4 Tips for Buying Your First Home

Buying your first home is a major milestone! As exciting as it may seem, there are a few things to consider as a first-time homebuyer, especially with the challenging real estate market we’re currently in. From your borrowing limit to your budget, here are four things to keep in mind when buying your first home!

1. Is the property still available?

You’ve spotted your dream home online, and it looks perfect in every way. You can already imagine yourself living there. Unfortunately, just because it shows up online doesn’t mean it’s still available… yes, the market really DOES move that quickly!

Since 2020 (in other words, since the beginning of the pandemic), the real estate market has grown steadily in terms of prices and the number of transactions. Demand is currently sky high and houses are selling at lightning speed. As a result, many online listings are for homes that have already been sold. Why do they set you up for heartbreak every time, you ask? It’s because the conditions in the promise to purchase must be met before the listing can be taken down.

Here’s an interesting (if rather disheartening) fact: according to the Quebec Professional Association of Real Estate Brokers (QPAREB), the number of annual transactions in the province of Quebec has increased by 17%. To give you an idea, there were 96,387 real estate transactions in December 2019, compared to 112,476 in December 2020. At the time of writing (February 2021), the statistics already show a 13% increase in sales compared to the same time last year. It doesn’t look like the housing market will be cooling down anytime soon… just something to consider!

2. What is your borrowing limit?

A challenging market means limiting the number of conditions in your promise to purchase. One frequently recommended practice is to check your maximum borrowing capacity with your bank or mortgage broker.

While various calculators are available online, a professional will be able to give you an exact amount; after all, it’s easy to forget to take several key factors into account, such as your student loan, a car loan, unpaid credit card debt, etc. These little “oversights” could have a major impact on your borrowing capacity with your financial institution.

It’s also wise to ask for a mortgage pre-approval certificate to speed up the homebuying process. This also reassures the seller by eliminating the possibility that the bank will deny the loan request after the seller accepts the promise to purchase.

3. Do you have the right support?

We suggest teaming up with a real estate broker in the search for your future home. Knowing how hot the real estate market is, a broker can be a huge help by:

  • Helping you navigate a challenging market (a valuable asset!).
  • Advising you on the best municipalities and types of houses for your situation.
  • Providing information about houses that have already received offers.
  • Helping you decide how much to offer for your new home.

Unfortunately, a harsh reality awaits buyers: overbidding. It is now common practice to make an offer that is higher than the seller’s asking price. Sellers often receive multiple (or even dozens!) of offers, and they naturally choose the best one. A broker’s advice is important when it comes to deciding how much to overbid on the house without going too high, since you might not be able to get the money back if you decide to sell the home in the future.

4. Do you have a budget?

Not only do you need to have saved enough money for the down payment, you should also have enough set aside to cover the other expenses involved in buying a home.

Many people decide to put down the minimum down payment (5% if the home costs $500,000 or less) and are required to take out mortgage loan insurance through the CMHC (Canada Mortgage and Housing Corporation) as a result. Read the CMHC’s general requirements for mortgage loans here

However, it’s also important to remember the following expenses:

  • Notary fees
  • Inspection fees – this part should definitely not be overlooked. In today’s market, some homes are sold without an inspection. There has also been a significant increase in hidden defects. Don’t get caught unawares, since this can incur additional costs down the road!
  • Property transfer tax (use this calculator to help with your planning)
  • Municipal taxes
  • School tax
  • Moving expenses
  • Home insurance

On the topic of home insurance, this is obviously an expense to plan for. The brokers at Lareau are here to assist you and discuss your new home. Our approach is based on an in-depth analysis of your needs, which allows us to recommend the right coverage for your situation and the risks to which you are exposed. You can also read this article to find out how to protect your home from all types of risks!

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