First Time Buyers

First-time buyers plan: 8 steps to buying smart

So you've decided that the time has finally come to become a homeowner. Buying your first home is an exciting project, but it can also be a source of anxiety. After all, it's one of the biggest expenses of your life. Here's a step-by-step guide to help you buy smart:

Step 1: Figure out how much you can afford.


Falling in love with a house you can’t afford can be heartbreaking. Avoid disappointment by figuring out your budget before you start looking.
 
  • First, decide how much you can afford for your down payment. The Home Buyers' Plan (HBP) allows you to withdraw up to $60,000 from your Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home. You must be a first-time home buyer or buying for a disabled person. The withdrawn amount must be repaid within 15 years. More on that here. In addition, the First Home Savings Accoun (FHSA) is also a very attractive option and a valuable resource for first-time buyers. This account allows you to withdraw an additional $40,000. For more details, click here or consult a mortgage expert. The bigger your down payment, the less principal you will owe, and the less interest you will pay.
 
  • Don’t forget about closing costs, like insurance, legal fees, home inspection costs, land registration and land transfer fees. Add those to your moving expenses and service hookup fees, and they can add up surprisingly fast.
 
  • Your monthly housing expenses (mortgage, taxes, heat, etc.) shouldn’t use up more than 32% of your income. (If your combined monthly income is $5000, for example, 32% of that is $1600.) If you have car payments or credit card debt, the rule of thumb is that debt repayment shouldn’t be more than 40% of your income.
 
  • Get pre-approved for your mortgage. It’s 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.

Step 2: 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 want 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 kids in a year or two, the studio loft might not be your best bet.

Step 3: 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? Rec facilities? Shopping?

Step 4: Start looking.

Go to open houses. Visit centris.ca. Check the classifieds. Drive around neighbourhoods you like looking for For Sale signs. Talk to your real estate agent about your needs and start looking at properties. If we work together after understanding your needs and which features are an absolute; I'll sort through the properties already in place and those being displayed daily to advise you which ones best match your ideals.

Step 5: Build a team.

Call on the professionals who can help you buy wisely. First find a realtor you can trust, then look for a reputable lender or mortgage broker, a lawyer (or notary, if in Quebec), a building inspector and an insurance broker. Since your realtor works closely with all these professionals, it will be my pleasure to refer you to reliable people.

Step 6: Make an offer.

You've finally found the property that's right for you - it's time to make an offer. An offer to purchase should specify the price you're offering, the furnishings included in the purchase (such as appliances or light fixtures), the amount of the down payment, the closing date and any other conditions. It's especially at this stage that the work of a real estate broker is important. In the offer to purchase, you need to make sure that the deadlines for occupancy of the house, the building inspection and the notary's office all correspond to a timeline that makes sense. You need to make sure that all the conditions you need as a buyer are met (for example, verification of leases for income properties, or a water, pyrite or ferrous ochre test, if necessary).

Your realtor will help you prepare your offer to purchase. He or she will present it to the seller, who will either accept it or make a counter-proposal (a higher price than the one you offered, or changes to the conditions). You can then accept or reject the counter-proposal. If everyone agrees, the house is yours. If not, you can either make a new offer, or keep on looking.

Step 7: 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.

Step 8: Move in and enjoy!

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