Almost nothing in life compares to the accomplishment of buying your first home! The one downside is that reaching this milestone in Toronto can feel almost impossible, especially in the current market.
However, with a little financial acuity, knowledge of available resources, and a lot of help, you might just reach this worthy goal sooner than you think. In this post, we’ve compiled some of the best tips and advice into one massive guide – just for today’s first-time home buyer.
If you’re a first-time buyer and want to learn more about the process from a professional, the ThompsonSells Team is always ready to help! Contact us for a buyer consultation today.
Tips From Real Home Buyers
We’ll begin the journey to your first home with some real, actionable tips from genuine first-time buyers that our team has helped in the past. Whether you’re a twenty-something just beginning your career or simply tired of renting at any age, the following guidelines will help you hit the ground running.
Stick to a Financial Plan
This advice may seem obvious; the hard part is in the implementation. When you land your first high-paying job, it’s tempting to want to buy all those little luxuries you could never afford. Just remember that few things compare to the luxury of owning a house. Taking this step gives you the immediate and tangible benefit of having a place to call home. Even better, you now own a significant asset that can grow your equity and financial power over time.
To put it into perspective, how long would it take you to save $100,000? Unless your income is sky-high, the answer is probably a long time. Next question, how long will it take a house you own to appreciate in value by $100,000? Chances are, this will happen much faster.
Every home buyer wants to get the best value, but it’s even more critical when it’s your first. The posts below can help:
- What Will It Really Cost to Buy a House in Toronto?
- How Not To Overpay For Your New Home
- Where Is The Best Value In Etobicoke When Buying A Home?
Understand Your Market
Every market has its nuances, and you always want to know what you’re getting into. A seller’s market, for example, means that sellers have the upper hand when it comes to negotiation.
It doesn’t mean that you can’t win or that you’ll have to blow your budget by a mile to find a house. However, you may need some creativity and out-of-the-box thinking. If you can manage it, you might add a little more to your deposit to show that you are serious. As real estate agents, we love this strategy because it makes your offer more appealing to sellers – without increasing your overall purchase price.
If you’re in a buyer’s market, you have an advantage, but you still want to do your background work and come prepared. By working with an experienced real estate agent who understands your local market, you have a better chance at securing favourable terms for your new house.
Prepare for a Change
Homeownership may be exciting, but your life is about to change in almost every way. Owning comes with a sense of freedom that is different from what you have as a tenant. True, you have just put down roots and are not likely to move again anytime soon.
However, your house is yours to decorate to your heart’s desire, unlike with renting, where you have to ask a landlord’s permission just to paint. However, keep in mind that there will also be maintenance tasks and repairs that pop up once in a while. In addition, you’ll have property taxes and home insurance to take care of each month.
Stay Within Your Means
When you fall in love with a beautiful home, you might be tempted to overspend to make sure no one outbids you. This is a pitfall you want to avoid at all costs. Real estate is expensive enough without paying more than you need to or can afford.
The best way to stay within a reasonable budget is to determine a range you are comfortable with before you even search for homes. Start by adding up what you have for a down payment and getting pre-approved for a mortgage. The amount you can borrow combined with your current savings represents the absolute most you will pay for your new home.
Remember that you’ll also have closing costs and will want some funds left over for the unexpected. That’s why it’s always advisable to stay within the mid to low range of your budget whenever possible.
Look Beyond Perfect
Can you imagine putting an offer on a house that’s a bit cluttered or is badly in need of new paint? These cosmetic flaws might turn you off a property completely, but look again. A house with minor imperfections could actually be undervalued, which potentially makes it an outstanding investment.
An experienced real estate agent can help you know what to look for during showings. If you can buy a house that’s structurally sound at a lower price, it may well be worth the cost of a few repairs.
Who should you work with when starting the search for your first home? A local expert is a great place to start. Learn more right here.
First-Time Buyers’ Government Assistance
When buying your first home, you sometimes need all the help you can get. Surprisingly, some of that assistance could come from the government. Though the First-Time Home Buyer’s Incentive has been discontinued, there are still several provincial and federal programs that could make getting onto the property ladder a little more affordable. Here are a few key benefits to be aware of.
Home Buyer’s Plan (HBP)
Through the Home Buyer’s Plan, the federal government of Canada provides you the opportunity to withdraw $60,000 from your RRSP to help fund your down payment. If buying with a partner who also qualifies, you can each take advantage of the program for a total of $120,000 toward your home. There is one caveat; you must repay those funds back to your RRSP within 15 years to keep the tax free benefit.
First Home Savings Account
The First Home Savings Account is similar to the Home Buyer’s Plan, with a few key differences. The entire purpose of the account is to help you buy your first home. You could start taking advantage of this program as early as 18 years of age and contribute up to $8,000 per year to a lifetime maximum of $40,000. Any dividends the account earns can also go toward your purchase. When you buy your home, the account is closed. Best of all, you don’t have to repay those funds unlike with the HBP.
Land Transfer Tax Refund
Land transfer taxes are one of the most prohibitively expensive closing costs of buying a home. Toronto buyers have it even tougher as there is both a municipal and a provincial tax. Fortunately, there is some relief for first-time buyers. The Ontario government provides first-time homebuyers an instant rebate of up to $4,000, and the City of Toronto offers a $4,475 refund on their land transfer taxes when purchasing a home.
First Time Home Buyers’ Tax Credit (HBTC)
The HBTC is a new non‐refundable tax credit for first-time home buyers. You OR your spouse can include this tax credit on your annual return. The credit is based on the amount of $10,000 (as of 2024) where you could claim a maximum credit of $1,500 (10,000 x 15%).
These government programs can be a great assistance when purchasing your first home. You’re only a first-time buyer once, so be sure to take advantage of these incentives while they are available to you!
It may be hard to believe, but we have even more great advice for first-time buyers! Check out the related posts below:
- How To Make Your Home Purchase More Affordable
- Why First-Time Buyers Should Buy a Home Now
- 10 Ways to Get Your Offer Accepted in Today’s Toronto Market
Avoid These Common First-Time Buyer Mistakes
There’s no question that buying your first home can be as nerve-wracking as it is exciting. Without guidance, it can be easy to fall into the traps buyers can make, particularly when getting into the market for the first time.
Let’s talk about seven of the most common errors you might fall prey to. Armed with this knowledge, you can jump in with confidence and feel good about your decision.
Relying On Open Houses to Find Your Home
Open houses can be fun and convenient, but your options could also be severely limited if you’re relying too heavily on them. Not every seller hosts an open house. In fact, not every listing makes it to the MLS®.
If you want the best home at the lowest price, you’re going to need to expand your horizons, and this means working with a Realtor® with a network and access to private and hard-to-find listings.
Of course, the benefits don’t end there. An experienced professional comes with a plethora of expert help and advice to guide you through every step of purchasing your new home. This is especially important for first-time buyers who are stepping into unknown territory.
Falling in Love With the Staging of a Home
When you go to a showing, you can count on the fact that the seller will be trying hard to dazzle you with beautiful staging. They do this for a reason – they want you to fall in love with the house and place an offer, hopefully above their asking price.
This can be an effective strategy, so it’s critical for you, as the buyer, to look deeper. You need to see past the pretty packaging right through to the bones of the house.
If you’re able to focus more on the layout and structure, you’ll be able to make a better decision about whether it’s the right one for you. By working with a local real estate agent who is trained to look past any decor, you’ll be able to avoid buyer’s remorse, as well as a host of unforeseen problems.
Buying a Home Just for Today
As a first-time buyer, your number one focus is to get into the market in any way you can so you can begin building equity. That said, you still want to think about the long term. A house that suits your needs today might not work two to five years from now if your family grows and you need more space.
Unlike when renting, you can’t just up and leave by giving your landlord 30 days’ notice. With all the costs of selling and then buying a new house, it’s not financially viable to hop from one place to the next.
Before you even start looking for your new home, make sure you think about what you’ll need in the future. This way, you’ll have the luxury of waiting for a favourable time if and when you decide to move.
Focusing on the Home Rather Than the Neighbourhood
The house itself isn’t your only consideration as a buyer. Remember that even your ultimate dream home isn’t going to make you happy if the location isn’t right for you.
Many first-time buyers fall into the trap of buying a big, shiny new house in a less-than-ideal neighbourhood. The fact is that you can always change and even rebuild a house as your financial power grows. The one thing you can never change at any price is the location.
A good approach to take is to choose your neighbourhood first. Think of the amenities that matter to you, such as schools, parks, shopping, and public transit. Once you know where you want to be, you can find a house to suit your needs.
Waiting Too Long to Get Pre-Approval
The notion of actually putting in an offer and purchasing a home might seem like a long way off. However, when it comes down to it, these deals often happen very fast. That’s why it’s so important that you’re prepared, especially when it comes to finances.
Getting pre-approved for a mortgage before you start looking is important for a couple of reasons. First, it means you can be certain of your budget. It can be heartbreaking to find a dream home you think you can afford, only to be crushed by the banks. Also, a pre-approval means you’re ready to pounce and make an offer as soon as you do find that home you love.
When it comes to your mortgage, don’t forget to shop around. It doesn’t hurt to try to get a better deal by asking banks or brokers to match other rates. You don’t have to accept the first rate a lender offers.
When buying a new house, a little background research into the market is always helpful. You’ll find plenty of valuable insight in the posts below:
Underestimating the Importance of Credit Rating
Speaking of financing, you never want to underestimate the value of a good credit score. Some people never think about it – until they start applying for a mortgage. Poor credit can lower the amount that banks are willing to lend you, and can even prevent them from approving you at all. This is especially true in today’s tighter lending environment.
It’s worth checking your score before heading to the bank to see if you need to do some damage control. Repairing your credit can take time, so it’s best to see what you can do now rather than waiting until you’re ready to buy a home. If your rating is lower than you’d like, don’t be discouraged; it’s always possible to build it back up.
In the meantime, try to keep your debt-to-income ratio as low as possible and make all of your monthly payments on time. And it goes without saying that you shouldn’t take out a massive loan for a new car or expensive vacation, at least until your real estate transaction closes.
Underestimating the Costs Associated With Buying a Home
Buying your house is just the beginning of your homeownership journey. Now, it’s critical that you don’t underestimate all of the other expenses you will soon face. Aside from the house price, you have closing costs, including land transfer tax, lawyer fees, title insurance, and more.
As a general rule, you want to set aside at least 3 to 5% of the purchase price to cover all other incidentals. Plus, remember to keep ongoing maintenance and repair costs in mind. If you plan on a total kitchen or bathroom remodel, you’ll need to save even more to comfortably afford your home.
As a first-time buyer, be sure to take into account all of the additional costs so there are no nasty surprises come closing day.
Buying your first home can be an incredible experience as long as you have realistic expectations and expert guidance at every turn. Now, you know what you need to make your purchase, what assistance is available, and what mistakes to avoid along the way.
Your next step is to reach out to a local real estate agent who will guide you from start to finish and work to negotiate the best possible terms in today’s market.
If you’re ready to move forward, our Etobicoke real estate agents are happy to help! Reach out today at 647-282-7653 or email contact@thompsonsells.com with any questions or to get started.
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