First Time Home Buyers
Buying your first place is an exciting time, but it can be a little scary, too. After all, it’s probably one of the biggest purchases you’ll ever make.
Here’s a guide that can help you buy smart:
Get pre-approved for your mortgage
Obtaining a pre-approved mortgage will give you the confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest rate increases while you look for your new home. It’s also a good way of finding out how much you can borrow – and it speeds up the process once you’ve found the home you want to buy. Once you do find the perfect home, it will mean you can make an offer immediately. It makes you a “cash buyer” in the seller’s eyes.
Here’s how a mortgage approval works: the amount of money you qualify for, plus the amount of cash you can put down equals the amount you can afford to spend on a home. Most lending institutions won’t allow more than about 30% of your income to support a mortgage. If you have other debts, they usually won’t allow your debts and your mortgage to exceed 40% of your income.
Type of home
Figure out what type of home is right for you. Sit down and make a list of must-haves and nice-to-haves. Be realistic, but be clear about the features you can’t live without. How many bedrooms do you need? Bathrooms? Do you need a home office? A garage? How about a big backyard? Hardwood floors? Eat-in kitchen? Consider your lifestyle and your stage of life. If you’re planning for children in a year or two, the studio loft might not be your best bet.
Where you want to live
Decide where you want to live. Living in an area you like is as important as buying a home you love. Do you want a busy urban lifestyle, a house in the ‘burbs, or a quiet place in the country? Do you want to walk to work or are you okay with a longer commute? Do you need to be close to good schools? Recreation facilities? Shopping?
Talk to your REALTOR® about your needs and then start looking at properties. Go to open houses. Visit mls.ca. Check the classifieds. Drive around neighbourhoods you like looking for “For Sale” signs.
Work with the experts
Put together the right group of experts to help you buy. Start with a REALTOR® you trust, then look for a reputable lender or mortgage broker, a lawyer (or a notary in Quebec), a home inspector and an insurance broker. Your REALTOR® works closely with all of these professionals, and will be happy to recommend people you can depend on.
Make an offer
You’ve found the perfect place – now it’s time to make an offer. An offer to purchase includes the purchase price you’re offering, chattels to be included in the purchase (like appliances or light fixtures), the amount of the deposit, the closing date and any other conditions. Your REALTOR® will help you prepare your offer, and will present it to the vendor, who will either accept it or make a counter offer (which asks for a higher price or different terms). You can accept or reject the counter offer. If everyone agrees, the home is yours. If not, you can make another offer, or you may have to keep looking.
Get a mortgage
Once you’re approved, you’ll need to decide what type of mortgage works best for your needs. Will you go with a fixed or variable interest rate? Will your mortgage be closed or open? What will your amortization period be? Will you make payments monthly, biweekly or weekly? Your mortgage broker or lender can help you find a mortgage that suits your needs – and saves you the most money in the long term.