A first-timer’s guide to

Buying a home

Have you looked at how much rent money you’ve been putting in somebody else’s pocket and have decided you’re ready to look at your options? This guide will help you buy your first home.

Are you ready for homeownership?

So, you think you might be interested, but where do you start? Condo or house? City or burbs? Fixed rate or variable mortgage? Open or closed? What’s an amortization period, anyway?! We’re here to help you get the answers to all your questions. Buying your first home is an incredibly exciting time, and with the right partner helping you, it can be relatively painless, too. A great place to start is with this guide. From helping you understand how much buying a home really costs, to walking you through the entire process right up to moving day, we’ll cover all the stages of homeownership. This is the single biggest investment of your life! We’ll help you do it right.

Here are some things to think about.

1. CAN I AFFORD TO BUY A HOME?
The actual cost of buying a home goes beyond the purchase price and your mortgage payment. Aside from your scheduled mortgage payments, there are several upfront costs involved in the process like closing costs, inspections, appraisals, taxes, maintenance, legal fees, and a down payment. These costs should all be factored into your initial budget.

2. CAN I AFFORD NOT TO?
Think of homeownership as an investment in your future. If you have a stable, secure income, and are ready to start building equity, homeownership is definitely something you should investigate further.

3. AM I READY FOR THE RESPONSIBILITY?
When you own your own home, you can do whatever you want—so go ahead and paint that powder room lime green! On the other hand, you’ll be on your own when it comes to fixing a clogged sink or if your washing machine bites the dust. There’s no sugar-coating the fact that owning a home can be a lot of work. At the same time, there’s a great reward in taking a house and really making it your home.

4. WHAT EXACTLY DO I WANT/NEED IN A HOME?
Are you looking for a home with a yard big enough to plant seven different varieties of kale? Or is downtown condo living more your style? What kind of neighbourhood do you want to live in? Are schools or public transit a consideration? Do you want your home to be move-in ready, or are you willing to roll-up your sleeves and get your hands dirty? Take the time to think about everything you’re looking for in a home—from size, to location, to amenities— and write it all down. Take your list with you when you start looking at homes with your real estate agent. It’ll help keep you on track.

DOLLARS AND SENSE
Your monthly housing costs (including your mortgage payment, property taxes, and heating expenses) should not be more than 32% of your gross monthly income. Your entire monthly debt load (including housing costs, plus all other debt payments like student loans, car loans/leases, credit card payments, line of credit payments, etc.) should not be more than 40% of your gross monthly income.

Things to consider when looking at a potential new home.

LOCATION IS EVERYTHING.
While you can always add on an extra room or even a floor to your home, you can’t exactly change your neighbourhood. Think about the things that are important to you—a big yard vs low-maintenance, rural vs urban, nearby amenities, transportation, etc. Keep these things in mind when you’re exploring different neighbourhoods.

SIZE IS HUGE.
There’s such a thing as not having enough room. But it’s also possible to have too much house. Think about what you need now, but also consider what you may need in the future. Home office? Kids’ rooms? A finished basement? Make a list of the things you can’t live without and take it with you when you look.

KEEP AN OPEN MIND.
Look past the surface. A coat of paint, some new light fixtures, and different furniture can go a long way. The same goes for a house that has been professionally staged: Don’t fall for it! Look beyond the presentation and focus on the structural features— that’s really what you’re buying.

PEEK INTO THE CUPBOARDS AND CLOSETS.
Look up at the ceiling and down at the foundation. Flush the toilets. Turn on the showers. Check out every nook and cranny. If there are unexplained water marks on floors or ceilings, or hasty repair jobs, make note and have your home inspector take a closer look.

ASK A LOT OF QUESTIONS.
The only question you will regret is the one you didn’t ask. Ask questions as they pop into your head. How long did the previous owners live in the house? How old are the appliances? What are the neighbours like? When was the last time the roof was re-shingled? The real estate agent might not know all the answers, but they’re questions worth asking.

TAKE PHOTOS AND VIDEOS.
You think you’ll remember the details, but you won’t. When you get home, print out the photos and make notes on them. List your likes/dislikes and the pros/cons for each. This is a good way to process what you’ve seen and will also come in handy when you’ve narrowed your search down to a couple of possibilities and want to look at them side-by-side.

How does financing work?

PRE-APPROVAL
Getting approved for a mortgage to purchase your first home is a big deal. It’s also a big financial commitment and an emotional decision. The first step to finding your way through the mortgage process is getting a financial institution’s pre-approval on a mortgage amount. This will give you a frame of reference for what you can afford.

It all starts with a pre-approval meeting with a trusted financial institution. We recommend taking documents like ID, proof of address, proof of employment, proof of income, social insurance number, account balances, etc. Click here for a copy of this guide tht includes a full checklist of documents to bring with you to this meeting. This will give the lender information about your overall financial situation, and will help them make recommendations that work for your individual needs.

Your down payment amount will be a big factor in determining your pre-approval amount. Down payments generally start from 5% of the purchase price. The more you can save toward your down payment, the more you’ll save in the long run—we’re talking thousands of dollars.

WHAT EXACTLY IS A MORTGAGE?
A mortgage is essentially a secured loan used to purchase a property. In order to guarantee the repayment of the loan, the property is used as security. This means your lender can take ownership of the property if payments are not made on time.

HOW DOES IT WORK? PRINCIPAL VS INTEREST
Interest on a loan is essentially the “cost” of borrowing money for a set period of time. The borrower (you) pays interest to the lender (a financial institution like us) in installments, along with payments on the principal loan amount. Principal refers to the amount of money borrowed. Together, interest and principal make up your house payments.

WHAT IS A CONVENTIONAL VS HIGH RATIO MORTGAGE?
A conventional mortgage is no more than 80% of the purchase price or the appraised value of the home (whichever is less). The benefit of a conventional mortgage is, if you can save at least 20% of your purchase price, you will save the added expense of having to pay for default insurance, which is required with a high ratio mortgage.

A high ratio mortgage is a loan over 80% (up to 95%) of the purchase price, or appraised value of the home (whichever is less). This mortgage option requires the value of the mortgage to be insured against default by an approved insurer, like the Canada Mortgage and Housing Corporation (CMHC), a federal government corporation, or a private insurer, like Genworth Financial Canada.

You will have to pay a premium for this insurance, which can be paid up front or included in the principal portion of your mortgage. The benefit of a high ratio mortgage is if you are unable to save a 20% down payment, you can still potentially purchase a home.

WHAT ARE MY OTHER MORTGAGE OPTIONS?
There are many different kinds of mortgages. Each feature different benefits or risks by offering different interest rates, flexibility in payment schedules, and options for renegotiation. We will discuss these options with you and answer any questions you may have about choosing the right mortgage for you.

Click here to download a copy of this guide that details the differences between the various mortgage types, a mortgage document checklist, and home financing checklist.