October 08, 2021
Five tips for buying your first home
Buying your first home comes with many big decisions. But Poetry Living is here to help. These five tips will help you navigate the process, from when you start looking, to when you’re about to close the deal.
Set a budget
Use a mortgage calculator to determine what down payment and monthly payment you can comfortably afford. For the mortgage payments, make sure you factor in other living expenses related to food, utilities, leisure, children, pets, etc. You’ll want to set a budget that gives you some breathing room. No more than 30% of your gross income should go towards servicing your mortgage debt.
Aim to save about 20% of the total home purchase price to pay down up plus enough to cover closing costs such as legal fees, taxes, and insurance (the Government of Canada has a summary of charges of which you should be aware). Remember, many homes in many Canadian markets today sell for over asking price, so if you begin by looking at the top end of your budget, you may feel squeezed later.
Get pre-approved for a mortgage. This will give you clear picture of how much you can afford and allow you to secure a favourable interest rate months before you buy.
Make a wishlist—for your home and neighbourhood
Think about what you want or need in your house and what you’re willing to compromise based on your lifestyle. You may be willing to live way outside the city to get a larger property, but you may be less prepared for how the commute to your job may wear on you after six, 12 or 18 months.
Here are a few very basic questions you’re going to want to ask yourself. Consider where you’re willing to make tradeoffs:
• How many bedrooms do you need?
• Do you have a strong preference for the style of home? (Detached, semi, town, loft, condo.)
• Do you need a yard?
• What kinds of things do you need nearby and what kinds do you want nearby? Your job, schools, stores, sports leagues, trails, etc.
• How far are you willing to travel to get to everything else?
Don’t do it alone
There are aspects of the home buying process that you simply can’t handle on your own. Closing involves the exchange of legal documents, which involves lawyers. Mortgages require mortgage specialists, etc.
It’s always a good idea to work with a realtor who can help steer you towards the right listings, tell you what kinds of things to look out for, and help answer your questions throughout the process.
You may think that if you’re buying a new build, it may not make as much sense to work with a realtor. But the builders, being the seller, pay the commissions, and the realtor will help ensure you’re getting a fair price and possibly secure upgrades or other perks on your behalf.
For new homes, get everything in writing
New builds are often solid investments. They tend to appreciate faster and they require less in terms of upkeep and repairs. But don’t fall into the trap of thinking a new build means you can avoid other common homebuying steps.
For example, you likely want to get a home inspection to ensure all the promised features are in fact included. You can rely on reputable builders to honour their promises, but when there’s a year or more between the purchase date and the move in date, occasionally things get missed. Written guarantees are binding; verbal ones aren’t.
Take full advantage of first-time homebuyer credits
According to Canada’s Financial Consumer Agency, there are a few different offerings to help first-time homebuyers break into the market. If you’ve begun saving for retirement, the Home Buyer’s Plan allows you to withdraw up to $35,000 tax-free from your RRSPs to put towards your down payment. The First-Time Home Buyer Incentive lends you up to 10% of your home’s purchase price to go toward you down payment, lowering your mortgage and carrying costs (you repay the loan once either the home is sold or after 25 years). You can also claim moving costs and certain credits on your annual tax return, often worth several hundred or thousands of dollars.
Be sure to investigate other local or provincial incentives to help give you a leg up.
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