Are you looking to buy your first home? You’re in luck! There’s a first time for everything, and buying your first home is no exception! Buying your first house can be an exciting and nerve-wracking experience.
You might be feeling overwhelmed by the endless choices available to you. From location to style, there are so many things to consider when making that first purchase. Thankfully, we’re here with some first time home buyer tips on how to make this process as easy as possible!
- A. First Time Home Buyer Tips to Consider During the Planning Stage
- B. First Time Home Buyer Mortgage Advice
- C. First Time Home Buyer Guide for the Shopping Process in Canada
- D. First Time Home Buyer Tips When it's Time to Purchase
- Bonus: First Time Home Buyer Tips and Advice From a Realtor
- FAQs – First Time Home Buyer Tips and Advice
- Final Thoughts on the First Time Home Buyer Tips and Advice
- Get Pre-Approved (or Approved) for a Canadian Mortgage in just 5 Minutes!
In this first time home buyer guide, we’ve compiled a list of 21 handy first time home buyer tips and advice for you. So when you go into your next meeting with a real estate agent or lender, you’ll feel more confident than ever about buying a home.
From start to finish, a successful house purchase requires attention to detail. The phases of purchasing a home are planning, searching for your ideal property, and finally closing. So we’ve broken down the stages into four groups of tips to assist you through the process, save money, and finalize the deal.
- First time home buyer tips during the planning stage.
- Mortgage selection advice.
- First time home buyer guide for the shopping process.
- First time home buyer tips and advice when it’s time to purchase.
A. First Time Home Buyer Tips to Consider During the Planning Stage
While being a first-time home buyer can be exciting, it can also feel intimidating. By doing some effective research, buying your first home can still be an enjoyable process. These are the first time home buyer tips and advice you should consider when you are planning to buy:
1. Begin Saving as Soon as You Can
When saving for a home, the main expenses you should consider are:
Down payment
The amount of money you need for a down payment is based on your home’s purchase price. In Canada, a 5% minimum down payment applies to homes costing $500,000 or less. One of the biggest challenges for new homeowners is saving up for a down payment. This is why you should develop a savings plan as soon as possible. A savings plan helps you set an achievable goal and lowers how much you need to borrow for the home, making it easier for everyone involved.
To estimate monthly mortgage payments once you’ve figured out your budget, use a mortgage payment calculator. If the down payment is lower than twenty percent of the purchase price, you will have to pay for mortgage default insurance that protects the bank if you fail to make your payments on time.
| Purchase price | Minimum down payment required |
| $500,000 or lower | 5% of the purchase price |
| $500,000 to $999,999 | 5% of the initial $500,000*10% of the part above $500,000* |
| $1 million or over | 20% of the purchase price |
Closing Costs
The closing costs consist of fees and expenses you pay to finalize your mortgage. Though they typically range from 2% to 5%, it is possible to get the seller to cover some portion of these with negotiations, and you can save by comparing prices for some services like home inspections. Closing costs can cover home inspection fees, legal fees, adjustment costs, title insurance etc.
Moving in Costs
You should anticipate having some money after closing for repairs, furnishing the home and upgrades.
2. Get Any Existing Debt Under Control
When you have a lot of high-interest debt, it will be challenging to take on more. Make sure that your existing debts are manageable and that you can afford the home by evaluating your budget.
For example, if you and your partner have a heavy credit card balance that eats into your monthly income, buying a home may not be the right time. Reducing your debt will give you room to save more for the down payment.
3. Know What You are Looking for in Your First Home
It is easy to be distracted by all the possibilities in the excitement of buying your first home. Figure out what you need first, and then start looking for homes that fit your criteria.
Instead of focusing on nice features like a granite countertop or hardwood floors, prioritize things like having two bathrooms, extra storage space, accessibility to transit, what the school district is like, etc. instead. This step will help you stay on track and make it easier to find your first home.
4. Decide How Much Home You Can Afford
Before beginning any home shopping, find out how much you can afford to spend. This will allow you to stay within your budget and limits. You should also consider the total amount of mortgage you can take so that your monthly expenses do not interfere with your other financial obligations.
To figure this out, you can use an online mortgage calculator. Once you input the numbers, the home buying budget calculator calculates your maximum monthly payments and shows the maximum purchase price for that amount.
SEE -> How much you can afford with our free Mortgage Calculator!
B. First Time Home Buyer Mortgage Advice
5. Find a Mortgage that is Suited for You
Variables to consider are the interest rate, term length, and type of mortgage. There are different types of mortgages:
Variable Rate Mortgage (VRM) vs Fixed-Rate Mortgage (FRM)
A variable rate mortgage’s interest rate is tied to the prime lending rate, which often changes. This type of mortgage has a lower monthly mortgage payment but a higher overall cost in interest charges than fixed mortgages. The advantage of this type is that your payments may drop if the prime rate drops, but you risk your payments rising if interest rates rise.
For Fixed Rate Mortgage, the interest rate is set for the duration of the mortgage term, so you know what your monthly payment will be each month. This type of mortgage has a higher monthly payment, but it is much more stable than variable mortgages. If you have a fixed-rate mortgage, you will not have to worry about your monthly payment changing.
GET -> Canada’s Best Mortgage Interest Rates Online
Open Mortgage vs Closed Mortgage
An open mortgage allows you to make extra payments without penalty. You can also increase your payments at any time in the life of the loan if you receive a raise or bonus. This way, when interest rates fall below the amount initially agreed upon, you may be able to pay off your mortgage faster by making larger than expected payments.
However, for a close mortgage, you can only make larger than usual payments if and when the lender allows. You cannot increase your payments at any other time during the mortgage term.
MORE -> Open vs Closed Mortgage
Conventional Mortgage vs High-ratio Mortgage
For a conventional mortgage, a down payment of more than 20% of your home’s purchase price is needed.
High-ratio mortgages are for homebuyers that do not have a 20% down payment and need to borrow more than 80% of the home purchase price.
6. Take Advantage of First-Time Home Buyer Incentives
The Canadian government provides incentives for first-time home buyers:
The Home Buyer’s Plan (HBP) allows you to borrow from your RRSP un-taxed to use as a down payment on your first home. You must pay the money back within 15 years. The Home Buyer’s Amount is a non-refundable tax credit that can be claimed on your income tax return up to $5,000.
The First-Time Home Buyer Incentive:
The First-Time Home Buyers Incentive provides qualifying first-time home buyers with the opportunity to obtain 5% or 10% shared equity mortgage rates from the Government of Canada without increasing their down payment.
MORE -> First Time Home Buyer Incentive
The GST/HST New Housing Rebate:
You may be entitled to a refund of the GST or HST you paid on the purchase price of your home. To qualify, you must occupy this residence as your principal place of residence within one year after the date that ownership in the housing transferred to you, and either own it alone or with someone else (such as a spouse).
7. Get a Mortgage Pre-approval
Mortgage pre-approval is different than a mortgage approval.
A pre-approval means that you have been approved for a certain amount of money from a lender, but it isn’t guaranteed until you get your official mortgage approval. Lenders will still look at your situation and credit score before giving you an offer on their products.
- ✔ A pre-approval will give you peace of mind by showing home sellers that you have the money to purchase their home.
- ✔ It also lets you know what your purchasing power is, which helps you narrow down your search.
Once you are pre approved, you can then begin your search for a home.
The Finance Key Recommends that your use Homewise Mortgage for Your Mortgage Pre-approval to get today’s best Pre-approval rates
8. Consider Using a Mortgage Broker
Mortgage Brokers are third-party intermediaries who can help you find the best deal on a mortgage. They may also advise and assist in interpreting your financial needs and lifestyle as they search and negotiate for mortgages. You won’t be tied to one lender with a broker; you’ll have access to many of them.
Mortgage brokers shop around for the best product available from a variety of banks and financial institutions. By shopping around, you may get a better deal than if you were to go directly to the mortgage lenders. Luckily, most mortgage brokers don’t charge you for their services; they get paid commissions by the lender for referring business.
MORE -> Mortgage Broker vs Bank, Canada
C. First Time Home Buyer Guide for the Shopping Process in Canada
Now for the fun part. You have to go on an adventure when shopping for your first home. To avoid the various pitfalls along the journey, do these things:
9. Carefully Pick a Real Estate Agent
Make sure that you pick the right real estate agent. They will have to negotiate all the details with the seller’s agent, so make sure they are professional and reliable. The best way to find an agent is to ask friends for referrals or go online to read reviews.
A good real estate agent will search the market for homes that fit your requirements and assist through the entire process from negotiations to closing. Ask potential agents about their experience helping first-time home buyers in your market, as well as what they plan to do to help you find a home.
10. Select the Right Type of House and Neighborhood for You and Your Family
The next step is to decide what house and neighbourhood you want. You need to know your needs and wants so you can compare houses fairly. Check if potential neighbourhoods have the amenities you want and assess your commute before committing.
Also, don’t forget to factor in your lifestyle and budget. For example, although condominiums or townhomes might be an affordable housing option, they offer much less privacy since neighbours share the same walls. Don’t forget about HOA fees when looking at condos and townhomes in planned communities.
If you plan on starting a family or expanding one, it may make sense to buy a home that has enough space for your growing needs now.
11. Talk to the Neighbours and Check out the Property
Visit the home when it is empty, if possible, to look around without distraction. Some sellers may not be able to host you or allow you inside; that’s okay. If you can’t get inside, examine external factors of the property, like landscaping and lighting.
Just as important are the neighbours on all sides of a home. Talk to your neighbours about the area. They are outsiders to the negotiating process and may offer valuable insights into the neighbourhood and building.
12. Stay Within Your Budget
Stay within your budget. Don’t go over it; you don’t want to buy a home that’s more than you can afford. If you do, it will be difficult to remain financially stable and pay for the house.
You may be tempted to spend more money than you can afford or pressured by the seller’s agent to bid higher in an attempt to “beat out” other offers. To avoid financial burden along the line, set a price range and commit to it. Look at properties below your price range to give yourself more room to bid on competitive properties.
13. Put in the Best Offer for You
Now it’s time to put in an offer. It is essential to do your research and know the market before making this decision. You should aim to present an offer that is best for you.
To ensure the offer is valid, have a lawyer or notary look at it before you sign. Your offer should include your name, the amount of money offered and the date that it expires as well as any other particular specifications.
D. First Time Home Buyer Tips When it’s Time to Purchase
14. Get a Home Inspection
Before finalizing the deal, it’s a good idea to have a home inspection. A qualified inspector is an unbiased third party who will check out your new home for any defects or damages that might be costly to repair after you move in. During the inspection, they’ll make a note of anything needing repair and give suggestions on how to keep your home in good condition over time.
Standard inspections don’t test for pests, mould, or harmful radon gas. If you’re concerned about these issues, it may be wise to get a specialized inspection. You can have the area tested for radon outside and inside your home. Remember that some issues will be beyond what can be detected during an inspection, such as structural or electrical problems.
To get to know a home better, you may want to attend the inspection so you can ask questions on the stop. If not, carefully review the inspector’s report and ask about anything confusing.
15. Negotiate with Your Seller
If you’ve done your research and found issues that need fixing in the house, this is a good time to negotiate. Write up a list of any items you’d like corrected or updated before the closing day and present it to the seller. They may not go for everything at once, but they’ll likely agree to some changes.
Pro Tip:
You should have an agent who knows your needs and can help you through the negotiating process. This will help ensure you do not miss out on any opportunities while also providing excellent service to you. Make sure that your offer is within the market price range for a home. The seller may try to convince you that their house is different, but don’t get caught up in this and end up overpaying.
16. Purchase Enough Home Insurance
Before you buy your home, make sure to get enough insurance. Realtors can provide referrals for insurance agents who specialize in new homeowners. Check that the homeowners’ insurance will meet your lender’s requirements and be comprehensive enough to cover any repairs or rebuilding costs.
Be aware that some policies have a waiting period before coverage begins, so do not delay! You should look for a customizable home insurance plan that will let you tweak your coverage to meet your needs.
17. Closing
When it comes to closing on a house, you will have to deal with many paperwork. You can ask your real estate lawyer/notary for clarification if you do not understand something. Make sure that on the closing day, your lawyer finalizes the delivery of funds to the seller’s lawyer before receiving the keys to your new home.
18. Plan for the future
Discuss mortgage protection options with your lender. Discussing this could help protect loved ones from the burden of financial consequences. It is also an excellent time to start saving for emergencies. Try saving a small portion of your salary every month, so you’re prepared for any extra expenses.
Bonus: First Time Home Buyer Tips and Advice From a Realtor
Here are some helpful first time home buyer tips from some realtor’s experiences that could help you get started on your journey. According to John Bodrozic, a realtor at HomeZada :
19. Create a Preventative Maintenance Calendar
You should have a monthly calendar that features all the necessary preventative maintenance procedures and covering minor issues before they become big ones. Going without these standard safety measures or forgetting about them will lead to higher costs for unexpected fixes because equipment fails before it should, and increased energy bills because the house is not operating efficiently.
20. Create a Digital Inventory of Your Personal Property and all the Fixed Assets in Your House.
This is important because it makes it easier to insure appropriately and can make claims processed by insurance companies smoother if any natural disaster or other fire were to destroy the home.
21. Factor in Renovation Projects into Your Home Buying Budget.
Label a list of tasks and prioritize them by how they fit into your plans, such as improvements that might increase resale value or anything crucial to living comfortably at home.
Due to considerable differences between brands and products, it is vital to keep track of each purchase individually – notably receipts, warranties, final costs, and before-and-after photos. All this documentation will significantly aid you when it comes time for tax season and whenever you decide to sell your first house.
FAQs – First Time Home Buyer Tips and Advice
Final Thoughts on the First Time Home Buyer Tips and Advice
The homebuying process is a big undertaking, and it can be even more daunting if you’ve never done it before. It doesn’t need to feel like an impossible task, though! You’ll be able to get your dream house in no time with the proper preparation and some perseverance. With these first time home buyer tips, you can help make your homebuying experience as stress-free and successful as possible.
Speak with a mortgage advisor to find out the best loan options for you. Use our helpful hints during your shopping process so that when it comes time to buy the perfect house, all of the details are in place!
What are some of your favourite tips?
Have any questions? Let us know in the comment section below!
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Charity (Charee) Oisamoje is the founder of TheFinanceKey - TFK. She leads the editorial team, which is comprised of subject-matter experts.
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I got an offer to work in Houston next year, so I was thinking of getting a house there since I plan to move there with my kids once it has been finalized. It was a good piece of advice when you told us to determine first how much we can afford before we proceed with our home shopping since having a set amount will help us to stay within budget and limits. I’ll keep this in mind while I look for a real estate agent in Houston to contact for inquiries regarding my new home purchase soon.