Buying a home is one of, if not, THE major purchasing decisions that a person will make in their lifetime, thus making it a pretty daunting process, especially for first time home buyers. This has stayed true over the past 30 plus years of my experience in real estate, however, this purchasing decision has been even more intimidating than ever due to the current climate of the market. So to all first time home buyers, here’s some helpful and prudent advice to consider that will prepare you when buying your first home.

What are some things that first time home buyers should be aware of?

First things first, you have to understand exactly what it is you’re getting into. Are you planning on purchasing an apartment, condominium townhouse or a home? It all depends on the person and their current situation, whether you are a young single adult, a young couple, or even about to start a family of your own. It’s important to first decide on which type of property makes sense for you because there are different factors for each type of property.

For instance, if you are looking into purchasing a condominium apartment or townhouse, it is important to understand that you are not only buying into the property but also interest ,it’s shared interest, liabilities, the (fees), common amenities and rules and regulations that come with the condo unit. You may feel like a condo is a more reasonable and economical purchase, but later realize that there are the expensive monthly condo fees that are associated with it. And maybe you need a condo that provides parking spots with charging stations for an electric car. Also, what comes with condos is the risk of privacy issues. Not to say that all condominiums share the trait of lacking personal privacy, but certain buildings may have restrictions in regards to smoking of any kind, including cannabis, quiet hours that restrict when you can play music, and some may have restrictions on “no pets” rule. It’s very important to make it known to your realtor what you are looking for and ask questions about certain things that may impact your specific needs and lifestyle.

On the other hand, when buying a house, there are other types of questions to take into account. Buying a home is a serious responsibility and you need to be knowledgeable of what goes into maintaining a house, which is quite a bit. But, it is very reasonable and easy to keep on top of if you are prepared. I alway recommend to allow for a budget that not only fits how much you can afford to buy a home, but also for extra incidental expenses, which may include repairs, renovations, and a home inspection which is highly recommended to avoid any surprises and possible latent defects.

How do I get started in the current market?

With the current prices in the housing market, it’s understandable for first time buyers to have concerns about being able to afford and getting into the market sooner than later. The first and most important step before starting the process of buying your first home is to make sure it makes sense. From a financial standpoint, you have to be sure you have savings built up, and maybe have the option of a co-signer to help with the pre-approval of a Mortgage. Keep in mind it’s never too late to start up a tax-free savings account (TFSA) and RRSP accounts to begin and build up capital.

However, if you are in a position where you have built up some savings or are able to have a co-sign, the next question is: how to compete in a competitive market as a first time buyer? 

I should mention here that right off the bat you should go to the bank and get pre-approved, which is where the bank essentially tells you how much you can spend based on several factors such as income, credit score, employment status, and current mortgage interest rates. This determines your budget when thinking about which properties you can afford, but it’s paramount to not rush yourself into a competitive market. This is because in a competitive market you have to anticipate plenty of bids on a single property, pushing you out of your budget. It’s key to not feel like you need to rush into purchasing a home in a bidding war outside your price range. This isn’t like Storage Wars or bidding for something at an auction, a home is one of the most important and largest purchases that you will make in your life, and possibly having the opportunity to own more than one.

Being able to compete in the market is still very attainable even with a smaller budget and lack of leverage in the impending bidding war. Similarly to having a co-sign for your down payment, you can ask someone to be a guarantor on your actual Mortgage, meaning you can be qualified for more money from the bank. So if you are in a position where you have to bid higher, any difference paid out of pocket must come from some other source, such as a gift letter from a parent, relative  or friend, since you can only increase the purchase price by increasing the down payment amount.

Are there any hidden or unexpected costs when buying a home?

There aren't necessarily any hidden costs, but as a first time buyer there are several costs to be aware of, and because of  this, I recommend that you take these costs into consideration for your overall budget for  purchasing a home,and to keep them in mind in the purchase and bidding process. Other important costs to be aware of are closing fees, legal fees, the land transfer tax, legal disbursements, title insurance, and registration of a mortgage. 

A simple tip would be to keep a minimum of 1% of what you purchase for these fees, with the exception of the land transfer tax, which depends on the type of property. Something that is noteworthy is that as a first time buyer, you get reimbursed the land transfer tax from the government.

Final thoughts and recommendations 

All in all, just be patient. Don’t feel overwhelmed by the market and current prices because the market will correct itself and there will always be listings. The more you save, the quicker you can get into the market and go to the bank to get pre-approved,the more you'll be able to afford. It may turn out to be more than you think.. 

Some final things to consider include eliminating extra credit cards if you have a lot of them . By reducing the amount of credits you have, it can help improve  the amount of mortgage you can get.  Also, if you are planning on buying a house and a car, it would be best if you buy the car after obtaining a mortgage. This is because the car debt will go against purchasing power when the bank calculates your pre-approval. The other option would be to pay off the car before buying a home.

If you are currently in the process of buying your first home, don’t stress out and contact an Experienced and seasoned realtor like myself for assistance in guiding you to your home. Head back over to my Contact page and I would be more than happy to answer any questions or concerns you may have.

Disclaimer: The reader acknowledges that any of the above information provided by Peter Racco, Broker with Royal LePage Elite Realty, Brokerage includes suggestions in industries outside of real estate, such as; legal advice, tax advice, and mortgage/ financial planning. To all readers, any topics discussed outside of real estate should be consulted with any such professional advisors prior to engaging in any written Real Estate agreement.