First Time Buyers

Looking for a home is exciting, but it can also be intimidating and stressful. Here are tips to help you get started:

KNOW HOW MUCH YOU CAN AFFORD. Before you start looking for your dream home, you need to know what’s actually within your price range. Use a home affordability calculator to determine how much you can safely afford to spend. Lenders have formulas to determine how much you can afford to borrow, but, they don’t always have your best interest in mind. Crunch the numbers yourself to make sure that you feel confident that you can afford the payments. Don’t forget to factor in ALL of your expenses.

CHECK YOUR CREDIT & PAUSE ANY NEW CREDIT ACTIVITY. When you’re taking out a mortgage, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms. Check your credit report before you begin the home buying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts. It’s not wise to make any huge purchases or move your money around three to six months before buying a new home. You don’t want to take any big chances with your credit profile. Lenders need to see that you’re reliable and they want a complete paper trail so that they can get you the best loan possible. If you open new credit cards, amass too much debt or buy a lot of big-ticket items, you’re going to have a hard time getting a loan.

GET A PRE-APPROVAL LETTER FOR YOU HOME LOAN. Being pre-qualified simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. It’s smart to get a pre-approval, where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you and at what terms. Having a pre-approval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step. Being pre-approved will save you a lot of time and energy so you are not running around looking at houses you can't afford. It also gives you the opportunity to shop around for the best deal and the best interest rates. Do your research and make sure there aren’t any hidden costs in the loan.

DETERMINE YOUR WISH LIST. Before you start seriously shopping for your home, you should determine what your needs and wants are. You probably won’t get everything on your wish list for your first home – but picking your top 3 must-haves and top 3 deal-breakers is a great place to start! By doing this, you will be able to narrow your house search down to properties that really fit your needs. This is doubly important if you are purchasing with a partner. Each of you needs to make a list of what is truly important in your new home. Then set  the lists side by side and rate your features onto a single list. Now, when you get into a home, you’ll be able to step back from the emotions and remember your important features.

AIM FOR A 20% DOWN PAYMENT. It is highly recommended that all first time home buyer aim to put down 20% of the value of the home in order to qualify for a conventional mortgage. If you have money in your RRSPs, you can use up to $25,000 towards the purchase of your first home. Putting down less than 20% may mean higher costs and paying for private mortgage insurance from the Canada Mortgage and Housing Corporation (CMHC) to cover the higher risk of this loan. Play around with a down payment calculator to help you land on a goal amount.

​New minimum down payment rules: As of February 15, 2016, home buyers will have to abide by new minimum down payment rules. The new rules require a minimum 10% down payment for homes over $500,000 – but only on the portion of the price over $500,000.

DON’T FORGET CLOSING COSTS. You also need to think about closing costs which can range anywhere from 1.5% and 4% of the purchase price of your home. Many first-time buyers are surprised by these costs. You might be expected to pay for some or all of the following: Home inspection fee, Legal fees, Property transfer tax, Appraisal fee, Land transfer tax, Title insurance, Interest adjustment, Property and fire insurance.

BUY WITH YOUR HEAD, NOT YOUR HEART. Buying a house based on emotions is just going to break your heart. If you fall in love with something, you might end up some pretty bad financial decisions. There is a difference between your emotions and your instincts. Thinking logically and realistically is key when making the biggest purchase of your life. Letting your emotions overtake common sense might result in paying more for your home – and you might never recuperate your losses. It’s an investment, so stay calm and be vigilant.