Buying a house is an important and incredible decision to make, especially for first-time home buyers. Of course, there would be mortgages and some risks about paying this huge amount of money in the Toronto real estate market, but buying a house for your family would certainly be worth it. First time home buyers would have to climb the property ladder at some point.
When you decide to buy your first home in Toronto, you must avoid some important issues and risks. So there is so much to consider. The more you know about the whole buying process, the better your investment will be, and the less the risks. So bring your cup of coffee and read the important tips for first-time home buyers in Toronto.
1. Make a wish list
As a start point, prepare a list of everything you want to have in your future house. You can make a list of all the necessary and also a list of unnecessary things in your mind. The things you really like to have and the things you always wish to have as a homeowner. This list can help you narrow down your choices and get less confused. If you are going to live in the house with a partner, ask him/her about what you both want to have to enjoy living together. Try to highlight your priorities. For example, which one is more important to you: proximity to your office or neighborhood’s parks, good access to public transit, shopping centers, etc.
2. Get a pre-approval
In order to be clearer about your wish list, you should be sure about your affordability. And DON’T trust an online calculator estimate for your financial qualification. The whole process may seem a little complicated, but this step is inevitable and in fact very critical. Because the mortgage lender institute needs to analyze your credit score and financial stability based on your income, your credit history and your debts, to eventually calculate how much you can afford. Then you will know how much your bank is willing to lend you.
So, long before you start looking for a house, you should start saving for your down payment which is usually at least 5% to 20% of the total home price. And also remember that the down payment isn’t the total amount you will end up paying. You might need to save up more for closing costs, some changes and repairs (if required), new furniture, packing and moving expenses.
Related article: Home buyers’ most frequently asked questions
The pre-approval includes a guaranteed interest rate which would be valid for just 90 days. Pre-approval will specify how much mortgage you can get. So you will be able to estimate the price range of homes you should search for. It means that pre-approval can help doing a more focused search with more certainty to find your perfect home. You can always ask a Top Toronto realtor to eliminate the risks related to finding a new home in Toronto.
3. Find a professional real estate agent
Buying a house is not only your biggest purchase, but also the most complicated process, especially for the first-time buyers. Of course, you don’t have to do this by yourself, you should hire a Toronto real estate agent to exclusively work in your best interests. They perfectly know the real estate market and have required knowledge and experience to help you with the whole home buying process. But, don’t hire quickly! Choose a realtor with the best credentials and references. Below you can find out how to find the best agent that helps you to protect your interest.
Related article: How to find the best real estate agent in Toronto
It’s always a good option to use referrals from your friends or family, but everyone has their own expectations and priorities. So, try to do your homework and find a realtor who completely knows your neighborhood of interest. And you don’t need to be worried about the commission, because the seller pays for your real estate agent commission, unless you have a different agreement with your agent. So, why don’t you use professional help when it won’t cost you a penny?
4. Consider all the extra expenses
As we mentioned above, when you start saving your money for buying a house, it’s not just about paying the down payment. The whole buying a house process has some obvious expenses, but don’t forget to consider these other expenses to make sure you can still comfortably afford the house you want:
- Potential interest rate increase
- Mortgage default insurance
- Closing costs (1.5 to 3.5 per cent of the total house price) which may include:
- Home inspection fee
- Legal fees
- Land transfer tax
- Appraisal fee (if needed )
- Title insurance
- Property and fire insurance
5. Consider the house as an investment
Since buying a house is one of the biggest purchases of your life, it is important to think and decide logically and realistically. Although this house is going to be your residential property, don’t forget that it would be a long-term investment. So don’t decide with your emotions and over pay.
Ideally, the house should have all you need and want, but you should also think about the future. What are your plans? Are you going to raise your family here for many years or resale the house within a few years? If you are going to live in this house for years to come, then it is better to think about things like the facilities that you need, a good neighborhood and proper transit access for the comfort of your family. But if you look at home as a long-term investment, it is better to consider its resale potential.
Read More : Best Strategies for Move-up Buyers in Toronto
6. First-time home buyer programs
The federal government of Canada has different beneficial programs for first-time homebuyers to help them purchase their first homes easily. Using these government programs can help you save some money. Some of these programs include:
- The Home Buyers’ Plan (HBP): This tax-free program allows first-time home buyers to borrow up to $35,000 from their RRSP to pay the down payment.
- In Toronto and Ontario, the first-time homebuyers have also received a land transfer tax rebate.
- GST/HST New Housing Rebate: If you are buying a pre-construction, or if you are planning to invest on the substantial renovation of the house, you could qualify for a rebate for a portion of the sales tax, if the net purchase price is $450,000 or less.
7. House hunting
You got pre-approval and made your wish-list about your future house search, it’s time to closely work with your realtor and start house hunting. Your real estate agent can help you find the best houses based on your priorities. House hunting includes an online thorough search in listings, checking the properties preview online, and eventually going and seeing the homes.
Sometimes when you visit the house and feel living there in person, you suddenly get attached to one house. It is a wonderful feeling, but again try not to decide emotionally. Choose the one which can completely satisfy all your needs and wants too. Don’t forget this important fact which is also applicable in buying anything: As soon as you found what you wanted, stop searching more!
8. Put in an offer
Now that you found your desired house, you should put an offer. But don’t do it before your solicitor reviewed the offer. Generally, the offer is the writing form of the Agreement of Purchase and Sale (APS) which contains your legal name, your offering price, amount of your deposit (usually 5% of the purchase price), the closing date and any other required terms and conditions that should be mentioned before closing.
Then your agent submits your offer, and the seller may accept, reject or negotiate. It is recommended to compromise on small things, and let your real estate agent help you with all the negotiations and legal documents to finally get what you want.
9. Home inspection
Before further negotiations, you need to hire a home inspector to make sure there are no hidden problems. Generally, the home inspection costs you about $500. But believe me, it is worth paying this amount to relieve your worries about any problems and complete your purchase with confidence. So, try to find an experienced and professional inspection company.
10. Closing the Deal
Closing is when after all the negotiations and home inspection, the ownership of the desired house will be transferred from the seller to you. It includes a lot of paperwork and legal and financial obligations. So you should use the professional help of your team (real estate lawyer, real estate agent, home inspector) to do it right. After the final delivery of the closing funds to the seller’s lawyer, you will receive the keys to your new home and become a homeowner. Congrats!