Is it time to buy your first home?

If you’re buying your first home, or looking to do so in the near future, you are likely walking a maze with a myriad of factors that accompany homeownership. Where do you want to live? Do you have a house in mind? What’s your budget? And there are the many, many factors involved with obtaining a mortgage that you will no doubt be thinking about.

Here are five tips to help you navigate the road to homeownership!  

Is it time to buy your first home?

This is always the first step when considering buying your first home. Millennials are less likely to buy a home because they’re more likely to travel or even relocate for work, so our best advice here would be to hold off on homeownership until you have an idea of how long you’ll be in a given area. This goes for everyone, too, not just millennials!

There are, of course, other factors that contribute to the decision to hold off on buying a home, including not having established credit, student debt and not being ready for the task of maintaining a home.

Are you financially ready?

When determining your financial readiness to buy your first home, consider how long you’ve been employed and what your monthly income is. The Canadian Mortgage and Housing Corporation (CMHC) suggests that you should not spend over 35% of your gross monthly income. This allows you to maintain your lifestyle while leaving enough for savings, depending on your other financial obligations.

Unfortunately, there are no magic numbers for you to review and assess your emotional readiness. This will require you to reflect on your motives, readiness to commit, and for you to be honest when doing so. Always remember, regardless of your current situation, it does not mean home ownership isn’t right for you in the future!

If you’ve had home ownership on the horizon, you’ve most likely been saving for a down payment. Ideally, you should have a down payment that’s equal to 20% of the cost of the house but you can purchase with less as long as you keep in mind that you will need mortgage default insurance. 

If you haven’t found a house yet, that’s okay! Start by researching prices of the area and save for an average, erring on the more expensive side. If you decide on a home that’s more expensive, the overestimate will be helpful and if you decide on a home less expensive, you’ll have more than enough saved.

Getting pre-approved

Now that you’ve gotten your down payment together, you can start the process of getting pre-approved for a mortgage. A pre-approval opens doors as it shows sellers, realtors and lenders alike that you’re able to secure a mortgage to cover the cost of the home. Gather the necessary paperwork (T4s, bank statements, proof of income, etc.) and contact your local mortgage broker to see if you can get pre-approved, and for how much.

To read more about the pre-approval process, read a recent post here.

Consider closing costs

Just as the down payment is a necessary cost to think of, so are closing costs! Unlike the down payment, however, this isn’t one simple payment. Closing costs include legal fees, land registration, HST/GST, home inspections and appraisals, moving costs, etc.

Do your research on how much you expect to spend and start saving. If you haven’t selected a house yet, you should still be able to come up with an estimate based on your research. As always, highball your estimate to ensure you will be able to cover the closing costs when you buy your first home.

If you’d like specifics about closing costs, check out our post here.

Take advantage of first-time buyer incentives

The next step in buying your first home is to explore government incentives so you can save on buying your first home.

The most well-known incentive is the Home Buyer’s Plan. This allows you to withdraw up to $35,000 from your RRSP to go toward your home. This makes the process of saving for the down payment easier. In addition, you can pay back the money tax-free over a period of fifteen years.

There is also a First-Time Home Buyers Tax Credit which is a $750 rebate for those who qualify. Depending on your province, there are also provincial land transfer tax rebates to consider. Finally, for those who buy an “in-progress” home or do heavy renovations you can claim a GST/HST rebate.

Research local and Federal First-Time Buyer incentives and your future-self will thank you.

Now what?

You’ve successfully navigated buying your first home. Congratulations! You have a down payment, saved enough for closing costs, got pre-approved for a mortgage and found a few home buyer’s incentives. You’ve even visited your local mortgage broker to secure the best lender. You may be asking yourself, what now? 

Buying your first home may look different in a Covid world, but if you have a reliable real estate agent guiding you, there shouldn’t be any major obstacles. If there are open houses that you can attend safely, this is the time to take advantage of them. Get a feel for being in the space and visualize seeing yourself in it. 

The beauty of this day and age is that you can do this via virtual house tours! You may not get a feel for physically being in the space until later in the selection process, but it will still be extremely useful as it allows you to create a mental picture of the space and ask the current owner or real estate agent your questions.

Start with a plan!

Remember, the home you choose now does not have to be your forever home. This takes the pressure off finding the “perfect” home and allows you to focus on the best home for you for the foreseeable future.

So, from making the decision to buy to finally buying that coveted first home, there are many twists and turns along the way. It’s a maze, but one easy to navigate once you’ve done the necessary research and have consulted a professional. Let your mortgage broker help you find the right path by answering all your questions and finding the best deal for you.

If you are looking for help with your mortgage when buying your first home, give me a call at (705) 333-4338 or get in touch with me here!

Customer Service Numbers:

CMHC: 1-800-668-2642
Genworth: 1-800-511-8888
Canada Guaranty: 1-866-414-9109

ATB: 1-800-332-8383
B2B: 1-800-263-8349
BMO: 1-877-895-3278
Bridgewater: 1-866-243-4301
CIBC: 1-800-465-2422
CMLS: 1-888-995-2657
Optimum: 1-866-441-3775
Equitable: 1-888-334-3313
Connect First: 403-736-4000
Chinook Financial: 403-934-3358
First Calgary Financial: 403-736-4000
First National: 1-888-488-0794
Haventree: 1-855-272-0051
Home Trust: 1-855-270-3630
HSBC: 1-888-310-4722
ICICI: 1-888-424-2422
Manulife: 1-877-765-2265
MCAP: 1-800-265-2624
Merix: 1-877-637-4911
Marathon: 1-855-503-6060
RBC: 1-866-809-5800
RFA: 1-877-416-7873
RMG: 1-866-809-5800
Scotiabank: 1-800-472-6842
Servus: 1-877-378-8728
Street Capital: 1-866-683-8090
TD: 1-866-222-3456