How to Buy a Home: A Step-by-Step Guide for First-Time Homebuyers
So, you want to buy a home, but you don’t know where to start. Don’t worry: we’ve got you covered. Here’s a no-nonsense guide on how to buy a home for the first time, step by step.
#1 Save for a down payment.
Before you can even consider buying a home you’ll have to save some money for a down payment. The minimum down payment in Canada for properties under $500,000 is 5%. If you’re buying a pricier house, you’ll be required to put down 5% on the first $500,000 and 10% on the remainder. If you put down less than 20%, you’ll be required to purchase mortgage default insurance, which is between 2.8 and 4% of the purchase price.
#2 Get Pre-Approved.
Make an appointment to get pre-approved for a mortgage. The amount of home you can afford will be based on your down payment, your annual salary, and your credit score. (What is a good credit score, you ask? Anything above 700 is good, above 800 is excellent). Tips for first-time homebuyers who are self-employed: because your income may fluctuate, you’ll be required to turn over your tax returns from the past two years. Remember to shop around for mortgage rates.
#3 Do Some Research.
It’s always best to do a little bit of research before you dive headfirst into looking for homes. Now that you know how much you can afford, you’ll want to see what neighborhoods and what size of home works with your budget. With a $500,000 budget in Canada, you might be able to afford a one-bedroom condo in Toronto or Vancouver, but a four-bedroom house in the suburbs of a more affordable city like Montreal. Websites like Realtor.ca or HomeSigma are most helpful.
#4 Hire a Real Estate Agent.
There are more than 100,000 real estate agents in Canada. So hiring the best one for you may seem overwhelming. Recommendations from family and friends goes a long way here. Also, be sure to hire your sister’s realtor who helped buy her home in the suburbs two hours away. Going to open houses or viewing virtual tours in the area you’re looking is a good way to meet realtors too.
#5 Go Shopping.
Although everyone says this is the “fun part”, it can also be exhausting and stressful. If your buying a home by yourself, have a person on speed dial to help talk you through any pros and cons. Also, try not to get too emotionally invested in any particular house, especially if you live in a large city that is prone to bidding wars (it’s one of the mistakes first-time homebuyers often make). When you’re shopping around, remember to think about repair costs. If a home you love needs some renovations, you have to factor this into the overall price.
#6 Make an Offer
If you make an offer and it is accepted: congratulations! But your home buying journey doesn’t end there. Most offers have conditions in them before the deal is done. One is a home inspection (that will cost you $400 to $500, as your realtor I have several home inspectors I can introduce you to). There’s also financing (if you’ve been preapproved, then you don’t have to worry about this; but your lender will still want to send an appraiser to ensure it’s actually worth how much they’re loaning you). You may also ask to view a Property Condition Disclosure Statement – this is a form that the current owner has filled out telling you what he knows about the house.
#7 Budget for Closing Costs
Don’t forget that you’ll need to budget for closing costs, specifically lawyer’s fees (that will cost you around 1 to $2000) You will also incur some moving costs, and connecting your gas, electricity, water, and internet may also require a deposit. However, there are benefits for first time home buyers, such as the homebuyers plan, first time home buyers tax credit, and first-time homebuyer incentive.
#8 Remember the Details
Before you move into your new home, you’ll need to remember to hire a mover, purchase home insurance, change your mailing address and update the contact information for all your incoming bills (such as the power company and property management company if you’ve bought a condo). Your lawyer will handle updating the information for your property taxes.
We have identified a host of information, if you have some questions please call me at 306-280-0989.
Thank you, Terry Alm
Credit for this information goes to Jennifer Foden