by Todd Lewys
The past six months or so has been a tumultuous time for first-time home buyers.
During that time period, the Canadian Mortgage and Housing Corporation (CMHC) changed debt-to-income ratio rules, the federal government instituted a mandatory stress test and interest rates have increased marginally. And to make things even more challenging for home buyers, mortgage insurers are poised to increase rates on home insurance premiums March 17.
Despite these challenges – and a looming spring market – there’s no need for first-time buyers to panic. Why? Simple: with the proper guidance, some due diligence – and a lot of forethought – the market can be navigated successfully.
The key to success lies in taking a methodical approach to finding a home, an approach that involves:
1. Establishing a team of industry experts that you trust implicitly. It’s never too early to start planning. With this in mind, find both a reputable REALTOR® and Accredited Mortgage Professional (AMP) you can trust to guide you through the complex process of finding your first home. Your REALTOR® will not only help you find suitable properties, but will also help shape your thinking regarding which properties best suit your needs. At the same time, your mortgage broker will tell you exactly what you can afford, and provide you with regular updates on interest rates and any other changes that might affect your purchasing power.
2. Be realistic. Due to factors such as the new government stress test, many first-time buyers have seen their budget shrink. While this can be an unpleasant reality check, first-time buyers need to accept the fact that they will likely be getting less in a home.
3. Stay within your budget. Avoid falling victim to HGTV Syndrome. Yes, it would be awesome to own a picture-perfect home. And yes, it’s tempting to blow your budget on such a home. Consciously make the decision to buy a home that you can comfortably afford so you can live within your means. You can always bring the home – or condo – up to speed over time as you save money for upgrades. Meanwhile, you’ll be able to take a winter vacation, and will avoid the agony of looking at your home’s four walls all winter long.
4. Location, location, location. Don’t make the mistake of buying a home in a far-flung area (or sketchy neighbourhood) to save money. Many people do this, only to sell a year or two down the line because they’re too far from work and/or family, or hate the neighbourhood. Buying in the right spot the first-time round will enable you avoid paying out land transfer taxes, REALTOR® fees and moving expenses all over again.
5. Make a Must-Have list. Put some deep thought into the qualities you want in a home, then make an actual checklist. When comparing properties, check off the boxes, and see which one wins out with the most checked boxes. Factors like storage space, natural light, balcony/no balcony, direction a property faces (south for natural light, east for sunrises, west for sunsets), and even what floor a unit might be on are some things to think about.
6. Don’t be too fussy. Don’t dismiss a property if paint colours aren’t perfect or flooring, countertops and/or cabinets need updating. Those issues can be addressed over time, and you might be able to use those shortcomings as a bargaining chip to get a better price.
7. Size vs. Savings. If you’re single, will a one-bedroom condo suffice, even though a two-bedroom unit would be ideal? Provided a smaller unit is functional/livable, savings could be used to pay down the mortgage faster and just enjoy a freer lifestyle (lower expenses, more money left over for vacations, vehicle upgrades).
8. Don’t be in a big hurry. Get the proper guidance, do your due diligence and know what you want in a home. In time, you will find the place that’s right for you.