Taking the leap into home ownership can be overwhelming.
Where to start? Who to call? What to do next? We’ve got it all right here for you, with this checklist for first-time homebuyers.
1. Determine what you can afford
By taking on more than you can comfortably afford, you’re setting yourself up to struggle financially when it comes to other wants and needs (read: house poor).
Before you give up your weekly takeout or tickets to see your favourite team play, consider what’s a realistic price to pay given your lifestyle and finances.
One way to do this is to work with a financial advisor to come up with a budget that accounts for your income, expenses, savings, and those fun things you don’t want to give up after buying a home.
It’s a good idea to work rainy day and emergency funds into your budget too, as they can help cover your expenses during financially tough times.
2. Save for a down payment
Unless you have the funds to pay for your home in full (in which case, you probably wouldn’t be reading this), you’ll have to come up with a down payment.
This offsets the purchase price, reducing what the bank has to loan you. In Canada, the minimum down payment for a home that’s under $500,000 is generally 5%. But, with any down payment less than 20%, you’ll be on the hook for mortgage insurance and the premiums that come with it.
Tip: Check out the Government of Canada’s First-Time Home Buyer Incentive, which lends qualified buyers a portion of their down payment.
3. Don’t forget the other costs
You’ll need to work these into your budget:
Appraisal fees, which your lender may require before approving your mortgage;
Home inspection fees;
Closing costs, which include land transfer and other taxes, insurance and professional fees;
Property taxes; and
Pre-paid bills, if the previous owner has already paid ahead for property taxes or utility bills.
4. Find a great real estate lawyer
It’s important to have a lawyer who knows the ins and outs of real estate, to protect your interests in what may be one of the biggest transactions of your life. Your lawyer will check that the property is legally owned and doesn’t have any claims against it, review the fine print of your purchase agreement, and act as a go-between with the seller’s lawyer, amongst many other things that are essential to closing the deal.
5. Get pre-approved for a mortgage
You want to put yourself in a favourable position to buy a home, as competition can be stiff in the buyer’s market. With mortgage pre-approval in place, you’ll be ready to bid the moment you find the home for you.
You’ll also need to know what your lender is willing to give you before you start house hunting, so you’re sticking within an accepted price range.
6. Start shopping
This is the fun part! Shop with your list of must-haves and deal breakers, so you’re not wasting time on the wrong properties while letting the right ones get away.
It takes an average of 30 to 45 days to close on a home, so keep this in mind if you have to be out of your current place by a certain date.
7. Get an appraisal and home inspection
Your lender isn’t going to sign off on a mortgage that’s worth more than the home it’s for. To be sure they’re getting value for their money, your lender could ask for an appraisal and they could also ask you to pay for it.
A bank appraisal may be a condition of your offer, as can a home inspection. Many would-be buyers request it for peace of mind, and to know they’re not buying a money pit.
8. Close the sale
Congrats, you bought your first home! Assuming your offer has been accepted, all conditions have been met and your real estate lawyer has okayed your paperwork, you’re good to go—almost.
You’ll need to have property insurance in place before you can officially close the sale. Your insurance advisor will help you choose the right coverage and make sure you have enough of it.
9. Get ready for possession
Let your real estate lawyer in on the news as soon as possible, to get everything in order for a smooth possession day. You’ll meet to sign some final paperwork and hand over any outstanding funds, while your lawyer will hand over the keys when the big day arrives.
10. Consider the future
A home is a major asset, and with it you might start collecting other assets. While no one wants to think of the worst, your loved ones would need to know what to do with those assets should something happen to you.
If you don’t have a will, now’s the time to sit down with an estate lawyer to create one. And if you do, now’s the time to update it. Your will should be updated with any major life change, as buying a home is.
Vexxit can match you for free with a real estate lawyer, a wills and estate lawyer, and a financial advisor, helping you through the process from merely thinking about home ownership to holding the keys to your new home.
Quiz: Are You Ready to Buy a Home?
Consider whether you’d answer “yes” or “no” to these statements.
I know what I can afford to spend on a home, based on my income and expenses.
I’ve saved enough for a down payment and closing costs.
I’ve been pre-approved for a mortgage.
I can pay my mortgage and bills for 3-6 months if I lose my income.
I’m prepared for the extra expenses that come with owning a home, such as property taxes and the cost of maintenance.
If you responded “no” more than “yes,” you may want to talk to a financial advisor so you can get on track to owning your first home.