Rule 1: Choose the Right Location
A common mistake many condo buyers make is not considering the long-term commitment of owning a property. When buying a condo, it's essential to plan to stay for at least five years. Being transient and owning a condo usually don’t mix well. If your job situation isn’t stable enough to commit to an area for an extended period, it’s worth considering whether owning a condo is the right move for you. Breaking a fixed-term mortgage can lead to penalties, and since real estate commissions are paid by the seller, you’ll also face those costs if you need to sell earlier than expected. If possible, make sure you’re ready to settle in for at least five years.
Rule 2: Stay on Top of Your Credit Score
Mortgage lenders assess the risk of lending money to home buyers, and your credit score plays a huge role in that decision. With the government regulating mortgage rates, especially with historically low interest rates, it’s crucial to maintain a strong credit profile. Even though Vancouver may not experience rapid price increases like other regions, changes in legislation can still impact your ability to borrow money. Ensure you make all of your monthly payments on time, and avoid taking on more debt than you can handle.
Rule 3: Set Realistic Expectations
While it’s easy to dream of a luxurious condo with breathtaking views of the ocean and mountains, it’s vital to keep your expectations grounded. A $350,000 budget might not stretch as far as you hope, especially if you're aiming for two bedrooms and a den. Market conditions dictate property prices, so take the time to do some research and understand what you can afford. A good rule of thumb is to spend no more than 35% of your monthly after-tax income on condo-related expenses. If you go over this amount, your dream condo could end up stretching your finances too thin.
Rule 4: The Bigger Your Down Payment, the Better
The size of your down payment plays a significant role in the buying process. If you can put down at least 20%, you can avoid CMHC insurance fees, though the minimum down payment is typically 5%. Start saving as early as possible—the more you can set aside, the better. Consider using your RRSP as part of your down payment. You can borrow up to $25,000 from your RRSP under the First Time Home Buyer’s Plan, within certain limits.
Rule 5: Work with a Trusted Real Estate Agent
While the internet provides an abundance of information for prospective buyers, working with an experienced real estate agent can make a significant difference. A knowledgeable REALTOR® will guide you through the entire process, ensuring you get a fair price and favorable terms. An often-overlooked benefit is that using an agent to find your condo doesn’t cost you anything; the seller pays the agent’s commission. So, it’s in your best interest to seek professional advice to make informed decisions.
Rule 6: Lock in Your Rate with a Pre-Approval
A mortgage pre-approval can give you peace of mind and help you establish a budget. Securing a guaranteed rate for 3-6 months means that even if rates rise, you’ll still pay the agreed-upon rate. If rates drop during that time, you’ll benefit from the lower rate. Being upfront and honest about your financial situation ensures the pre-approval process goes smoothly, and it will give you a clearer picture of your price range.
Rule 7: Knowledge is Power
A real estate agent brings valuable insights into local market conditions. They can access proprietary data on what comparable properties have sold for, including within the same building you’re considering. While anyone can see a listing price, only licensed REALTORS® can access sold data. This information is essential when negotiating, as it helps you understand the true market value of the property.
Rule 8: Be Thorough with Property Inspections
When submitting an offer on a condo, standard conditions typically include finalizing financing, conducting a property inspection, and reviewing the strata documents. Financing should be straightforward if your pre-approval remains valid and you’ve been transparent about your financial situation. During the inspection, pay attention to potential issues like rainscreening and mold, which are common concerns in Vancouver condos. Reviewing the strata documents is crucial to uncover any potential problems with the building, such as financial stability or unresolved issues. It’s vital to understand whether the strata has a healthy contingency fund and if there are any concerns about your specific unit that may have been overlooked.
