Signing on the dotted line for a mortgage should be done with plenty of forethought

HOMEFINDER: Think long-term with first home

Making sacrifices early can pay off later for homeowners

Buying a first home is only going to happen to a couple or an individual once in their lifetime.

With housing prices on the West Shore and Greater Victoria flatlining, for the most part, it means first-time home buyers have to be as close to right as possible when they make their choice. Except in rare cases, the days of flipping a home and making some money toward the next purchase are gone, at least for the time being.

Langford-based mortgage broker Darrell McCollom knows that fact well and takes a pragmatic approach to the housing market. Having been in the business for 25 years, he’s seen several buying cycles come and go. And with lending rules tightening up in the past few years, he’s seeing a lot more young clients hear ‘no’ than ‘yes’ than in the past.

When young clients walk through his door, he tries to determine where they’re at in life and get a good sense of their longer-term plans.

“When I counsel my clients, I encourage them to buy the house you’re going to be wanting not now, but 10 years from now,” he says. “You’ve got to be very clear about where you’re going, and whether your future involves kids, cars, boats.”

While the instant gratification trend that has gripped the younger generations is a boon to the economy, it can also be a detriment for people looking to get out of renting and into their first home.

The newer small-lot homes that have been built to be affordable on the West Shore can be great for the fact that no major repairs can be expected anytime soon. But with that affordability comes the tendency to want to get all the toys, which take up space and render the home too small fairly quickly, McCollom says.

“The ‘kids’ have to start to live within their means. The house is central – the backbone of your family is where you are. Maybe that means giving up the big-screen TV or the vacation in Cancun.”

Lisa Verwolf, senior manager of lending services for Island Savings Credit Union, tells a similar story reflecting on her 35 years in the banking industry. Staff in their branches do their best to “coach” first-time buyers through the process of buying a home, she says.

“People need to have some realistic expectations,” she says. “That is, where do they see themselves in three, four five years? Are they going to expand their family?”

Young buyers have increasingly complicated income situations, such as those who live here, but work up north or in Alberta, she says. It can be more difficult to determine what is affordable and what isn’t.

What can really throw things for a loop for first-time buyers, however, is an unexpected expense. Not something like a blown hot water tank or car transmission, more like a septic system renovation, which is not an uncommon requirement on the West Shore and can cost upwards of $35,000 or more.

“We’re trying to get that education out there to borrowers, to find out what the system is, do the research before you buy,” she says.

It can be more difficult when the potential buyers have found a home they like before getting approved for financing. “Some people, they don’t want to hear it, they just want to get into the house. They think maybe you don’t want to give them the loan, but we want our members to survive and be successful. It’s up to us to make sure they can afford it.”

She also suggests calculating affordability based on a higher interest rate, to ensure buyers can make those monthly payments in the event of unforeseen circumstances.

While many buyers are drawn to affordable homes in newer small-lot developments around the West Shore, Verwolf says Island Savings is seeing more people buying older homes and obtaining mortgages for the purchase price plus improvements, spreading out the payment for necessary or desired upgrades.

It all comes down to looking ahead and being realistic, she and McCollom say.

Q: WHAT KINDS OF THINGS SHOULD I CONSIDER AS A FIRST-TIME HOME BUYER?

• Determine what type of home best suits your needs. A traditional single-family home offers more control over major decisions, but may not be in your price range; whereas a condo can be more affordable, but comes with commitments like strata fees.

• What specific features are you looking for? Figure out the things that would be nice versus the deal breakers, like whether or not the property has a yard, the size of the kitchen or location in a specific neighbourhood.

• Talk to a lender and find out how much of a mortgage you’re qualified for, before you start shopping around, to avoid disappointment.

• And after you’ve got your approved mortgage amount, figure out the total cost of the home, including utilities, maintenance, taxes and insurance.

GREATER VICTORIA MARKET UPDATE » AS OF SEPT. 15/14 COURTESY VICTORIA REAL ESTATE BOARD

» 232/487 — NET UNCONDITIONAL SALES / TOTAL, SEPT. 2013

» 580/1,106 –NEW LISTINGS / TOTAL, SEPT. 2013

» 4,310/4,547 — ACTIVE RESIDENTIAL LISTINGS / TOTAL, SEPT. 2013