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Real Estate: Tips for buying your first home in Canada

Buying your first home is an important step in your life. However, this is a delicate and difficult process to implement. It’s all in the details and you have to know each step like the back of your hand.

Here are some tips for first-time buyers who are ready to make the move to homeownership.

Have the house inspected before you commit

A home inspection is absolutely essential, especially if you are buying an older home. The inspection ensures that the structure and mechanical systems of the property are sound and in working order. The inspector will evaluate the property for potential problems and provide you with a final report on which you can comment.

It’s often a good idea to make the property report an essential part of your offer on the property. This allows you to take advantage of an exit clause if the report has very negative aspects that put you off.

Tip: Use a reputable home inspector and make sure he or she examines every detail of the house. This includes the roof and crawl spaces that are beyond the reach of any normal property tour.

Get home insurance

Your lender will often require you to purchase home insurance before you close on the property. They require it as a safeguard for the asset they are lending you money for.

Home insurance covers the cost of any damage to the property caused by events such as flooding, theft or vandalism. Most types of insurance also cover the entire contents of the property.

Try to apply for more insurance than you think you need. You don’t want to be in a situation where your house fire causes $500,000 in damage, but you only have $250,000 in insurance.

Do not exceed your budget!

Just because the lender offers you the money doesn’t mean you have to accept it. Taking on a mortgage that is well outside your comfort zone can lead to regret and financial problems.

Try to keep your monthly mortgage payments below 28% of your pre-tax income. This is not something the lender will consider, but it is a general budgeting tool that will keep you within your budget.

It is especially tempting to go over budget when you are in a bidding war with another buyer. This is when it is important to stay calm and think logically rather than with your heart. There are many properties on the market, and going far beyond your budget can lead to resentment and regret.

Visit many different properties

Visit as many properties as you can. Even visit properties that you might not have thought were the type of home you want to buy. Visiting as many properties as possible allows you to really understand what you like or dislike, and what you want or need.

Thinking about what we want in our ideal property can be fairly simple and easy, technically, but there are often factors we don’t think about until we see them in person. For example, you may not have thought about whether or not outdoor space is essential to you, but then you visit a property with no private outdoor space and suddenly realize how much you want it.

Since COVID, online virtual tours have become more popular. Unfortunately, these tours don’t really give you a clear picture of a property, but they are a great place to start if your local real estate agents don’t hold tours or open houses.

Open your senses when visiting properties and understand and appreciate all the quirks and unique aspects of each property. Listen for any noise, pay attention to any concealed damage or breakage, and ask lots of questions if you have any.

Make sure you fully understand your mortgage options

It’s easy to take out a mortgage blindly when you’re in love with your dream property. It is always recommended that you discuss your mortgage fully with your lender or broker and understand the ins and outs of the contract.

You need to consider basic factors such as prepayment fees, the length of the mortgage, and the type of mortgage you have and its consequences.

A mortgage broker will probably be less biased and open about the pros and cons of each type of loan and will explain all the specifics of your contract.

Be aware of your surroundings

Sometimes the perfect home can become a nightmare if it’s in the wrong neighborhood. It is always recommended to take a drive and/or walk around the neighborhood before making an offer on a property. Consider even coming back in the evening, or even at night, because an area that looks perfect during the day can be the complete opposite at night.

It is never advisable to judge a book by its cover. However, you can usually get a good idea of what the neighborhood looks like by observing it.

Find out if first-time buyer assistance applies to you

Many regions offer first-time buyer assistance, which can help you if you’re struggling to get into homeownership.

Normally, these programs offer low-interest mortgages and provide some assistance with your down payment, either by allowing you to have a smaller down payment or by replenishing it. There are also tax credits for some first-time buyers.

It’s a good idea to make an appointment with a mortgage broker in your area, as they will know exactly what assistance is available for first-time buyers.

Improve your credit rating

Your credit score is one of the main factors that determine whether you are approved or rejected for a mortgage and at what rate. There are simple steps you can take to ensure that your credit score is as high as possible when the lender reviews your credit report:

  • Look at and understand your dossier de crédit. You can access it free of charge and determine the aspects that could lower your rating. The most common providers of these reports are Experian, Equifax and TransUnion. There may also be errors in your credit score, which you can report.
  • Make sure you pay all your bills and loans on time. If you have a credit card, make sure it is paid off each month and keep your credit use to a minimum.
  • Closing a credit card can actually lower your credit score, believe it or not. Even if you do not use the card, do not contact the credit card company to close the account. If you must use it, purchase a small item each month with the card.

How much can you afford?

Many first-time buyers overestimate the amount they can actually afford to buy.

It’s always a good idea to sit down with the lender, or a mortgage broker, to discuss your current financial situation and determine exactly what you can afford to spend each month on a mortgage – as well as how much you could be approved for.

There are also many online affordability calculators that can be used to determine a price range you can afford based on your income, debt load and available down payment.

Start saving sooner rather than later

There are three main categories you will need to pay for when you buy your first home: down payment, closing costs and move-in costs.

The down payment must be at least 5% of the value of the property you are buying. Therefore, if you are buying a $300,000 property, the down payment required could be $15,000. However, there are currently some options for first-time buyers with good credit histories that allow for a down payment of only 3%.

There are many online down payment calculators that can be used to determine exactly what you will pay.

There are costs associated with buying the property, such as legal fees and home inspections. You can probably estimate these fees to be around 2% for simple properties or up to 5% for more complex properties, depending on the value of the property.

Finally, you cannot move into an empty home and carry all your belongings yourself. There are costs such as moving expenses, new furniture, small repairs or changes you can make to the property. People often spend thousands of dollars in the first few months of moving into a property.

Try to think logically rather than emotionally

It’s hard not to think with your heart when buying your first property, but unfortunately, that’s not always the best approach to buying the right home for you. We often look at things through rose-colored glasses when we first visit properties and overlook obvious problems that would not otherwise have been missed.

When you visit the properties you are interested in, have a plan of action and a series of “yes/no” questions. This tactic can really help you find the perfect home for you. Simple questions like “Do the walls need repainting?”. It may seem simple, but redecorating can be expensive, and understanding all of your needs and wants when you are looking for a property can really benefit you.

Come to discuss that topic in our Facebook Group!
Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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