Your Simplified Guide To Buying Your First Home
While buying your first home is an extremely exciting time, it can also be difficult to know where to begin. We’re here to help! We’ve put together this detailed guide and it’s full of useful information designed to help you through the first-time home buying process.
Armed with this knowledge, you’ll be able to move forward with confidence, knowing your dream home is just around the corner.
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Deciding to Buy a Home
If you’re already renting, you probably already know there are a lot of advantages to owning your own place – you won’t need to worry about unexpected rent increases, you’ll be building your own equity instead of your landlord’s, and of course, you can do whatever you want with the space and decorate as much as you want!
However, there are also some trade-offs. As well as more responsibility (if something breaks, it’s 100% up to you to repair or replace it), you’ll also need to come up with some extra money to get started, so it’s important to make sure you can afford it before you begin.
Know What You Can Afford
Everyone wants their mortgage to be affordable without having to sacrifice their lifestyle. The key is to know what you can afford before you even start your search. An excellent resource for calculating what you can afford is an online mortgage affordability calculator. This tool can take into account all your costs, including living expenses and debt payments.
If you’re finding yourself coming up a little short, consider what you need to do to reach your new homeowner goals. This means thinking hard about what’s important. If you set a monthly budget and stick to it, it can make it much easier to save up for that down payment. Sell things you no longer use, consider a part-time gig, or even consider taking in roommates once you purchase your new home. Renting out a room or a basement suite can lower what you pay into your mortgage to the point of nearly nothing coming from your own pocket.
Coming Up With Your Down Payment
Your down payment is how much you’re willing to contribute upfront to the overall total of your home in agreement with your lender. If you make the minimum down payment (5%), you’ll end up paying more due to the added cost of mortgage insurance (this is mandatory for any down payment less than 20%), so try to put down as much as possible.
Putting more down can also make you appear much more serious about paying back your loan. For example, let’s assume you have some credit card debt or a car loan. If you invest more in your down payment upfront, the lender may ignore these few shortcomings, although you should pay off as much debt as possible beforehand.
Seeking Help For First-Time Buyers
Speaking of down payments, we understand it’s not always easy to come up with cash. The good news is, as a first-time homebuyer, you have the upper hand when it comes to government resources.
The Home Buyers’ Plan, for example, allows you to withdraw up to $25,000 out of your RRSPs to use towards your down payment. On top of that, if you’re purchasing a home with a partner, that amount doubles as they can also withdraw $25,000 for a total of $50,000.
You can also apply for the First-Time Home Buyers Tax Credit, which will allow you to claim a tax rebate of up to $750 as long as your home meets the following criteria:
- You’ve purchased your home within the last 12 months
- The home is your principal residence and is registered under your (or your partner’s) name.
- The home is a single-family, semi-detached, townhouse, condo or mobile home and is located within Canada.
Additionally, the GST/HST New Housing Rebate allows you to reclaim some or all of the taxes you paid during the purchase of your home.
To obtain a mortgage pre-approval, your desired lender will evaluate your finances and credit score. They will then give you a certificate pre-approving you for a mortgage. In short, a pre-approval is the lender’s commitment to loaning you these funds so you can go forward in your house hunting.
Getting a pre-approval is important for a couple of reasons:
- It locks in your mortgage rate until you close the deal on your new home.
- You’ll be taken more seriously when it comes to putting an offer on a home. (In fact, it’s not uncommon for buyers without a pre-approval to have their offers overlooked).
- It gives you some perspective on how much you can actually afford.
One thing to note: any changes in your job or investments can change your pre-approval – meaning it would have to be re-evaluated in the case of any major adjustments to your finances.
How Much Do You Want to Spend?
One of the largest mistakes new homebuyers make is taking the maximum amount they were pre-approved for. That is to say, just because you’re pre-approved for $500,000, doesn’t mean you should use the full amount. Overspending can easily result in becoming “house poor“; where you’re spending the majority of your income on your mortgage and little else.
In fact, the government states that homeowners should pay no more than 32% of their monthly income on monthly housing costs.
That being said, location also plays a big part in how much you can afford to spend on a home. This is because home prices vary depending on how far out of the city you are and what type of home you’re looking for.
For example, a more suburban bedroom community such as Spruce Grove can be the perfect fit for people looking to get a single-family home on a budget. Whereas for the same amount, you may only be able to afford a duplex in the more central areas of Edmonton.
It’s not a stretch to say you can save tens of thousands of dollars by choosing a new home in a bedroom community. Which is a great deal for those who aren’t worried about commuting.
Narrowing Down Your Choices
When it comes to choosing the best community, there are a few things you’ll want to consider other than just the home styles available. Consider the following when trying to zero in on your new neighbourhood:
When you’re looking into prospective neighbourhoods to call home, be sure to consider your commute time. With the variety of new communities available in and around the capital region, you’re sure to find many convenient options.
In addition to being built close to major routes such as the Yellowhead, Whitemud and Anthony Henday, Edmonton’s newest communities are also easily accessible by transit. This means that whether you prefer to drive or take public transit, you’re guaranteed a quick and convenient drive.
Whether you’ve started your family or are planning for one in the future, a family-focused neighbourhood will be important. Not only does having schools nearby reduce travel time (for both you and your kids), it’s a huge bonus for your children to be able to walk to school. New communities, especially, are known for their brand new schools, centrally located with top-notch resources and amenities.
Other amenities you’ll want to look for include everything from shopping, restaurants, entertainment and green spaces, to important services like hospitals, dentists and police stations. Having shopping nearby makes life simpler because you won’t have to go far for anything you need. Restaurants and entertainment are important too, whether it’s to meet your friends for dinner or take the kids out to a movie.
Those who enjoy an active lifestyle will also want to choose a community with walking paths and parks for morning jogs and dog walks, or parks and playgrounds for afternoon picnics and playdates.
These are all things to keep in mind when buying a home. Being in a newly developed area that has all these amenities for you to enjoy makes all the difference.
When it comes to buying your first home, we guarantee the journey ahead will be fun, exciting and simple once you’re equipped with the right information. Keep our handy guide in mind throughout the process and not only will you find the home of your dreams, but you’ll also be amazed at just how easy and stress-free it was!
Originally published Mar 8, 2020, updated Feb 1, 2022
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