Buying your first ever property is exciting and daunting at the same time. There is so much needed just to make this decision of a lifetime. And so much is hidden until you make your move to buy a new home.
Luckily for Canadians, this single task is becoming more and more user-friendly. And this is one of the reasons where over 40% of the homebuyers in Toronto are under 35.
You, too, could become part of this age group with these five home-buying tips exclusively for first-time buyers.
Tip# 1 – The Importance of Owning a Home
Why you need to own a house?
The simplest reply here is; you need a place to live. But if you go beyond this, you would understand the living under your own rood (even if it is on a lease) is cheaper than renting a home.
You do not worry about relocating to another place just because your landlord does not want you anymore. You could upgrade your house accordingly.
Average age of homebuyers in Canada
It is quite unfortunate that we often do not think about the importance of buying a home. We get busy making money and then spending it over the weekend or buying unnecessary items. And owning a house is not on the list until later at some time.
Though this trend is changing with time, we realize the importance of buying our own home (see how 40% of the Canadian homebuyers are just under 35).
It is imperative for every Gen Z and Gen Alpha (and even Gen Y) to add buying a home in their list soon they land their first job (or even before). That is how they could start managing their finances and work towards a stable income, rather than doing ordinary jobs.
What else you could do with your own home?
The first intention of buying a home is mostly (and should be) keeping it for yourself. After all, you need a place to live.
Luckily, this single decision has more to offer:
- You could turn you house into a business by reselling it in the market for a higher bid.
- You could rent a spare room o space and earn some extra bucks.
- You could even rent it, while you live in (say) a condo
- It could be your legacy which you pass on to your children
Tip# 2 – Managing Your Finances
Since you are already familiar with the importance of buying a property, you would already be saving for it. Here is what you need to do as a first step to managing your finances:
Set you budget
There are two common ways to set your budget:
- You put aside a fixed amount or percentage from your steady income OR
- Raise the bar of your income (by doing more than one job or working hard)
Whatever budgeting plan you choose will help you decide how much you could afford. The more your budget is, the expensive house you could buy, or vice versa.
Just make sure you have a steady source of income.
Start saving early
Down payment – the minimum down payment you require is 5%. But 20% is recommended as below this percentage, you would be required to acquire mortgage loan insurance.
Closing costs – these come when you finalize your mortgage.
Move-in expenses – these are unforeseen expenses and come only when you move or just moving in. these may include immediate home repairs, upgrades, furnishings, relocating costs, and so on.
Improve your credit score
Since you are most likely to acquire a mortgage to buy a house, you need to keep a good and clean credit score. For this, follow the below guidelines:
- Get free copies of your credit reports
- Pay your bills on time
- Keep your credit card balances low
- Close unused credit cards
Tip# 3 – Mortgage Selection
To buy a house, mortgage is the most common way. This is the amount you borrow from a financial institute or private investors and pay the home seller.
You then pay off the mortgage amount in installments over a period of years ranging from 5 years to 30 years.
Types of interest rates
There are three major types of mortgage interests available for you in Canada:
Fixed interest rate: – It remains the same for the entire mortgage term and is usually higher than a variable interest rate.
Variable interest rate: They are usually lower than a fixed interest rate and will vary over the mortgage period.
Hybrid or combination interest rate: They are a mixture of fixed interest rates and variable interest rates. They secure you if the interest rates go up.
For first-time homebuyers, the Government of Canada offers a shared-equity mortgage. The First-Time Home Buyer Incentive offers:
- 5% or 10% for a first-time buyer’s purchase of a newly constructed home
- 5% for a first-time buyer’s purchase of a resale home
- 5% for a first-time buyer’s purchase of a new or resale of a mobile/manufactured home
If you are eligible for a First-Time Home Buyer Incentive, you may not require a hefty amount for the down payment. You may want to read guidelines by Canada Mortgage and Housing Corporation (CMHC) or consult your local real estate agent for more details.
Get pre-approved mortgage
A pre-approved home mortgage is:
- How much could you afford to acquire a house?
- What your interest rates would be?
- How much would you be paying month-over-month?
A pre-approved mortgage does not guarantee a mortgage. It only helps in narrowing down your search. It would further refine your search for your dream house by giving a clearer picture of the house you could afford, your likely neighbourhood, and the size of the house.
Tip# 4 – Home Shopping
With big shopping budgets, comes big decisions. When you are buying a new home for the first time, you need to shop it in a professional-like manner, which start by hiring a professional real estate agent.
Choosing a real estate agent
Hiring a real estate professional is almost mandatory in Canada. There is too much involved in buying your first home that you always need a friendly professional to guide you all through the way.
Imagine if you were to buy a bungalow in Toronto. You meet your real estate agent, share your budget range, and give an idea of your dream (budget) home. Your real estate agent would then help you find the perfect home for you from their vast list of bungalows for sale in Toronto, take you on tour to the bungalow(s), guide you if you need home inspection services, renovations, prepare your documents, and finally transfer the house under your name.
(If this sounds easy, you should give a call to a nearby realtor. They will guide you on how tough it could be to buy your first home).
Selecting home type
Condos, detached, semi-detached, townhouses, and so on; are all types of homes. It is imperative to know all the terms and choose the one right for you.
In today’s housing market, single-family homes (including bungalows) are among the top-most want type of homes by Canadians. They are spacious, beautiful, give you room to sit with family, play with kids in the yard, and work from home while staying far from the hustle and bustle of the outside world.
The demand for bungalows is high in the market, and their prices are booming. If you are lucky to buy one now, you could expect to earn some good profits reselling it later this year. And if you do not want to sell it, you still would not regret buying a bungalow, as they are always in demand and worth buying property.
Tip# 5 – Bonus Tips for Buying Your First Property
You may not want to spend a dime on a home inspection, even before visiting the property. But this small expense is somewhat necessary than regretting later. A professional home inspector would investigate the property of any fixes it may require and advise you with the possible solutions with a range of cost the fixing requirements.
It is your right always to negotiate when buying a home. You are spending a significant portion of your savings buying this property.
You could either ask the home seller to fix the problems, upgrade them or lower the asking price.
Buy home insurance
When you mortgage your house, the lender may ask for home insurance. They need to keep them safe from any mishaps, and so do you. Home insurance generally covers the repairing cost as well as the cost to replace the property and what it contains if they are damaged by an incident covered in the policy.
What is Next?
These five essential tips for buying your first home is almost recurring whenever you plan to buy a new property. And the essential tip is acquiring a professional realtor’s services. They are always in the market, updated with current housing market knowledge and regulations, and understand what is best that comes under your budget and requirements.