Buying a home for the first time ever is quite challenging and thrilling at the same time. You’re excited because you’re making one important decision in your life. And you’re frightened because of a big investment you’re about to make.
Worry not! I will share some tips for first-time homebuyers to make the entire buying process smooth and easy, so you’d plan wisely.
Before we go into details, I’ll share some necessary information about the incentives offered to first-time homebuyers:
Incentives for First-time Homebuyers
Let’s start learning the tips to buy your first home!
Tip#1 – Why do You Need to Buy?
You may laugh at this tip, but it a question you must answer before buying your first-ever home.
Do you plan to buy and live OR buy and rent OR buy and sell?
All three buying decisions follow a similar process (almost) but have different outcomes.
So, if you plan to buy and occupy, you need to answer the below:
- Affordability – Condos are relatively inexpensive than single-family homes. And they’re usually the first option for first-time buyers.
- Area – Do you prefer living in the city or town?
- Location – In downtown areas, you have more access to public transportation, restaurants, malls, etc. But, are surrounded by the hustle and bustle of big cities. Whereas, in the suburbs, you got peace.
- Type of house – There are many options, including condos, single-family homes, townhouses, etc. Choose the one you could afford and love the most.
- Type of neighbourhood – For a friendly community, condos are better. And if you prefer staying away from the masses, bungalows are right for you.
And if you plan to buy and rent, your questionnaire would look like this:
- How much access amount do you have? Depending on your investment, you need to consider how much you’d afford as of now? Do you have a hefty amount to invest in a single-family home or just enough to buy a condo?
- Which one is high in demand? Before COVID-19, condos were trendy. But the trend has shifted towards single-family houses. However, experts say that this trend would soon return to its norm.
- Who would be your potential tenants? Condos are usually occupied by individuals, couples, or immigrants. Whereas families prefer single-family homes.
If you plan to buy and sell, you must consider the below:
- The real estate trends – Understand what the real estate market has to stay for the year (and beyond). What is the average home price in the country and the expected increase over the year?
- Buy one or two? Single-family homes are more expensive than condos. Suppose you could afford to buy one single-family home (let’s assume) in Toronto. In that case, you could alternatively buy two condos and sell them one-by-one as and when required.
- Find the best location – The best place is usually larger cities. However, the current trend shows a preference for suburbs over downtown areas.
Tip#2 – Managing Finances
Let’s assume that you plan to buy-and-occupy.
So, now that you have decided to buy a principal home instead of investing, you need to start managing your finances:
Set a monthly budget
Based on your current monthly income, prepare a monthly budget with a hefty portion setting aside as your savings.
Your budget will also help you decide if you could afford a condo or a single-family home.
Save more for the down payment
The down payment is your significant contribution in the beginning. The law says that you need at least 5% of the total house price as a down payment. But 20% is the optimal value. With 20%, you secure yourself from taking mortgage loan insurance.
Improve credit score
The simple rules to maintain good credit scores include:
- Pay bills early.
- Keep credit balances low.
- Close unused credit cards.
Read more if you plan to buy a condo: 3 Key Elements to Consider When Buying a Condo
Tip# 3 – Mortgage Selection
Types of mortgages
The most common types of mortgage are:
- Fixed: the interest rates remain the same throughout the mortgage term period.
- Variable: the interest rates vary over the period.
- Hybrid: they incorporate effects of fixed and variable interest rates and keep you safe in case if the interest rates go up.
Get pre-approved mortgage
A pre-approved mortgage doesn’t mean that the lender will approve your mortgage, but it helps refine your search for the right mortgage.
It helps you in:
- Deciding what you could afford.
- Estimating your expected interest rates.
- How much would you be paying?
Tip# 4 – Home Shopping
One challenging part is down, the other to go – selecting your dream home.
Home shopping is best done when you initiate your search on the internet. Technology is taking over, and we can’t deny the importance of it.
Start your research by visiting several realtors’ websites. For instance, if you plan to buy a condo in Toronto, you need to search condos for sale in Toronto. Refine your search by applying filters based on requirements and budget.
You could also read different blogs from these professional real estate agents and learn about the country’s housing market.
Once you have a good knowledge of the real estate market, you now need to call the real estate agent near you. These professionals would further advise you on the best option you need to consider.
Tip#5 – Home Inspection
Don’t miss this tip just to save a few hundred (or less) dollars. The professional home inspectors would help you identify the house’s problems and may guide if you should fix them or look for another home.
For build-to-occupy homes (or condos), you might be needing some renovations or fixes. However, for ongoing (pre-construction) projects, you’d rest assured that no renovations or fixes would be required.
These tips are essential when you plan on buying your first home. So, review all the central elements, and revise the content if something is missing:
- Why do you need to buy a home? Is it an investment or you’re purchasing a principal home?
- Manage your finance – this is always crucial. You should always save something from your income, so you don’t have to look here and there to make the purchase.
- Selecting mortgage – I’d highly recommend consulting a professional broker for in-depth knowledge.
- Home shopping – this would give you a good idea about the real estate market, what is the right home option for you, and what are the future expectations.
- Home inspection – spend a few dollars now to save for bigger expenses later.