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I’m Thinking About Buying My First Home. Where Do I Start?

Step 1: Speak to your mortgage professional (specialist or broker) and ultimately get pre-approved for a mortgage. A pre-approval lets you know how much you can spend, and can lock you in at the current interest rate for 90 days or more, allowing you to shop with confidence. This is especially important with potential interest rate hike’s, which may impact your mortgage rate and ultimately, your home-buying budget. 

Mortgage rules and regulations (stress test anyone?!) can be complex and confusing, speak to a professional.

Don’t know any mortgage professionals? I’d be happy to refer a wide range of individuals for you to choose from, each with their own unique personalities and abilities.

Is There a “Best” Time of Year To Buy A Home Price-Wise?

Not really. Prices depend on a number of factors like supply, demand and other housing market conditions which can vary greatly from city to city or from one neighbourhood to the next. Rather than season, Months of Inventory (M.O.I) is the strongest indicator of whether the time to buy/sell is right for you.

Furthermore, the number of days a home has been on the market can be the biggest indicator of your negotiating power. If the home was recently listed, the seller will have had less time to test the market and gauge buyers’ response to the price, and will be less likely to negotiate. 

How Much Money Will I Need For Closing Costs?

Closing costs will typically range from 1.5% to 4% of the home’s purchase price. These costs include but are not limited to items such as legal and administrative fees, and are payable on closing. 

You can expect to pay for your home inspection, mortgage default insurance if your down payment is less than 20% of the purchase price, the Land Transfer Taxes, lawyer fees, appraisal fee and property taxes, among other things. Make sure you budget for this! On a $500,000 home, closing costs can range from $7,500 to $20,000. 

Other costs many people don’t take into account are items like the cost of moving, furniture, or that new T.V you had your eye on. Take careful consideration when budgeting for your big move.

Should I Buy A Home Or Continue To Rent?

Buying a home can be a very solid investment.  That being said, renting can also be a better option for some, depending on individual circumstances.  

The main question one should ask before deciding to buy a home: Is my lifestyle suited for home ownership?

Take into consideration the length of time you plan on staying in a home, if you were to purchase.  If the answer is only a year or so, it’s likely the better decision is to continue renting. Does your job require you to be mobile and change locations with little notice?

Ask yourself whether you’re ready to take on the additional “costs & responsibilities” of home ownership. Owning a home requires time, money and care in up-keep and general home maintenance.

Ultimately, buying a home is a great option in many cases, but not always. 

How Much Do I Need For A Down Payment?

The amount of your down payment influences the property you can afford, the type of mortgage you get and whether you need to purchase mortgage default insurance.

Minimum down payment requirements:

For homes that cost up to $500,000, the minimum down payment is 5%

For homes that cost more than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance.

For homes that cost over $1 million the minimum down payment is 20%

For Example: If you purchase a home for $850,000 the minimum down payment is 5% of the first $500,000 or $25,000 and 10% on the remaining portion, in this case that portion is $350,000 or $35,000. For a Total down payment of $60,000

I’ve Listed My Home But It’s Not Selling What Do I Do ?

It’s critical that you list your home for the right price from the outset, in order to attract interest from buyers and generate serious interest in your listing.

As a home owner, do your best to take a serious look at your home without emotion or bias. It’s hard, but try to separate your personal feelings and fond memories when establishing a market value for your home as opposed to a perceived value from an owners perspective.

Much like the price, staging and preparing a home prior to list is paramount to your success. Small upgrades like fresh paint or new trim can make big impact.

The old adage tends to ring true - ‘the two main reasons a home doesn’t sell is because it’s overpriced or it doesn’t show well.’ If you find yourself in a situation where your home isn’t selling, consider reducing the price or cancelling the listing all together and re-listing at your new and improved price.

Ensure your Realtor provides you with: up to date comparable’s, market statistics and recent trends for your area and home type, to establish a market value. Set out a strategy and realistic time-line prior to listing and you’ll be ahead of the game once your property hits the market.

What Does the Mortgage “Stress Test” Mean?

The mortgage rules that took effect on January 1, 2018 require that all mortgage applicants qualify at a rate that’s two per cent higher than your contracted rate or the Bank of Canada’s five-year benchmark rate.

This is to ensure that borrowers will be able to make their mortgage payments should interest rates increase.

For example, this means if you’re given a contracted rate of 4.99% you’ll have to qualify for the mortgage loan at a rate of 6.99% – even though you’ll only pay at a rate of 4.99%

Does A Higher Credit Score Mean A Better Mortgage Rate?

Your credit score is a measure of your financial health.

According to the Government of Canada, your rating “indicates the risk you represent for lenders, compared with other consumers…The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender.”

Thus, a higher rating will typically secure a better mortgage rate, since you’re considered to be more likely to make your scheduled payments.

If you don’t have a great credit score, it would be prudent to take steps towards improving it, especially if you’re considering buying or even renting within the next year. Paying off debt and outstanding bills is a start, but be sure to seek professional financial advice.