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Negotiating a mortgage

It may seem obvious, with today's low interest rates, high rents and a strong housing market: If you've got the money, buy now.

But how to know when you are truly ready to make the leap?

Not everyone who would like to buy is actually prepared, financially and emotionally. Real estate experts have recognized signs that indicate when someone is, and meeting those criteria can make the difference between frustration and success.

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You're taking financial steps

The first sign, of course, is the financial foundation upon which a potential buyer can build.

"If they have already started saving toward a down payment, that is a great sign," said Jeffrey Baker, a real estate agent with Sutton Group in Montreal. "They have either been saving aggressively over a certain length of time and given themselves a target for the amount that will be their down payment. Or they will have had a meeting with a financial adviser or bank, who has shown them the amount they can realistically spend."

They also should meet with a mortgage broker and gain pre-approval. Although, as Austin Keitner of Keller Williams Realty in Toronto pointed out, "pre-approval doesn't mean they're actually looking at your credit rating but asking questions about your income, expenses and getting to know your ratios a little bit."

A buyer may not get the final approval if his or her credit rating is not up to snuff. But, nonetheless, "if they don't have that done by the time they are talking to me, I encourage them to do that. Especially in this market, you want to be ready. You want to be able to act fast," Mr. Keitner said.

You are plotting your spending

Ability to budget is key. "A well-educated first-time buyer needs to know their budgets to know where they stand," said Russell Westcott, vice-president of Vancouver-based Real Estate Investment Network.

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The move itself as well as the fees and taxes and the costs of properly maintaining a house can add considerable amounts to the down-payment and mortgage. Apartment dwellers might not think about these expenses. Whether it's a lawn mower or a new roof, Mr. Westcott said, "they have to figure out how much their housing expenses are going to be."

Does the new house need renovations? "As a general rule, renovation projects will take three times longer than you thought they would," Mr. Baker said, "and cost at least twice as much as you had budgeted."

You know what you want

Is it a condo, a townhouse or a big, fully detached home? You should decide that before you start browsing the listings.

"Until you have looked at your budget, and talked to your mortgage broker, you can't really even determine what type of property you should be looking at," Mr. Westcott said. "And, does it fit with your lifestyle?"

Knowing the neighbourhood where you want to be is another part of that process. It may be trendy or offer great views, but does it mean a longer commute to work, for example, or have the services – schools, supermarkets and transport links – you need?

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"The buyer should ideally know what community they want to be in," said Mr. Keitner, who has on occasion been asked by clients whether they can lease a property for a year, instead of buying it outright, to see whether it's the right fit for them.

Otherwise, your location choice might come back to bite. "If you end up leaving the house after a couple of years, you're going to lose money on it," he said. "Because after your moving costs, legal costs and so on, its sale is not going to compensate you through market growth."

You know what you actually need

For Mr. Westcott, the fourth sign that new home buyers are ready to make a serious commitment is when they have "put the focus on what they need, not what they want. Three bedrooms, two bathrooms and an attached garage – those are needs," he said. "A want would be high-end fixtures, granite countertops or a wine cellar."

Would-be buyers are sometimes seduced by the "bling," he added, "and all of a sudden the budget gets thrown out the window."

Conversely, ignoring properties that meet all your needs but not your whims will only make the already complicated process of buying a new home more challenging.

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You have tempered your expectations

The final sign you are ready to take the big step is when you realize that, as Mr. Keitner put it, "there is no such thing as a perfect house. I've never really seen a eureka moment where it's, 'Oh my God, this is the place where I need to live.'" Rather, he said, the home you buy and make your own becomes the home you love.

"You have to be prepared, as a first-time homebuyer, to temper your expectations," Mr. Westcott agreed. "You are not going to get what you want and, if you are young, you're not going to get the style and the quality of living that your parents have."

What's more, Mr. Keitner said, "there's a risk that if people don't act on properties that they can make work, prices continue to go up. So a decision based on emotion, rather than practicalities, can cost tens of thousands of dollars."

However, losing a home that, in retrospect, would have been the right buy is also part of the education of home buying.

"My experience with first-time buyers," Mr. Baker said, "is that they have to live the experience of a place getting away from them to realize that sometimes the market won't wait for them."

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Buying your first house is probably one of the most difficult decisions you will ever make. But understanding the signs of the well-prepared homebuyer will go a long way in ensuring that it's the right one.

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