Survival Guide for First Time Home Buyers
Buying your first home is one of the biggest purchases you will ever make in your life, so doing it right is the only way to go. For most first time buyers, this process can be overwhelming and sometimes scary. There are so many things to consider and various parties involved. Not to mention that having a comfortable financial resource is one of the key factors in a successful purchase.
It took me almost a year of searching for the right property until I made a decision that I felt confident and happy about. However the journey to that final decision was a rocky one. I was not 100% prepared and I made mistakes along the way, thankfully by the time it was all said and done it all worked out and was happy with the final outcome.
Here are a few things to consider to survive the overwhelming process of purchasing your first home…
Save, Save, Save - ‘To reduce the feeling of anxiety and secure yourself a successful purchase, make sure that you save enough money for the following:’
Pay Off Debt – It’s always good to free yourself from any financial obligations that you currently have before purchasing a home. Paying a mortgage on a property is not like paying rent. You have to consider many factors and future expense that may arise from the property that you recently purchased.
Down Payment – Typically needed to receive a mortgage from a financial institution. In Manitoba its 5% of the purchase price. Today you can receive a mortgage with no money down, however I don’t recommend this route.
Closing Cost – Needed to close the deal. These fees usually goes towards the Lawyers that handles all the paper work and the transfer of Titles.
Property Assessment – To get approval on the mortgage, an assessment is required by the mortgage provider. The price can range any where from $200 - $500.
Home Inspection – To avoid any future problems with the property, it’s best to get a home inspected prior to purchasing it. The price to get a home inspected can be anywhere from $500 - $1000.
Making an Offer – Have funds available for a deposit when making an offer on a property. You can make a deposit as little as $500, but the more flexibility you have on your deposit, the bigger the negotiating power you have. Most sellers feels comfortable and will likely chose your offer versus others if your deposit is fairly large, even if your offer is less than others.
Shop, Research and Negotiate - ‘The more knowledge you have the better you will feel. Also keep in mind that everything is negotiable.’
Mortgage Rates – You don’t necessarily have to receive your mortgage from your bank. You may find better rates from other financial institution. Shop around.
The Right Property For You – Make sure it’s the right property for you. It’s always good to have a few houses you are interested in lined up and viewed for comparison. It’s also a good idea to view the property more than once before making any final decision. Spend half a day inside if needed. Get the feel for it, visualize yourself living it. Make sure it’s right for you.
Do Your Research - When shopping for the right house, get all the facts and information you can get. Normally your Realtor will get you all the information you need and want about the property you are interested in. They can also get you information on the current homes around the neighborhood and what selling price they went for, this will give you a good idea on whether you are getting a good deal or not.
Negotiate Everything - When negotiating on a property, try and get as much as you can for as little cost as possible. Keep in mind that appliances and furniture can be negotiated. Also any future work that you think is necessary such as remodeling the bathroom, or replacing the floors is also negotiable. Be flexible on your possession date, the more flexible you have on the possession date, the more negotiating power you have.
And my number one rule when buying a property is, when in doubt don’t buy. You have to feel 110% confident in your decisions. Take your time.
You may feel a lot of anxiety during this process, which is normal. I also recommend that you research online for more resources on first time home buyers. I watched a lot of HGTV shows during the year I was searching for a home, you can learn a lot from those shows, especially if you are also planning on doing your own renovations. 
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Misconceptions of a Payday Loan
Payday Loans are often compared to ‘loan sharking’ minus the part where you get your arms and legs cut off if you don’t pay back. You often hear the words like usury, or exploiting the poor, uneducated and the unemployed. These are just some of the misconceptions of a Payday Loan. For those who don’t know what a payday loan is, it is short term loan that is typically paid back within two weeks, or the next payday of the borrower. Fees are applied usually to every $100 borrowed. These fees can range from $15 - $40.
The purpose of this entry is to clear up some of the negative views and to educate the general public. The Payday Loan industry is not about exploiting the poor or unemployed. A customer cannot take out a loan unless they are actively employed and receiving income. Most companies do not accept customers who receive income through benefits or pensions.
A customer satisfaction survey, sponsored by CFSA in 2004 was conducted and they found that 69% of Payday Loan customers have a household income above $25,000 a year. 52% are in the middle income group (25 – 50K). It was also found that 58% of users have at least some college education and 1 in 5 have a university degree. These are just some of the numbers that the media does not like to publish as a 650% interest rate, makes much of a better story.
The most common complaint of payday loans are its interest, what banks like to call it. But for Payday Loan providers, it is the administration cost of issuing a loan, also called fees. To the average Joes, an interest rate of 650% may be ridiculously high compared to traditional banks. But let me shed some light on this.
Supposed that the total fixed cost of providing a loan is $50.00, it doesn’t matter what the loan amount is. Say you borrowed $1000 from a traditional bank that has a maturity date of 1 year. In order for the bank to cover all of its cost ($50) of issuing you the loan, they would need to charge you an APR of 5%. However as the loan size and maturity decreases, the equivalent interest charge must rise up in order for the bank to cover all of its cost. If for example you chose to borrow $200 from the bank and you want to pay it back in 2 weeks, the banks would need to charge you an interest rate of 650% to cover the cost of issuing a loan, which in this example, is still $50.00. (200 x 650% x [2/52 weeks] = $50.00).
You can see that it is not fair for the media to compare payday loan interest rates to traditional banks. Yes, some may argue that the fees are extremely high for the principal amount borrowed. Many articles will suggest that it’s a better alternative to use the bank, however most banks will not consider a loan application for $500 and even if they did, the process to acquire a loan is a nuisance and an inconvenience. Some of these customers have also been turned down by their banks due to credit. Also keep in mind that the lenders are taking a big risk. I can’t even imagine what their bad debt is like.
The best way to deal with Payday Loans is to understand them. They are meant to be used as a short term and not a long term financial solutions. You don’t take cabs to travel from one state to the next. You use the cab to get you from one side of the city to the other. Similar to payday loans they need to be used that way, short term solutions in a convenient way. Customers need to understand this concept and need to know that they have options. If you are in the market to shop for the right payday loan, here are some tips you can use.
- Before you borrow money, make sure that you fully understand the fees and charges that are applied to the amount of money you want to borrow, as well as the application process and payment details. The more you know and understand the better.
- Stay away from companies that offer roll-overs. This may be tempting because you only have to pay for the fees and not the principal. However you may put yourself in a habit of doing this every two weeks. A two hundred dollar loan that could off cost you only $50 would have cost you $1200 after 1 year.
- Make sure that you only borrow what you can afford. This means that when its time to pay back the loan, make sure you have enough cushion to help you get by until the next pay period.
- If unexpected or emergency expenses come up which may require you to borrow a larger amount or subsequent loans. Make sure that your subsequent loan amounts are smaller than the previous one. Work your way back down to a position where you will have enough cushion to help you get through until payday.