8 Step Guide to Buying your First Home
- Peter Gregorian
- Sep 4, 2024
- 4 min read
As a first-time home buyer, it's essential to educate yourself on the steps involved with purchasing a property to ensure a smooth and successful transaction.
Buying your first home is an exciting milestone, but it can also be a daunting process, especially if you're not sure where to begin. Here are 8 key steps involved with taking the plunge into home ownership.
Determine Your Budget
Before you start house hunting, it's crucial to figure out how much you can afford. By considering factors such as your income, credit score, current monthly expenses, down payment, and interest rates you can have a clear idea of what type of home you can afford.
Tip: Using an affordability calculator is a quick and easy way to estimate the mortgage you can qualify for and the additional costs involved in buying and maintaining a home.
Get Pre-Approved for a Mortgage
If budgeting is the homework, think of a pre-approval as the test. Getting pre-approved for a mortgage adds an official stamp on your home-purchasing power.
With a pre-approval letter in hand, you will be able to make offers more confidently on homes that fit your budget and criteria making you a more attractive buyer to sellers. By working with a mortgage agent, you'll also be able to shop around for the best mortgage rates and terms.
Save for a Down Payment and Closing Costs
Working with your mortgage agent, determine how much of a downpayment you need to make the monthly mortgage payments fit your budget. If you haven't quite saved enough, perhaps try speaking with a financial advisor to craft a financial plan to reach your goals. In addition to the down payment, don't forget to budget for closing costs like Lawyer Fees, Land Transfer Taxes, Moving Costs, and Home Insurance.
Note: While downpayments typically range anywhere from 5% to 20% of the purchase price of a home, it's always best, if possible, to put at least 20% down in order to skip paying for mortgage insurance. (P.S. The higher the downpayment, the lower the monthly payment!)
First Time Home Buyer Incentives
Although the First Time Home Buyer Incentive is no longer available, there are a number of new/existing incentives offered by the Federal and Provincial governments to financially help First-Time Home Buyers. These incentives include:
Begin the hunt for your first home!
With the "housekeeping" out of the way, it's now time for the fun stuff! Working within your budget, think about the style, location, number of bedrooms and bathrooms your ideal first-home should have. Determine which of those criteria are wants or needs and think about trade-offs you would be comfortable with:
Are you willing to consider a different area of the city in order to afford a townhome instead of only a condo?
Do you need to have 2 bathrooms?
Is parking necessary or is accessibility to transit routes more important?
Would you consider living in a semi-detached or is it necessary to own a detached?
By working with a REALTOR® who is knowledgeable and conscientious of your wants and needs, it can make the home-buying process much smoother. They will help you find properties that fit your criteria, negotiate on your behalf, and guide you through the paperwork and legal aspects of the transaction.
Make a Competitive Offer
You've toured a number of properties and have finally found the one that ticks the most boxes! Once you find your dream home, your agent will work with you to craft a competitive offer based on recently sold comparables in the area.
In a seller's market, you may need to act quickly and be prepared to make a strong first offer as there will likely be multiple offers on the same property. A strong offer typically includes fewer conditions and clauses in the agreement in order to make the transaction as frictionless as possible. In this type of market, working with your mortgage agent and having a pre-approval ready to go is crucial for moving fast!
In a buyer's market, there is more flexibility to include contingencies to protect yourself and take a little bit of extra time to make a decision. Conditions such as a home inspection, can be included in confidence.
Get a Home Inspection and Appraisal
Before closing on the home, arranging for a professional home inspection can uncover any potential problems with the property and provide peace of mind helping to avoid costly issues down the road. If issues are found, you may be able to negotiate repairs or a price reduction with the seller. An appraisal is also typically required by lenders to ensure the home's value aligns with the purchase price.
Review and Sign the Purchase Agreement
All your diligence in saving, searching and locating a property finally amounts to this moment - signing on the dotted lines! Carefully review the Agreement of Purchase and Sale (APS) with your agent and lawyer. This document outlines the terms of the sale, including the purchase price, closing date, deposit and any conditions. Make sure you understand and agree to all the terms before signing.
Closing on Your New Home
Leading up to closing day, there are a number of things that will happen in the background. Any conditions included in the agreement will need to be successfully completed and fulfilled to your satisfaction. This includes the home's condition checking out, financing being approved, and, if a condo, review of the status certificate by your lawyer.
On closing day, you'll sign the final paperwork with your lawyer, pay any remaining closing costs, and receive the keys to your new home. Congratulations, you're now a homeowner!
Buying your first home is a significant financial and emotional investment. By educating yourself on the process, working with trusted professionals, and staying within your budget, you can make your dream of homeownership a reality.
Ready to begin looking for your first-home? Get in touch with Peter to begin the search!
