5 Smart Strategies For First-Time Home Buyers

When considering one of your life's biggest purchases, it is crucial to do your research and be ready. It is not only about what you can afford now, but how you will be affected long-term, whether that is if a baby comes along, a drastic career change occurs or a major repair for the house is needed. The fact is many things happen at the most uncalled time and in today's post, we are here to help prepare you for your first home purchase!

1. Get a Pre-approval

Mortgage calculators are a wonderful way to get a rough estimate of what you can afford. If you're curious as to what you can afford, use our mortgage calculator readily available on our website, which provides a thorough breakdown! There are five things to factor in when using a mortgage calculator: income, expenses, down payment, insurance and much more!

Although the mortgage calculator is great, it is best to consult an expert before shopping as they understand how mortgages work and can give you a true and specific breakdown of what you actually qualify for. Mortgage brokers consider all factors that are both minor and major, which can affect your pre-approval significantly. A few things they consider during the mortgage approval include the credit score, a close analysis of your income and the down payment (i.e., where are the funds coming from or how much down payment can you put down etc.). 

Another thing to keep in mind is just because you're approved to buy, doesn't mean that the lender may agree. That is, the lender must approve of the deal before advancing the mortgage funds. It is important for the lender to run the numbers on the property you've made an offer on so you can spend with confidence. The lenders always ensure that the amount you are spending your money on is worth the purchase price of your home/condo. If you're like Harris Does Homes and are experts in mortgages, then we can help you buy with confidence and get approved on almost anything! 

2. Understand What Is Going On 

First-time buyers tend to have small down payments, which leaves little wiggle room when it comes to their mortgages and inspection. When purchasing a house, a house inspection may be useful to avoid unknown house problems in the future. It also makes a difference to work with a realtor who is experienced and can gauge the condition of the house just by viewing it.

As it is inevitable to avoid house repairs as a whole, ensure you have resources available to absorb the extra costs. If you're considering a condominium, you also have to consider the maintenance fees as they will only increase with time.  One way to accumulate money could be cutting out the morning coffee or tea. Instead, spend that extra five minutes and make it before you leave the house. Another tactic to save money could be putting some funds aside (i.e., $15) every time you receive your paycheque. At the end of the year, reflect on how much you have saved. Every dollar makes a big difference when unforeseen situations or repairs are required. 

Understand the process. Before buying a property, you should understand how down payments work. Although a greater percentage down payment is encouraged, you don't have to worry about reaching 20% which is the standard down payment as there are many ways to save!

Having a larger down payment is beneficial to have a smaller mortgage loan, lower mortgage rates, fewer interest expenses and many more! However, larger down payments may take a longer time to save and enter the market, To save for a down payment, build a Registered Retirement Savings Plan (RRSP), which allows for funds from this account to purchase your first home with no interest on the money borrowed. You can also sell assets to help you reach your goal or pick up a temporary job. 

Before buying, consult an expert realtor who can thoroughly explain all of your questions without any hesitation and ensure they are able to breakdown the numbers and potential cost.

3. Don't Rush

You should not be buying a house now because you're scared that you would not be able to afford a place later. Just because the market is a good time to buy does not mean it is a good time for you. Although you can work harder and generate an additional income by getting another job, job security has been a rising issue within the GTA. There have been instances where a buyer has obtained a second job which was sufficient in paying the mortgage, however, as time passed, their hours were reduced, which resulted in a loan to be taken.

Talk to a mortgage advisor or a realtor to understand the market and the margins which allow for you to buy with peace of mind.

At the end of the day, it is not wise to buy any property with thin margins as anything can happen. If you are in need to purchase a property, buy within your budget and then save for your next house when the time is right and you have more leeway. This doesn't mean you have to purchase a property that looks like a shack. It means you might have to purchase something a little further or something a little smaller for the time being. Just because you are buying within your budget doesn't mean you have to settle forever. After all, your property will be the last thing you see when you sleep and the first thing you wake up to. When purchasing a property, identify what your property must have versus nice to have and go from there. 

4.  Future-Proof Your Plan

The wisest thing you can do is plan ahead. That means assessing what or where you will be comfortable today and up to the next five years and securing your plans such that you will have no worries despite what the future will bring. 

Things to consider when buying a house may include what will your future bring. Will you have kids? If so then how much will you need to allocate for daycare and their essential needs? What if your job reduces your work hours or you have a loss of income due to an unforeseen event (i.e., COVID-19)? What will you do? Since the global pandemic, lots of people have lost their jobs due to a lack of sales. Truth is, there are a lot of things you have to consider before buying a property and at the end of the day, money is a big factor, which is why it is important to plan and save.

Other factors you might want to consider when buying your home may include:

• Commute - How far are you willing to commute to and from your job every day? Will the length of commute affect valuable time (i.e., spending less time with your loved ones or being less proficient with your work as you're spending time commuting)?
• Transportation - How do you get to and from places? Do you need a subway, bus or train access? If so, what are the schedules like, do they get you from point A to B with minimal switchover?
• Grocery markets -  How far are the grocery markets and what kind of grocery markets are near you? It would be ideal to have grocery stores with the best deal while close in proximity in case you have frozen foods and need to drop them home ASAP
• Schools - If you're considering having kids, are schools in close proximity to your house for easy access? 
• Neighbourhood - Consider if the neighbourhood is family-friendly or not. You might want to check out the property during the day versus the night time to see what the activities are like. What communities are available? Do you need a community centre?

Once you buy a house, be sure to build a timeline and set up a regular automatic contribution or withdrawal (i.e., save $50 every week). Owning a house requires lots of precision planning and by saving extra money here and there, it provides room for renovations or for new fixtures or appliances. Depending on when your closing is, building a timeline is crucial (i.e., 8-week tasks, 6-week tasks, one day before and moving day tasks). You do not want to leave it up to the last day before ordering packing boxes or ordering a moving truck or leave it to the last day to buy paint or fixtures, etc. 

5. Always Ask For Help

The process can be overwhelming, so don't be afraid to ask! For first-time buyers, one of the largest obstacles is saving enough for a down payment despite a good income and credit score. AN option to save enough for a larger or required down payment is asking your family for help if possible. Having help from others can increase your chances of competing in the market of the GTA. 

If family is not an option, find a realtor who is willing to assist you. This doesn't mean you should beg your agent to help you pay, however, if you're a good client and you have a realtor that cares about you, they might assist in, finding a lawyer with excellent closing costs and or find a mortgage company that best suits you.

If you are still unsure about how mortgages work or have any questions about how to successfully buy your first home or condominium, DO NOT hesitate to contact us, we are here to help!