Congratulations on making the decision to buy your first home. Home ownership can be a great investment and exciting adventure. Here are some of the important steps you can expect to take as you head down the pathway to your first home.
1. Determine what you can afford
Figuring out how much home you can comfortably afford should be #1 on every Buyer’s to-do list. Understanding monthly mortgage payments and other costs associated with home ownership can help to focus your search and set you up for a greater chance of financial success in the long run. There are many different tools available online that can help you determine how much house you can afford. Online mortgage calculators can give you a rough estimate of what size mortgage you will be approved for. I recommend meeting with a qualified mortgage broker to help you determine how much house you can afford and to help you negotiate the best possible mortgage terms once you find a house you want to buy. Figuring out how much home you can afford and getting mortgage pre-approval shows your Realtor and Sellers that you are serious about the process!
2. Set aside a down payment
First-time home buyers have the option to save specifically for their down payment or borrow the money from their RRSPs. Buyers are typically required to have a down payment that is at minimum 5% of the total purchase price of the home. If a Buyer is able to put down more than 5% of the purchase price, it can help to secure a mortgage with better terms and, if the down payment is high enough, can avoid mandatory CMHC mortgage loan insurance. CMHC mortgage loan insurance is required if you buy a home with a down payment that is less than 20% of the purchase price. Talk to your financial advisor and your mortgage broker to help you determine what type of down payment is best for your personal financial situation and the impact that various down payment amounts will have on your mortgage.
3. Hire a Realtor
Do not hire the first Realtor you come across. Take the time to ask your friends and family for referrals and do a little research online. Realtors have different credentials and areas of expertise and it is important that you hire one who is qualified to meet your needs. Interview a few different Realtors to find one that you get along with and who really listens to what you have to say. Here are some questions you can ask potential Realtors.
- Tell me about your background and qualifications.
- Is this your full-time job?
- What type of Buyers do you typically work with?
- What is your availability for showing me homes?
- How will you determine which homes you show me?
- How many homes did you help Buyers purchase within the last year?
Helping someone to buy a home requires a different set of skills and expertise than selling a home. Look for a Realtor that has earned the Accredited Buyer’s Representative (ABR®) designation. Click here to learn more about the ABR® designation.
4. With your Realtor, put together your wish list
This is an important step that many Buyer’s do on their own. The benefits to including your Realtor in this process are two-fold. It can help your Realtor to better understand exactly what you want in a home and what your non-negotiables are. It can help you to determine what features are really important to you and identify areas where you are willing to be flexible. Your wish list should include items such as the location and size of the home as well as special features that are important to you.
5. Determine what type of home ownership is best for you
There are several types of home ownership and each has their own unique advantages and disadvantages. Together with your Realtor, review the features and benefits of freehold, leasehold, condominium, and co-operative home ownership options.
Buying your first home is exciting and it can be a little overwhelming. By taking the 5 steps outlined above, you will help to ensure that your experience is a positive and successful one! If you have any more questions about first-time home ownership, please feel free to contact me for more information.