Buying your first home can be both exciting and a little bit scary. Not only can the buying process take time, with the potential for confusion with all the information to absorb, but homeownership also comes with a lot of responsibility. Here are some things you need to know before you start the process.
The Real Cost of Buying a Home
Many first-time homebuyers will use their existing rent as a base number to calculate if they can afford the monthly mortgage, however, your mortgage is only the start. You should include the costs for property taxes, homeowners insurance, the interest on borrowing the funds, and potentially HOA fees on top of your monthly utilities that could increase from your current utilities depending on the home you are considering buying.
A financial hurdle many first-time homebuyers experience is determining, and saving, the cost of your down payment and closing costs. These need to be paid upfront before you can call the home your own. Make sure you factor them into your budget and save accordingly. Down payment requirements vary depending on the purchase price of the home, and there are benefits for first time home buyers, your real estate agent can guide you so that you have a clear goal in mind. Land transfer tax is included in your closing costs, you can find a Land Transfer Tax calculator here. Anticipate needing an additional 2-5% of the cost of the home you intend to buy for potential closing costs.
As you may have heard from family and friends, or read in the news, now is a good time to apply for a mortgage. According to the Toronto Regional Real Estate Board (TRREB), borrowing costs were ultra-low in March of 2021. Get pre-approved prior to beginning your home search, so that you can properly budget and advise your real estate agent on your criteria.
Look Into Home Buyers Incentives
While looking at your budget, spend some time researching government incentives for first time home buyers. In Ontario, some you may have access to are the First Time Home Buyers Incentive, which “offers 5 or 10% of the home’s purchase price to put toward a down payment,” the Land Transfer Tax Refund, the Home Buyer’s Plan, which may allow you to withdraw funds from your RRSP, or the GST/HST new housing rebate, to reclaim some of the taxes you pay on your transaction.
It’s Good to Have Help from a Professional
These days buying a house is a lot different than it was 30 years ago. With access to the internet, we have any information we want at the tip of our fingers. This makes many people feel like they don’t need help.
It’s important to remember that a trained professional can save you time, money, and headache. A trusted real estate agent is vital for a good home buying experience, they are neighbourhood experts and can advise if the empty lot next to your condo has been slated for development, they understand rights of way and easements that run on properties and how that might affect you as a homeowner and above all they are your advocate and have your best interests at heart, so make sure you do your research and hire someone you feel confident in.
Check out our top five reasons to use a local realtor here.
Compromise is Part of the Deal
First-time homebuyers often have smaller budgets than those who already have equity invested in an existing home. Because of this, it is important to understand that you may need to compromise.
Having a list of needs and wants while knowing where you’re willing to compromise before you start your search will save you time and help you get what’s really important to you.
Research neighbourhoods you’re interested in to see what’s available, and what the typical home looks like and costs. Location is important, but so is the home and it’s features. You have to determine which carries greater weight and which can be compromised. Search current listings by neighbourhood here.
It Could Take a While
Be prepared to exercise your patience. One thing to take into consideration is that buying your first home can be quite a lengthy process. From pre-approval to actually getting the keys in your home it could take several weeks or even months to find the perfect fit for you.
Market conditions are also a huge factor in supply. According to the Canadian Real Estate Association (CREA), home sales hit record numbers in February of 2021, despite challenges like COVID-19 lockdowns and policy adjustments. “The number of newly listed homes rebounded by 15.7% in February,” reported CREA.
If you have any questions about market conditions or more tips for first time buyers, drop us a line, we’re always here to help.