This is for you, first-time homebuyers of the GTA!

Talk about mixed messages. You think you’re ready to buy your first home, but then you start reading the news and there’s all this exciting doom and gloom stuff being talked about.  Writers express concern that tightening mortgage rules might push first-time homebuyers and investors out of the market. Other articles talk about people “scrambling” to re-qualify prior to new-build condo closings.  Even others keep warning of a U.S.-style real estate market crash, and the only thing that keeps changing is the rationale.

On the other hand, just as many experts point to the lack of data to support a real estate crash like that experienced by our American neighbours.  And occasionally you hear a little good news about mortgages, along the lines of mortgage rates improving, and the like.  And  in fact, you’ve been saving and getting ready for buying a home, and you simply feel ready.

So what’s a first-time homebuyer to do?  Is buying a home right now a reckless risk?  Or is it a smart, time-limited opportunity?

Home ownership can make great financial sense

Over the long term, residential real estate in Toronto, Etobicoke, Mississauga, and elsewhere in the GTA, has been a very strong asset, showing excellent appreciation. Renters who add up what they’ve shelled out during their renting years are often shocked to see how much mortgage help they’ve given their landlord. Most would prefer to have that money build their own home equity, particularly if they are planning to stay in the same geographical area for several years or longer.

In my opinion, a big part of deciding whether it’s the right time to buy, is whether you feel it is.  If you’re financially ready, and mentally ready for putting down roots and establishing yourself in a home of your own, then it is the right time.

If you’re dreaming of a home of your own, then there’s good news. Getting into today’s housing market just requires you to do some good common-sense planning.

I think you can break home buying down into a simple three-step process:

Step 1: Run the numbers

First, determine what you can afford.  Before you go looking at homes – and long before you consider putting an offer on one – you need to run the numbers. Don’t allow yourself to fall in love with a home that seems perfect, but later turns out to be way outside your possible price range. Get some professional guidance.  There’s more to buying your first home than a mortgage payment, so get someone to help you crunch the numbers and determine exactly what you can comfortably afford.

Don’t be afraid to set up a meeting with a mortgage broker.  It will cost you nothing, and give you so much financial benefit in return. Independent mortgage professionals – not affiliated with any one bank – are expert at providing the advice, education and resources that first-time buyers need.  We can offer advice on boosting your credit rating, determining an affordable mortgage payment, and explaining the extra costs that come with buying a home.

We can also help you get a pre-approval with an attractive rate locked in – usually good for 90 to 120 days – so you’re house-shopping with a plan and a budget. Doing this work ahead of time will make you a confident and informed homebuyer. You’ll know exactly how much house you can afford – before you ever start dreaming of one!

Step 2: Get that down payment

For many first-time homebuyers, that down payment is one of the big obstacles to home ownership. Saving up cash – especially if you’re paying rent, paying down student loans, and trying to live a life – can be challenging.  I’m a big believer in the “slow and steady” approach to saving up for your down payment.  Every little bit helps!

In most cases, you’ll need to save up at least 5% of the purchase price of your home. But there are some programs and tips we can offer to give your down payment a boost – to get you into your home faster:

1. Home Buyers’ Plan (HBP) lets people buying their first home withdraw up to $60,000 each (or $120,000 for a couple) tax-free from their RRSPs. You’ll need to pay those funds back, of course, on a repayment plan over a 15 year time frame.  Click here to read more about how the HBP works.
2. A financial gift from a parent or blood relative can be used as a down payment. This can not be a private debt; your relative(s) will need to confirm, in writing, that the funds are a gift and you are not required to pay the money back at any time.
3. Start small. If your dream home is out of reach, look for a starter home. Use today’s low interest rates to start hammering down your first mortgage, then watch for the opportunity to move up to the home of your dreams – using the equity and credit rating you’ve been building.  Many people figure out ways to even keep the first home as a rental property, and leverage that first purchase into a nest egg for the future.

Step 3: Get expert advice

There’s a tendency to go rate shopping when you’re looking for a mortgage. After all, a great rate can save you thousands and help you better manage your debt.  That’s one reason so many first-time homebuyers are working with independent mortgage brokers. Most of us have access to a wide range of established lenders – up to 50 – including major banks. They can compare rates across the board and show you where the best bargains are for your situation.

But the real value of a mortgage broker goes beyond rate. A good mortgage broker will provide you with invaluable education on mortgage preparedness. A first-time homebuyer should see a mortgage professional early – for tips to boost and/or repair your credit rating (so you qualify for the best rates), and for advice on down payment options. Your mortgage broker can sort through all of the mortgage options and get the right combination of features, privileges and rate that is best matched to your needs. It’s so important to consider term, prepayment options, refinancing penalties, restrictions, and fees because the right choices can save you thousands.

Dreaming of home? Don’t hesitate to get in touch.  I’ll help you get started!

For more information about buying a home, please check out more posts in my blog!

Photo credit: [c] Oleg Gapeenko for vecteezy.com

Thanks also to Invis for some of the content.