... Also, any credit cards or lines of credit you may have will be assumed to be maxed out in their calculations, even if your balance is zero.
I talked to a mortgage broker about this and he said that is false information... Any others want to chime in?

[Cos]

.

[A790]

Originally posted by Cos
You've already got lots of good advice but I'll just add something I think has been omitted or missed. You have a great down payment but your monthly income isn't huge so it is going to limit what you can buy. Instead of just looking at straight costs, I'd look at what you get for those costs.
This is good advice. You don't want to be house poor.

Even with 20% down, a $400,000 house is still $1,400/mo (25 year am, 2.34% interest). With $3,500/mo coming in, with a new baby, that leaves $2,100 for everything else...

You can get some great townhouses in the high $200's, low $300's that would be more affordable and offer plenty of space :)

[TimLacroix]

Originally posted by Dumbass17

I talked to a mortgage broker about this and he said that is false information... Any others want to chime in?

Yes, this statement is misleading. Most lenders do not calculate qualifying based on limits... but by the balances owing.

There may be some lenders that look at the amount of available credit and assess risk. But this is based on your overall credit report and history of payments and / or missed payments.

If you are refinancing to pay off debt, some lenders look at the debt limit on that account being paid off, for qualifying. This is lender specific... and most don't do this.

Hope this helps.

[cycosis]

Originally posted by A790

This is good advice. You don't want to be house poor.

Even with 20% down, a $400,000 house is still $1,400/mo (25 year am, 2.34% interest). With $3,500/mo coming in, with a new baby, that leaves $2,100 for everything else...

You can get some great townhouses in the high $200's, low $300's that would be more affordable and offer plenty of space :)


Forget shared walls man. I am a 6'5" ogre thats way too loud and I would hate to upset my neighbours.

We have a pup, the lady and I enjoy Drum & Bass, and due to my weight I stomp (not fat, just big due to height). I want to be on good terms with my new neighbours.

Again some excellent advice that is really helpful. We are quickly learning that our desired neighbourhoods (core) are way out of our range considering the type of house we want. We currently rent a house in bridgeland ($2000 all in, utilities too).

Gonna start looking cedarbrae/woodlbine/woodlands.

As for the travel component, I have been ridiculously fortunate to get 29 countries under my belt. And due to the nature of my work, I shouldnt be travelling anywhere for a while as I need to commit and learn the business from the old man.

[A790]

Originally posted by cycosis



Forget shared walls man. I am a 6'5" ogre thats way too loud and I would hate to upset my neighbours.

We have a pup, the lady and I enjoy Drum & Bass, and due to my weight I stomp (not fat, just big due to height). I want to be on good terms with my new neighbours.

Again some excellent advice that is really helpful. We are quickly learning that our desired neighbourhoods (core) are way out of our range considering the type of house we want. We currently rent a house in bridgeland ($2000 all in, utilities too).

Gonna start looking cedarbrae/woodlbine/woodlands.

As for the travel component, I have been ridiculously fortunate to get 29 countries under my belt. And due to the nature of my work, I shouldnt be travelling anywhere for a while as I need to commit and learn the business from the old man.
Have you thought about a duplex/semi?

We just bought one. My wife went on one side, I on the other, and we proceeded to yell/stomp around/etc. The only time we heard each other is when we were directly beside the wall, and even then, she only heard me... barely.

More affordable than a standalone, and you get most of the same perks :)

[ercchry]

Originally posted by cycosis



Forget shared walls man. I am a 6'5" ogre thats way too loud and I would hate to upset my neighbours.

We have a pup, the lady and I enjoy Drum & Bass, and due to my weight I stomp (not fat, just big due to height). I want to be on good terms with my new neighbours.

Again some excellent advice that is really helpful. We are quickly learning that our desired neighbourhoods (core) are way out of our range considering the type of house we want. We currently rent a house in bridgeland ($2000 all in, utilities too).

Gonna start looking cedarbrae/woodlbine/woodlands.

As for the travel component, I have been ridiculously fortunate to get 29 countries under my belt. And due to the nature of my work, I shouldnt be travelling anywhere for a while as I need to commit and learn the business from the old man.

check out inglewood, its great... stay south of blackfoot and no flooding issues and you will save a good amount. its super quiet down at that end too, not many homeless wandering around either, plus no real through roads so traffic is low.

woodbine/woodlands is great... i personally would shy away from cedarbrae though and keep in mind that the west side WILL one day get a ring road, so dont get too close to the edge of woodbine, woodlands has some interesting streets though, but there are also some great ones... like mine :D

[cycosis]

Originally posted by ercchry


check out inglewood, its great... stay south of blackfoot and no flooding issues and you will save a good amount. its super quiet down at that end too, not many homeless wandering around either, plus no real through roads so traffic is low.

woodbine/woodlands is great... i personally would shy away from cedarbrae though and keep in mind that the west side WILL one day get a ring road, so dont get too close to the edge of woodbine, woodlands has some interesting streets though, but there are also some great ones... like mine :D


We are actually having a peak at one tomorrow in woodlands :)

Ingle wood would be very desirable but from what we have seen it is beyond our price ceiling.

[ercchry]

Yeah, right now there isn't any deals in inglewood... but they do pop up and if you have a year to find one you could probably luck out

[max_boost]

This has worked out for some of my friends. Whatever your mortgage payment is, double it.

i.e. $1500 mortgage payment. Deposit 3000 into your account, the extra 1500 will cover all your utilities, property taxes, insurance, maintenance etc.