Frequently Asked Questions About Buying Your First Home

Buying your first home can be as exciting as it is nerve-wracking. Often the excitement makes people overlook certain details as their questions don’t have ready answers. As an experienced real estate agent, Donna Maguire wants to arm you with all the right answers to help make your first home buying experience as happy and hassle-free as possible. To help you get started, I’ve answered some of the most frequently asked questions about buying your first home.

1. Am I ready to make my first home purchase a reality?

There are a few key components that need to be in place for a home purchase.

You will need to have access to a down payment, typically five percent of the purchase price of the home (if under $500,000 in Ontario). The down payment can come from savings, the RRSP Home Buyer Plan or a gift from an immediate family member.

Sometimes you can borrow the downpayment, but you'd want to be sure you can afford to repay that loan. You'll also want your credit score to be favorable, if there are any blemishes on your credit you will want to correct those. A good credit score is essential to qualifying for a mortgage.

Closing costs are also important to consider and these will typically run at about two percent of the purchase price of your home and include items like inspection, land transfer tax, legal fees, title insurance and adjustments on closing.

The above are some of the essential financial components, there are also other considerations, like your job stability, potential of upcoming moves for career or family, if you love the city you are planning on buying in, whether you are the only person making the decision or if you have a spouse/partner involved.

2. How do I qualify for a mortgage?

Having a good credit record, proof of income and enough funds to cover a down payment and closing costs are the first steps to qualifying for a mortgage. Arranging a meeting with a mortgage broker or your bank is a good first step to figuring out if and how much you qualify for.

3. Why should I have representation? What does that mean exactly?

I like to compare representation in real estate to the legal profession. You would never use the same lawyer as the person who is suing you, you would want your own lawyer to represent your interests.

In real estate, some people believe that using the listing agent (who is representing the seller) is the better way to go. This is not a good idea as the listing agent has an obligation to the seller and is already working on their behalf. It is a better idea to choose a real estate agent that will work with you and represent your interests during negotiations and closing.

This is particularly important if you are unfamiliar with market values where you are planning to buy, for example moving from Toronto to Ottawa, Ottawa prices look like a bargain and without your own representation, you may overpay on a property that looks like a good price but may actually be overpriced for the Ottawa market.

4. How do I know how much 'house' I can afford?

There are many guidelines for how much 'home' you can afford. The new stress tests for mortgages are also having an impact on how much 'home' you can buy. Typically the qualifying guidelines are set up as a percentage of your gross income, GDS which includes mortgage, taxes and an amount for heat, or TDS which includes the previous items and all other outstanding debt.

These are qualifying guidelines and sometimes don't factor in lifestyle and costs like daycare. The best way to figure out how much house you can afford is to meet with a mortgage broker and figure out your comfort level for payments (not what the charts say).

Doing this in advance can give you the opportunity to test out a budget and make “pretend” payments to a savings account, to see how comfortable the house you would want to buy is going to be for your financial picture.

5. Should I get pre-approved for my mortgage?

Absolutely! Knowing what you can afford is very important in the home buying process, particularly in a robust market where there may be more than one buyer for a property. Locking in your interest rate for 120 days is also smart, as it seems likely they can only go up from here!

6. How should I choose a realtor?

You can spend a lot of time with your realtor, you will want to choose one that you trust, have a good rapport with and who listens to you. Experience is also important. Referrals from friends and family are a good resource. Testimonials from clients on the realtor's website can give you insight on how they operate and what type of customer service they provide.

7. How can I avoid common pitfalls?

- Have your own representation.

- Get pre-approved.

- Don't overspend.

- Keep emotions under control.

- Get a home inspection.

- Take your time.

8. How long does it usually take to buy a home?

A home can be purchased in two to three weeks from beginning to end. That's how long it takes to draft and submit the offer, move through conditions and close with the lawyer.

However, it will typically take much longer than that! Finding the right home can mean looking at several homes and depending on inventory in your marketplace that can take weeks or months and years for some buyers (yes, years!). On an average, right from the time you have an accepted offer closing (getting the keys) can take thirty to ninety days, but each purchase is unique and I have seen a couple take weeks to six months or more. It really is dependent on the sellers and buyers timelines.

If you have any more questions about buying your first home, get in touch with the expert - Donna Maguire. Whether you’re a first time home buyer, moving to a bigger or smaller home or transitioning into retirement, I’m dedicated to making your real estate experience both informed and as stress-free as possible. As an experienced, caring realtor who is an excellent communicator and tough negotiator, I am completely dedicated to achieving the best results for my clients. To learn more about how I can help you, contact me by clicking here.