As the real estate market continues to thrive, you might be considering buying your first home this year. You’ve been reading about low interest rates and rising prices, and you think it’s best to jump in now.
You might be correct! The question is, are you ready?
It can be hard to know when you’re truly prepared to commit to home ownership, especially if you only have experience renting. If you’re currently renting, you can check out this blog we wrote earlier this year, which will help you decide if you should cross the bridge into home ownership!
If you’ve determined that buying is the right move for you, there are some items you need to have in place. It’s time to get ready to buy your first home!
Budget
Obviously, your budget will be a massive part of buying your first home. It would be best not to look at homes until you determine your price range. There’s no point exploring homes you can’t afford or facing the disappointment of falling in love with a home you can’t have. So, what is your budget?
Your budget of course depends on your income and your expenses. Consider how much money you have each month after you deduct your expenses, and this will help you figure out how much you can afford for a mortgage and save for your down payment. There’s no one-size-fits-all answer, so it’s up to you to work out your finances. However, there’s a general rule that you shouldn’t spend more than 39% of your income on housing costs, such as mortgage payments, taxes, and heating costs.
Need a hand working out your budget for 2021? Read this post for some tips on maintaining money goals this year.
Pre-qualification
To buy your first home, or any home, you should get pre-qualified for a mortgage. This is an important step in the home buying process that many people might overlook. A pre-qualification is when a broker collects your supporting income information – often T4s and paystubs – to give you a rough idea of the mortgage you might qualify for. Keep in mind this is not a guarantee of a mortgage! However, it does put you a step ahead in knowing what you can afford.
Set up your pre-qualification appointment early. This way, you’ll have a clearer idea of your financial situation before jumping headfirst into the process of buying your first home.
What you need in a home
When you buy your first home, you need to think about what that home should provide. Consider the area you want to live in. Is it important to be near schools? Do you want to be in an older or a developing neighbourhood? Of course, you should also consider the type of home you want to live in. For example, a condo search will look much different from a detached house hunt. Be as specific as you can with your needs, so it’s easier to narrow down your choices when the time comes.
Questions you should ask
Some of the questions you should ask a mortgage broker may have never occurred to you. Consider these:
- What are the additional costs of buying a home? (Appraisal, land transfer tax, etc)
- How big should my down payment be?
- What are the penalties for breaking my mortgage early?
- In 2021, is a fixed-rate or variable-rate mortgage better?
These are all items you should be aware of when buying your first home. Your broker will be happy to guide you through the process. Sometimes it is a case of ‘you don’t know what you don’t know,’ so don’t be shy about asking your broker what questions you should be asking!
Act now
It’s important to get started sooner rather than later. A recent report from Urbanation shows Toronto’s rental vacancy rate is at its highest point in 50 years. With people leaving urban areas due to the pandemic, we’re seeing supply issues in smaller cities like Barrie. Competition is increasing in these areas. Acting early can mean you get the home you’re looking for, while delaying might mean you miss your chance to get into the market. This is a common theme lately, so if you’re actively looking to buy in 2021, you should get started. The market moves quickly, so it’s best to get ahead!
Buying your first home is an exciting, and maybe scary, process. Entering the market in 2021 is unlike past years, and we’re seeing new trends all the time. However, what has stayed the same is the importance of speaking to an unbiased mortgage professional!
If you’re ready to buy a home and get started with the mortgage process, I’d be happy to help. Get in touch with me here!