First-time Home Buying: Easy Steps to Buy Smart
Image: City Street
Navigating the world of Canadian home buying
Falling in love with a house you can’t afford can be heartbreaking. Avoid disappointment and home-buyer’s remorse by taking the time to plan out your budget and expectations before you start hunting for your new house.
Step 1: Figure out how much you can afford.
First, figure out how much you can afford for your down payment. After assessing your finances and calculating your expenses, you have a few potential courses of action. It is important to note that the bigger your down payment, the less principal you will owe, and the less interest you will end up paying. Resources like The Home Buyers Plan allows you withdraw up to $35K per person ($70K per couple) from your RRSPs – tax-free – to be repaid over the next 15 years. A few other things to consider include:
It may seem a bit overwhelming, but forgetting about closing costs, insurance, legal fees, home inspection costs, land registration, and land transfer fees can really add up to quite the headache. Include these details with your moving expenses and service hookup fees and avoid some unpleasant surprises after settling into your new home. Getting pre-approved for your mortgage is a good way of finding out how much you can borrow – and it speeds up the process once you’ve found the home you want to buy.
Keep track of your monthly housing expenses (mortgage, taxes, heat, etc.) for a few months before looking for a new home. This will prepare you and keep you from getting in you’re your head. Ideally, debt shouldn’t require more than 40% of your monthly income. This includes car payments and credit card debt. While you may be comfortable dedicating this percentage of your income to debt and your new home, it increases the risk of being hurt by unexpected financial hits.
Image: Beautiful Kitchen
Step 2: Figure out what type of home is right for you.
Sit down and make a list of must-haves and nice-to-haves. Be realistic, but be clear about the features you can’t live without. Start by considering your lifestyle and stage of life. If you’re planning to have kids in a year or two, a studio loft might not be your best option. Start simple, how many bedrooms or bathrooms do you need? Do you want a home office or garage? How about a big backyard? Hardwood floors and an eat-in kitchen are nice, but not all features will be essential or functional for your household.
Step 3: Decide where you want to live and start looking.
Living in an area you like is as important as buying a home you love. This is where the “home essentials” list you made in step two comes in handy. Somethings to consider include whether you want an urban lifestyle, a house in the suburbs, or a quiet place in the country; what your commute to work and grocery stores might look like; and whether you need to be close to good schools or recreational facilities.
Go to open houses and visit places like Realtor.ca or the Royal LePage Triland website to stay up to date on new listings in your preferred area. Similarly, driving around neighbourhoods you like means you may get lucky and be one of the first to spot a For Sale sign on your dream home. Talk to your Real Estate Agent about your needs and start looking at properties.
Image: City Skyline
Step 4: Build a team and make an offer.
Put together the right group of real estate experts to help you buy, build, or sell your home. First and foremost, hire a licensed real estate sales representative that you can trust. Hiring a professional means having access to resources you may not have known about, and they can even refer you to other experts and businesses that can make your transition easier. For example, a reputable lender or mortgage broker, a lawyer (or a notary in Quebec), a home inspector, or an insurance broker. Once you’ve found the perfect place your real estate representative can help you make an offer. An offer to purchase includes: the purchase price, items to be included in the purchase, like appliances or light fixtures; the amount of the deposit, the closing date, and any other conditions. Your agent will help you prepare your offer and present it to the vendor, who will either accept it or make a counteroffer. If everyone agrees, the home is yours.
Congratulations on purchasing your dream home!
To learn more about the home building, buying, or selling process visit our blog or contact us. We are never too busy for your questions.