Hello, This is my first post at these forums, I predict it will be the first of many. I`ll try to be brief, but there`s lots to say. The last few weeks have been extremely hectic for me as I research the purchase of a new home, and the stress is pretty high. Maybe some of the knowledgeable people here can give me some focus.
Quick Facts:
- I have great credit (800 or so) and a decent monthly income that will allow me to buy a variety of properties, but I only have a small down payment of about $20,000. A high ratio mortgage is likely.
- I`m a young single professional.
- I feel intense time pressure. I fear mortgage restrictions may be introduced in the spring that will push me out of the market, or prices will rise. I want to buy right away.
- I don`t have a realtor, a mortgage broker, a lawyer, an accountant, or a home inspector. If I spend money to get all of these I fear I won`t have enough down payment left for a home.
- I`m able to save money at a fast rate (just got a raise at work), but that won`t help me today.
- I`ve been researching madly for 2 weeks and have learned a lot, the more I learn the more complicated things get.
- I`ve bought 6 real estate books and have gone through 4 of them so far (Including Don`s "Real Estate Investing In Canada").
- I`m wondering about buying in a new housing development to save costs on a lawyer, accountant, realtor, and home inspector (the builder provides a free lawyer).
- I`m keenly interested in real estate investing and starting my own businesses, but I think I need to handle getting myself my first home before I do that.
- My current apartment rent is $1,115 per month including utilities. I have rented a single family home in the past for $1,400 per month plus ~$300 for utilities. I managed the house fine, but had less cash.
- I`m burning out with all the research and need to refocus my efforts.
New home options:
- Buy a single family house for about 300,000 in a nice new area at the edge of the city that is being built and projected to increase in value due to rising population, new schools, a hospital, transportation improvements, etc (from my own research). This will stretch the budget, but give me a nice and sizable residence which should increase in value greatly in the next few years if my calculations are correct.
- Buy a condo or townhouse for $250 or so. Condo fees would be maybe $350 per month. I can choose a place downtown (small and expensive), or towards the edge of the city (big and cheaper). For the last two years I`ve lived in apartments downtown and don`t care for the noise my neighbors make, or the fact that I can`t make my own noise without disturbing people. There are lots of condo/townhome choices, but I hate the concept of condo fees (no incentive to save energy), or the fact that I can`t make my own improvements to the place (specifically, a solar heating setup). Condos and Townhouses are projected to not increase in value in the immediate future due to a large supply (from my research).
- If I buy new I may not need a realtor, lawyer, etc. There are also down payment options that let me spread the payment over time allowing me to pay a much higher down payment (10 or 15% instead of 5%).
Used home options:
- The only used single family homes I can afford are generally dumpy places in bad neighborhoods that I don`t want to live in, so I`ve sorta ruled this out. But who knows.
- There are lots of used condos and townhomes for sale but often for the same price as the shiny new ones. I would find it difficult to spend $300,000 for a decent downtown condo and then have condo fees on top of that.- If I buy used I`ll need a realtor, lawyer, etc. I`ll also need the down payment ready up front, so will only have a small down payment.
Questions:
- Do I need a realtor, a lawyer, and all those other people if I`m going to buy new? If I buy from a reputable builder (based on research I`ve done) who provides a new home warranty then do I still need these people?
- Can anyone recommend a good mortgage broker? There seems to be a million of these people, and all of them seem to have won some sort of award and are awesome.
- Books I have read suggest I should get several quotes from several brokers. How does that work in Canada? (they were US books). Do I get pre-approved by several brokers? Do I fill out a full application for several brokers? I was going to prepare my "Sophisticated Investor" binder and try meeting with brokers for lunch and such, but then started to think that maybe I should save this work for a year or two in the future when I start my investing, and that for now when I`m buying my first home I should just go and get a mortgage from somebody and have them help me along. All the extra future investment planning is a lot to add on to an already stressful situation.
- Considering I`m buying a home for myself and not an investment, would you recommend getting something nicer (for more money) or going cheap? If I go cheap then I`ll have to suck it up and suffer a little, but I`ll be able to kick start my investing sooner. If I go for a nicer place then I`ll live comfortably but it`ll be longer before I can save up another down payment. This question really has me torn. And to make it more complicated the house could appreciate more, where the condo/townhome may not. So do I pay more for a place that will appreciate more?
- I have the choice of buying a new townhome or a new single family home, both of which are in the same new area on the edge of town which is expected to increase in value (according to my research). The townhome will be less expensive, less work, and will add a garage. The house will be bigger (more than I need) and without a garage. The benefit of the house is that I can make noise and not worry about neighbor noise (I love my home theater and long to set it up again). The neighborhood is primarily single family homes, mainly large $450,000 ones. My research indicates that single family homes will appreciate far more than townhomes, and buying in a new area with "family" oriented amenities appearing should further improve the single family house attractiveness. A friend of mine has also done research and warns me that townhomes and condos on the fringe of the city (such as this area) will be the first to drop when the market drops, but the single family home will do much better. Thoughts?
- If I buy the house I`ll need a 35 year amortization to keep payments reasonable (about $1200 a month). If I buy a condo/townhome I can go for shorter amortization periods, but I think I still want a 35 year term to allow me to save faster for investment properties. Thoughts?
My current rough strategy:
This isn`t set in stone, but here`s my rough plan at the moment, with rough numbers. I go and buy the $300,000 single family house in the new area that is just being built (it`s a dirt lot right now). I don`t get a lawyer or anybody else, which saves me money up front when I really need it. I`m still a smart guy and I`ll read all the fine print and ask all the questions. The builder lets me pay my down payment spread out over time. I need to pay $1,000 up front, then another $9,000 in two weeks. I take some of my saved cash and put it aside for this. The rest of my cash I put into my RRSP right now and I use that contribution to get a large amount of tax back atthe end of February. I then put the tax refund into the RRSP as well. For the next few months I pay the rest of the minimum 5% down payment in monthly installments (about $1,000 a month), and funnel extra cash into the the RRSP until the full RRSP amount is $25,000. At the end of a year when the house is built I take the full $25,000 out of my RRSP using the new home builders plan and combine it with extra savings I`ve made during the course of the year to make a final lump sum down payment, hopefully giving me a total amount of about $45,000 (15%). When I take possession of the house around early 2011 extra amenities in the neighborhood will have been built and the house should have already increased in value. Initial research I`ve done seems to indicate that the $300,000 house will jump in value to $350,000 once the neighborhood is established. Does this plan sound plausible, or am I nuts?
Thanks for the input, and thanks for reading all of that. I`m wordy, I know.
Jonathan
Quick Facts:
- I have great credit (800 or so) and a decent monthly income that will allow me to buy a variety of properties, but I only have a small down payment of about $20,000. A high ratio mortgage is likely.
- I`m a young single professional.
- I feel intense time pressure. I fear mortgage restrictions may be introduced in the spring that will push me out of the market, or prices will rise. I want to buy right away.
- I don`t have a realtor, a mortgage broker, a lawyer, an accountant, or a home inspector. If I spend money to get all of these I fear I won`t have enough down payment left for a home.
- I`m able to save money at a fast rate (just got a raise at work), but that won`t help me today.
- I`ve been researching madly for 2 weeks and have learned a lot, the more I learn the more complicated things get.
- I`ve bought 6 real estate books and have gone through 4 of them so far (Including Don`s "Real Estate Investing In Canada").
- I`m wondering about buying in a new housing development to save costs on a lawyer, accountant, realtor, and home inspector (the builder provides a free lawyer).
- I`m keenly interested in real estate investing and starting my own businesses, but I think I need to handle getting myself my first home before I do that.
- My current apartment rent is $1,115 per month including utilities. I have rented a single family home in the past for $1,400 per month plus ~$300 for utilities. I managed the house fine, but had less cash.
- I`m burning out with all the research and need to refocus my efforts.
New home options:
- Buy a single family house for about 300,000 in a nice new area at the edge of the city that is being built and projected to increase in value due to rising population, new schools, a hospital, transportation improvements, etc (from my own research). This will stretch the budget, but give me a nice and sizable residence which should increase in value greatly in the next few years if my calculations are correct.
- Buy a condo or townhouse for $250 or so. Condo fees would be maybe $350 per month. I can choose a place downtown (small and expensive), or towards the edge of the city (big and cheaper). For the last two years I`ve lived in apartments downtown and don`t care for the noise my neighbors make, or the fact that I can`t make my own noise without disturbing people. There are lots of condo/townhome choices, but I hate the concept of condo fees (no incentive to save energy), or the fact that I can`t make my own improvements to the place (specifically, a solar heating setup). Condos and Townhouses are projected to not increase in value in the immediate future due to a large supply (from my research).
- If I buy new I may not need a realtor, lawyer, etc. There are also down payment options that let me spread the payment over time allowing me to pay a much higher down payment (10 or 15% instead of 5%).
Used home options:
- The only used single family homes I can afford are generally dumpy places in bad neighborhoods that I don`t want to live in, so I`ve sorta ruled this out. But who knows.
- There are lots of used condos and townhomes for sale but often for the same price as the shiny new ones. I would find it difficult to spend $300,000 for a decent downtown condo and then have condo fees on top of that.- If I buy used I`ll need a realtor, lawyer, etc. I`ll also need the down payment ready up front, so will only have a small down payment.
Questions:
- Do I need a realtor, a lawyer, and all those other people if I`m going to buy new? If I buy from a reputable builder (based on research I`ve done) who provides a new home warranty then do I still need these people?
- Can anyone recommend a good mortgage broker? There seems to be a million of these people, and all of them seem to have won some sort of award and are awesome.
- Books I have read suggest I should get several quotes from several brokers. How does that work in Canada? (they were US books). Do I get pre-approved by several brokers? Do I fill out a full application for several brokers? I was going to prepare my "Sophisticated Investor" binder and try meeting with brokers for lunch and such, but then started to think that maybe I should save this work for a year or two in the future when I start my investing, and that for now when I`m buying my first home I should just go and get a mortgage from somebody and have them help me along. All the extra future investment planning is a lot to add on to an already stressful situation.
- Considering I`m buying a home for myself and not an investment, would you recommend getting something nicer (for more money) or going cheap? If I go cheap then I`ll have to suck it up and suffer a little, but I`ll be able to kick start my investing sooner. If I go for a nicer place then I`ll live comfortably but it`ll be longer before I can save up another down payment. This question really has me torn. And to make it more complicated the house could appreciate more, where the condo/townhome may not. So do I pay more for a place that will appreciate more?
- I have the choice of buying a new townhome or a new single family home, both of which are in the same new area on the edge of town which is expected to increase in value (according to my research). The townhome will be less expensive, less work, and will add a garage. The house will be bigger (more than I need) and without a garage. The benefit of the house is that I can make noise and not worry about neighbor noise (I love my home theater and long to set it up again). The neighborhood is primarily single family homes, mainly large $450,000 ones. My research indicates that single family homes will appreciate far more than townhomes, and buying in a new area with "family" oriented amenities appearing should further improve the single family house attractiveness. A friend of mine has also done research and warns me that townhomes and condos on the fringe of the city (such as this area) will be the first to drop when the market drops, but the single family home will do much better. Thoughts?
- If I buy the house I`ll need a 35 year amortization to keep payments reasonable (about $1200 a month). If I buy a condo/townhome I can go for shorter amortization periods, but I think I still want a 35 year term to allow me to save faster for investment properties. Thoughts?
My current rough strategy:
This isn`t set in stone, but here`s my rough plan at the moment, with rough numbers. I go and buy the $300,000 single family house in the new area that is just being built (it`s a dirt lot right now). I don`t get a lawyer or anybody else, which saves me money up front when I really need it. I`m still a smart guy and I`ll read all the fine print and ask all the questions. The builder lets me pay my down payment spread out over time. I need to pay $1,000 up front, then another $9,000 in two weeks. I take some of my saved cash and put it aside for this. The rest of my cash I put into my RRSP right now and I use that contribution to get a large amount of tax back atthe end of February. I then put the tax refund into the RRSP as well. For the next few months I pay the rest of the minimum 5% down payment in monthly installments (about $1,000 a month), and funnel extra cash into the the RRSP until the full RRSP amount is $25,000. At the end of a year when the house is built I take the full $25,000 out of my RRSP using the new home builders plan and combine it with extra savings I`ve made during the course of the year to make a final lump sum down payment, hopefully giving me a total amount of about $45,000 (15%). When I take possession of the house around early 2011 extra amenities in the neighborhood will have been built and the house should have already increased in value. Initial research I`ve done seems to indicate that the $300,000 house will jump in value to $350,000 once the neighborhood is established. Does this plan sound plausible, or am I nuts?
Thanks for the input, and thanks for reading all of that. I`m wordy, I know.
Jonathan
otential to get screwed, potentially losing tens of thousands of dollars, potentially having little to no protection if the builder doesn't finish the house to standard. 
