Entering the market as a first-time home buyer? New buyers have experienced a couple years of poor luck trying to break into the market. However, now is perhaps a better time for many new buyers to make their move. Although we are dealing with higher interest rates, housing prices are lowering, making homes potentially more affordable for those who have been saving and looking for a chance to purchase. Even as the market shifts more in favour of buyers, the process can still be tricky without proper preparation, especially for a first-time home buyer. Here are some things to keep in mind if you’re a new buyer hoping to purchase your first home soon.
What’s going on in the market today?
Let’s begin by discussing the current state of the real estate market in Barrie. Like many other parts of the province and the rest of the country, Barrie is experiencing a cooldown. This means homes are selling for lower prices than they were earlier this year. Many markets hit their peak back in February. According to Zolo, the average price of a home in Barrie is currently $772K. This is a big drop from the February peak price of $951, 652 (according to the Barrie & District Association of Realtors). Homes are spending about 26 days on the market, and selling for about 96 per cent of their listing price. All of this means that homes are selling for less, and are spending more time on the market, signaling a drop in demand. With that drop in demand comes a boost in supply, since fewer buyers are searching for a home. For a first-time home buyer, this presents an opportunity to enter the market that may not have been available before.
Know the importance of being pre-qualified
For a first-time home buyer, and for any buyer, getting a mortgage pre-qualification is an essential part of the process. If you’re new to the real estate world, a pre-qualification is an informal estimate a Broker gives a borrower on the mortgage amount they may qualify for. Your Broker will take a look at your income, expenses, and credit history to determine whether or not they feel a lender would be willing to finance a mortgage based on that specific situation. This means if you are pre-qualified, a lender may finance your mortgage if your situation stays the same. It’s not a promise of mortgage financing, but it does introduce you to lender options and gives the Broker a lot of the information they would need from you later in the process. This means the approval process will be quicker down the road. A pre-qualification also allows you to take a look at your situation and see if you need to improve it, whether that means reducing your debt or raising your credit score. Finally, it gives you an idea of the budget you will be working with, which is important for when you’re actually viewing properties.
Have an accurate budget
Budgeting is perhaps one of the more stressful parts of being a first-time home buyer. It’s your first time making such a huge purchase, so it’s hard to know how to calculate the right budget. While every new buyer’s budget will vary, there are some general tips that serve everyone. First, of course, you need to calculate how much money you’re bringing in once your other expenses are spoken for. While you’re not paying for the entire home at once, you need to cover monthly mortgage payments, and utility and property costs. A good rule of thumb is your total debts, including housing and other expenses, shouldn’t exceed more than 40 per cent of your monthly income. Work out what number that gives you for your purchasing power. Try not to view homes outside your budget. You don’t want to fall in love with a home you can’t afford and find you’re unhappy with the properties in your price range. It’s very important to stick to your budget to avoid becoming house poor.
Consider your housing needs
Before you go out to view properties, make a list of your housing requirements. This includes the property type you’re looking for, such as a detached house, a townhome, or a condo. Narrow down your preferred location, and what amenities you need to be near. Think about property size and number of bedrooms to accommodate your family. Some things are non-negotiable. For instance, a one bedroom condo if you have two children is likely just not going to work for you. Other things might be more flexible, like the specific neighbourhood or whether the property has a pool. Being specific will help you narrow down and speed up your search. Be realistic about your requirements, and remember this is your first home, so it’s likely not your forever home. Entering the market by purchasing a starter home is a great way to build equity and gain leverage in the housing market, allowing you to purchase a bigger home down the road.
Use professional help
Finally, don’t try to buy your first home without the help of professionals. As a first-time home buyer, you are new to mortgages and real estate, and there are several people in the industry who will make your experience easier. Real estate agents are essential for finding properties, submitting offers, and negotiating on your behalf. Mortgage brokers (that’s us!) will help you find the right mortgage lender with a product and rate that supports your situation and needs. Home inspectors ensure your new property has no safety issues, appraisers confirm the value of the home, and lawyers ensure your purchase agreement is correct and fair. You should have a good understanding of how each person can help you on your buying journey.
Being a first-time home buyer can be stressful, but we’re here to make it simpler. With a proper understanding of your purchasing power, your budget, and your housing needs, you’ll be well on your way to finding the right home for you.
If you have any questions about your mortgage, get in touch with me!