A guide to first time home buyer

first time home buyer guide

Buying a Home is one of the biggest investment that anyone makes in his or her lifetime. Buying a home can be a huge challenge if you haven’t done your homework while can be a seamless job if you are well prepared and have done all your research. We are presenting a small guide to first time home buyer and we hope this would help you prepare well.

Decide the type of home you need:

home search

Before making a decision to buy a home, you have to figure out what type of home would you require. The choice of your home might depend on the following factors:

  • size of your family
  • your family income
  • vicinity to your job location
  • Age of a property

and more. Based on these factors, you then need to figure out the type of home that you would need. If you are living in and around the downtown Toronto, you might want to buy a condo or a townhouse unless you have enough money to buy a detached or semi-detached. If you are working in Mississauga or Brampton or prefer to live in the GTA, you might want to buy a townhouse, a semi-detached home or even a detached home based on your income and family size. A good way to evaluate your buying power is by considering the formula of debt-to-income ratio. This may help you get a clear picture on how much you can afford to buy considering all your regular expenses.

Applying for a Mortgage:

apply for mortgage

First time home buyer mortgage: The next important step would be the mortgage. You would need to figure out how much mortgage would you be able to secure before making any home buying decision. At the first-time homebuyer, calculate the amount of mortgage that you can afford. Use any good mortgage payment calculator that should give you a good idea about how much can you afford. The amount of your down payment will determine whether you’ll have a conventional mortgage or a high-ratio mortgage, which must be insured. The government has modified some rules for new mortgage down payments this year. Here are the details. Effective February 15, 2016, any home with the purchase price less than or equal to dollar 500,000, the minimum down payment has to be a minimum of 5%.For homes with a purchase price greater than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance. For homes with a purchase price of $1 million or more, the minimum down payment is 20%

Land Transfer Tax Refunds for First-Time Homebuyers

tax Rebate first time home buyers

First time home buyer tax credit: As a first-time homebuyer, you are eligible for a land transfer tax refund issued by the Government of Ontario. The land transfer tax is the amount that you pay on purchasing a home or an interest on the land. First-time homebuyers are eligible for a complete exempt on this tax. To claim this tax refund, you should not have any home on your name either in Canada or any part of the world.

RRSP homebuyers plan

RRSP homebuyers plan is a great way to save tax when you are buying the home for the first time. Under this plan, as a first-time buyer you are allowed to borrow up to $25,000 from your RRSP account as you down payment. There is no tax on this withdrawal but since RRSP is a loan, you will have to pay that within a time span of 15 years. But this is a great opportunity to withdraw RRSP from your account tax-free as a down payment. Your RRSP account should be older than three months or 90 days to avail this opportunity. If you have a partner who is buying a property along with you, each partner can contribute $25,000 each which makes up to $50,000 as combined down payment from your RRSP account.

Home shopping

The next and one of the most critical steps is looking for a suitable home. You need to understand if you are in the seller’s market or in the buyer’s market. In the seller’s market, there is usually a shortage of homes while there are a number of buyers. The seller is an advantage as multiple buyers try to buy one single property which eventually leads to the rise in the house price. In the case of buyer’s market, which is currently the situation as of fall 2017, there is a huge unsold inventory of homes while buyers are cautious to buy. So if you are shopping in the buyer’s market, you are at an advantage. You can negotiate the best deal for your home since you have plenty of options to choose from.

Engaging a good real estate agent

Another very important step towards your home goal is choosing a professional real estate agent who knows the market very well. Home buying is a big decision so don’t fall for dicey advertisements or solicitations from your relations. The real estate agent that you choose should have a good experience in home buying and selling and should know the market very well.

Signing an offer

home offer sign

once you’ve chosen the home of your choice, the next step is putting an offer for the home. If you are in the buyer’s market you can always go a lowball. This can be done through your real estate agent. Make sure you add all the necessary clauses which cover you in case of any eventuality. You need to put all possible clauses including the approval of mortgage condition, home inspection, date of closing etc. Home inspections are very critical and cover you in case there is any major structural flaw or home needs a major repair. These can be repaired at the cost of the seller before the buyer takes over the property. Once your offer is accepted, you deserve congratulations!

Closing Costs:

Closing costs include fees and payments towards your legal fees, transfer, title insurance, City Taxes etc. Check with your Real Estate agent about the estimated costs so you are well prepared before moving into your home. You might bump into some unexpected charges and fees and have some extra room just in case.

Engaging a Good Real Estate lawyer

real estate lawyer

After your offer is accepted, you have to engage a good real estate lawyer who has good experience with real estate laws. The lawyer will help you with all the transactions title search and all formalities that are associated with the transition of the property.

Moving into the home

home moving

This stage of home buying is one of the most exciting stages. Moving into your first home can be both exciting and challenging. Based on your date of closing in the agreement offer, you should plan well ahead of how you are going to move. If you have lots of furniture in your current home, you need to hire a good moving rental company, who can take care of moving all your furniture and home stuff into your new home. Always set aside your moving expenses. Once you have moved to your new home, it’s your duty to keep your existing home clean and tidy because there is nothing like your own home.

  • Update all your records to new address including Banks, medical records, Tax etc. Once you have moved to your new home, it’s your duty to keep your existing home clean and tidy because there is nothing like your own home.
  • Engage Canada Post to redirect or forward all your mails at the old address to new address at least for 3 months.
  • Test the smoke & carbon monoxide detectors
  • Change all the old locks
  • Reprogram Garage door openers
  • Locate all the important utilities including Electrical Circuit, Main water shut-off valve, Gas valves etc.,

Nothing have you more happy than moving into a home that you can call your own. It’s a great feeling and we hope you will enjoy this!