Everything a First-Time Home Buyer Should Know
Are you a first-time home buyer?
Firstly, congratulations on this important and special journey you are about to embark on. While house hunting and negotiations can come with their fair share of stress and anxiety, it can also be one of the most memorable times of your life and a major stepping stone as you enter the housing market.
In this helpful guide, we are going to walk you through everything that a first-time home buyer should know, from planning and mortgages, to house hunting, closing, and more.
Planning
We suggest starting the planning phase as the idea of buying your first home becomes a real possibility.
Your Priorities
Your first step should be to discuss and align your priorities. This is especially important if you plan to purchase your first home with a partner or significant other.
Knowing what you would like from your home and what you are willing to compromise on is extremely important, as it can help to create a smoother approach to house hunting down the line.
Commit When You’re Ready
While it can be fun and exciting to discuss buying your first home, it’s strongly recommended to wait until you are ready to fully commit. We suggest staying within the planning phase until you have all your ducks in a row, from securing a down payment to meeting with lenders and more.
Mortgages
For many, a mortgage will be required during the first-time home buying process. Meeting with a lender at the beginning of your journey can help you to:
Determine the amount that you qualify for
Find out what you can comfortably afford
Assess existing debt and your financial situation
Compare your assets, debts and income
Review your credit report and score
With help from the right lender, you can properly assess your current situation and create a plan to help you work toward your goals.
Down Payments
As a first-time home buyer, you might be asking yourself how much a down payment should be. Especially in 2021 and 2022, this amount is significantly different from 20 years ago, let alone the last five.
The amount of money that you put towards your home as a down payment can depend on factors such as your financial situation, the kind of mortgage you are applying for and whether or not you would like to pay mortgage insurance. In Canada, a deposit of 20% or higher is required to avoid paying mortgage insurance.
Here is a general guide to help you determine how much your down payment should be:
If the purchase price of your home is $500,000 or less, your minimum amount of down payment should be 5% of the purchase price
If the purchase price of your home is $500,000 - $999,999, your minimum amount of down payment should be 5% of the first $500,000, and then 10% of the remainder
If the purchase price of your home is $1 million or more, your down payment should be 20% of the purchase price.
These amounts may change depending on factors such as credit score, credit history and if you are self employed.
Looking for more information about down payments? Take a look at this helpful article from the Government of Canada.
Creating a Budget
Whether you’re starting to save for a down payment or you’ve just met with a lender, having a comprehensive budget is an absolute must.
Your budget should account for both the short and long term, while including everything from income and expenses, to bills, savings and everything in between.
Once your budget has been finalized, you will have a better idea of what you can afford when it comes to purchasing and owning a home, and the kind of down payment you will be able to come up with.
Take Advantage of the Perks
Did you know that there are many perks available to assist first-time home buyers? To find out what may be available to you, speak with members of your team, such as your lender, real estate agent or other new homeowners in your life.
We always suggest that our clients look into the First-Time Home Buyer’s Incentive as they get started to see if they are eligible for assistance. There are also ways that an RRSP can assist first-time home buyers as well.
House Hunting
Is it time to hit the market and look at houses for sale? Here are some things to consider as you get started!
Guidance and Support
Never underestimate the importance of having guidance and support throughout this process. Your support team can help you look through available listings, attend open houses and even determine if it is time to put in an offer.
Every support team can look different from the next. Generally your guidance and support can come from your real estate agent, family members or a spouse.
Have an Open Mind
Many of us have been picturing our dream home for many, many years. As you enter the market and begin to house hunt, it’s important to maintain an open mind. Not every home will be perfect or meet your every expectation, but that doesn’t mean you can’t turn it into your dream home with a little TLC.
Having an open mind and being open to change can make house hunting all the more enjoyable. The home of your dreams might be one you never expected!
Check Neighbourhood Building Plans
Before allowing yourself to fall in love with a house, it might be worth your while to check the neighbourhood building plans first. While the idea of construction or a new development might sound like not a big deal at first, these kinds of projects can sometimes put the enjoyment or value of your home at risk.
Putting in an Offer
Have you found the perfect candidate for your first home? It’s time to put in an offer. To put in an offer, you’ll need help from your real estate agent to review the offer before it becomes official.
The offer will require your legal name, the amount offered, date of expiry, and any other conditions.
Will I Need a Real Estate Lawyer to Buy a House?
Yes! You will absolutely need the help of a real estate lawyer to buy your home.
Your real estate lawyer will handle the title insurance, land transfer tax, any rebates for first-time buyers, registration of the title, reviewing of a Status Certificate if the property is a condominium, and the transfer of funds.
Closing and Beyond
Congratulations - you found your first home! Let’s navigate the closing process and beyond.
Insurance
As a homeowner, you will be required to obtain home insurance. You may want to make a few calls to different insurance companies to find the best option for you. If you currently have automobile insurance, you may want to start there. Often insurance companies will provide you with a discount for bundling your home and auto coverage.
We always suggest finding an insurance company that offers flexible coverage, so that you can customize it to meet your every need.
Closing
The closing process will require a lot of paperwork, which is why it’s so important to have guidance and support from your real estate agent, real estate lawyer and/or notary. They can walk you through the fine print and explain complex legal terms that are often overlooked because they are misunderstood.
Ask as many questions as needed, to ensure that you feel comfortable and confident while navigating this important process. On closing day, the closing funds will be delivered from your real estate lawyer to the seller’s.
Once all is said and done, you will receive the keys to your new home. Congratulations!
Planning for the Future
Now, it’s time to plan for the future.
We suggest creating a folder with all of your important documents, from paperwork regarding your home to the paint colours used and everything in between, proper organization is key to successful home ownership.
Plan for anything that can come your way as a homeowner by saving money each month and providing your home with preventative maintenance. The simple act of cleaning your gutters, performing regular inspections and scheduling professional care from time to time can go a long way.
