First Time Buyers
Let me help you buy your first home!
Work with a local mortgage broker to understand your options at this important stage in your life.
I have helped hundreds of first-time home buyers over the years and will provide you with all the information, sound advice, and assistance you need every step of the way.
Below is a list of topics you'll want to read over as you plan what may be your largest purchase ever. If there's anything you're unsure about, please don't hesitate to contact me. I am prepared to do what I can to help make things proceed smoothly, quickly, and effortlessly.
- First-Time Home Buyer Programs
- Mortgage Pre-approval
- Selecting the Right Mortgage
- Choosing a Realtor
- Making House Hunting Fun
- Making an Offer on a Home
First-time Home Buyer Program
First-time home buyer programs are designed to assist individuals who are purchasing their first property. These programs aim to make homeownership more accessible by providing special incentives tailored to first-time buyers. Here are some key programs available in Canada:
Home Buyers' Plan (HBP): The Home Buyers' Plan allows first-time buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) tax-free, which can be used as a down payment or to cover other related expenses. Learn more about this plan on the Government of Canadas website>>
First-Time Home Buyer Incentive (FTHBI): The FTHBI is a shared-equity program offered by the Canadian government. It allows eligible buyers to finance a portion of their home through a shared equity mortgage with the government. This helps reduce the monthly mortgage payments and makes purchasing a home more affordable. Learn more about this plan on the Government of Canadas website>>
First Home Savings Account (FHSA): A First Home Savings Account allows you to contribute $8,000/year, with a maximum lifetime contribution limit of $40,000. This allows for tax-free savings, meaning it's non-taxable, just like a TFSA. Learn more about this plan on the Government of Canadas website>>
To take advantage of these programs, it's important to research and understand the eligibility criteria, application process, and any limitations or conditions that may apply. You may need to meet specific income thresholds, purchase price limits, or residency requirements.
When buying your first home, the first step is to talk with a local mortgage broker to review your current income and expenses. Securing a mortgage pre-approval with a broker will allow you to get an idea about how much mortgage you will qualify for, so you can have a price range in mind when you look at different properties.
Mortgage brokers determine affordability by examining your Gross Debt Service ratio (GDS) and Total Debt Service ratio (TDS). The GDS ratio is based on what you can afford to pay each month; it includes mortgage payments, taxes and utilities. The TDS ratio includes everything covered under GDS plus all your other financial obligations. Before you're pre-approved, a mortgage broker will also pull your credit bureau report and ask for written confirmation of income and how much you plan to put down on your purchase.
Once you're pre-approved, the interest rate may be guaranteed for 120 days from the time of your application. If rates drop, you'll get the lower rate; if they rise, you're covered. And just because you are pre-approved by a certain lender, you're not committed to that lender. I'll continue to shop the market to get you the deal that suits your needs!
Selecting the Right Mortgage
Choices in selecting a mortgage include:
Conventional vs. Insured Mortgages
A conventional mortgage is a mortgage that has a principal amount that is no more than 80% of the appraised value or purchase price of the property, whichever is less. Meaning you have a 20% down payment available. The principal amount of an insured mortgage is usually more than 80% of the appraised value or purchase price. Meaning you have less than a 20% down payment. An insured mortgage may also be referred to as an NHA or high-ratio mortgage because it may be entered under the provisions of the National Housing Act and must be insured by law. The borrower pays an insurance premium that is included in the mortgage. Learn more about insurance premium costs>>
Short-term vs. Long-term
The term you select is important. Short-term mortgages are appropriate if you believe interest rates will be lower at renewal time or you plan to sell your home at the end of the term. Long-term mortgages are suitable if you feel current rates are reasonable and want the security of budgeting for the future. This may be especially important for first-time homebuyers. Typically first-time home buyers choose a 5-year term.
Fixed-rate vs. Variable-rate
You can choose a fixed or variable interest rate. A fixed-rate mortgage makes it easier to budget for whatever term you select. A variable rate mortgage fluctuates with the market.
Lenders vary in their pre-payment privileges, which let you pay down your mortgage faster. A mortgage broker can discuss your pre-payment options based on the mortgage you select.
Another option to consider is portability, which may help ensure you have financing if you sell your original home and purchase a new one. You may also wish to consider whether the buyer may assume your mortgage if you sell your home. This can be a major advantage if your mortgage rate is below current market rates.
Choosing a Realtor
Choosing the right realtor can help ensure you get the right house at the right price. You want a real estate agent whose attitude and availability inspire your trust. Start by seeing who's most active in your neighbourhood. An agent who makes regular sales calls and keeps you informed of listings and sales in your area probably pursues business aggressively.
Set up appointments with a few agents from different companies and assess their presentations. Are they prepared? Have they done their homework in advance? Work with someone you relate to, with whom you have some chemistry, and who offers excellent service and value.
I work closely with a few trusted local real estate agents and can provide you with recommendations to ensure you are working with a true professional.
Here's a checklist of some questions to ask potential realtors before deciding which is right for you:
Qualifications: Ask to see a personal brochure or resume. Look for experience in your area, your price range, and letters of reference.
Full-time Realtor®: Ask if this is their full-time career and whether they're committed to it in the long term.
Track Record: How many properties have they sold in the last 3 months? How do they rank among peers? How many current listings do they have? What has their ranking been over the last 5 years? Where does their real estate company rank in sales and market share?
Strategy: Ask how they'll approach your home search. Will they only rely on MLS listings, or do they have other sources of homes to show you? Are they willing to change their strategy to adapt to market conditions?
Price Negotiation: What's the current selling price versus the asking price in your area and the current market? Is their personal sell vs. ask price better than average?
Viewing Appointments: Do they prefer to pre-book viewing excursions, or can they show you listings as they become available?
Find a real estate agent whose attitude and availability inspire your trust. Start by seeing who's most active in your neighbourhood. An agent who makes regular sales calls and keeps you informed of listings and sales in your area probably pursues business aggressively.
Making Home Hunting Fun
There's no shortage of information to help you make an informed purchase decision. Lenders, as well as CMHC, Mortgage Professionals Canada, RECA, and the Canadian Home Builders' Association, among others, have information to make home hunting stress-free and fun. Visit their websites for more information.
Take the guesswork out of shopping for a home by taking advantage of the professional resources available to guide you through the many choices available when purchasing your first home.
Making an Offer on a Home
Once you have found the perfect home, your real estate agent will help you write and negotiate an offer. Once the offer has been accepted by the home sellers, a copy of it needs to be sent to the mortgage broker to finalize the mortgage approval. There will be conditions, including a finance condition, written in the offer that is typically 2 weeks. Getting all the information your mortgage broker requires during this timeframe is essential. Many steps are involved, but I will keep you updated during the process. Once a lender approves the mortgage, you can remove your finance condition. Your real estate agent and lender will send documents to your lawyer to close the transaction.
At this time, the purchase price balance will be exchanged for the keys to your home, and closing documents will be exchanged. Your lawyer will register the title transfer and the mortgage. Finally, you pick up the keys to your new home!