What First-Time Home Buyers Need to Know

By Kerri-Lynn McAllister
Special to WalletPop Canada

So, you're at the stage in your life where you are at least thinking about buying a home or condo, but have no idea where to start. This is not uncommon. It is, after all, completely overwhelming and likely the largest purchase you will ever make.

Before you start pouring over new real estate listings on sites like BuzzBuzzHome.com and NewinHomes.com, or Vogue-ing your virtual living room, you might first want to figure out exactly what it is you can afford.
First the Financing
Affordability is based on your household income, your monthly expenses (car payments, credit cards, etc.), as well as the expenses associated with owning a home (property taxes, condo fees, and heating costs).

You also have to determine if you have the outright cash resources required to purchase a home. This includes the down payment put towards the purchase price in addition to the closing costs that will be incurred to complete the purchase.

The minimum down payment in Canada is 5%, but if you can stretch that to 20%, you can avoid paying mortgage default insurance. Default insurance, commonly referred to as CMHC insurance, can run up to 2.95% on your mortgage value, or $2,950 for every $100,000 of mortgage.

Further, closing costs such as Land Transfer Tax and legal fees can run you up another 1.5-4% on the selling price of your home.[1] Some closing costs are not mandatory, like a home inspection; however, it is highly recommended you contract one as it could save you thousands later on.

Luckily, there are some great online resources like RateHub's mortgage affordability calculator that take into account all these costs for you, and will give you a pretty accurate picture of what you can afford.

Got your number? Okay, let's find you a home.
Start to map out what it is you are looking for in a home or condo. Of course, there are the structural requirements like the roofing, wiring, heating and plumbing in addition to the material finishes.However, you should also think about your personal requirements and lifestyle. Do you spend a lot of time entertaining and cooking? Then you probably want an open layout kitchen. Similarly, you may want your own personal space closed off, and would benefit from a split layout with bedrooms separated by common areas. If you are looking at a condo, there are a number of special considerations to evaluate as well such as the make-up of the condo community, parking, and vicinity to noise such as common areas or construction. Make a list of your needs, 'would-be-nice' additions, as well as your deal-breakers.

Equipped with a good idea of what you can afford and what you are looking for, you can then enter the house hunting game. Start looking and don't stop until you have a good understanding of what's out there. With so many resources at our disposal in this age of technology, there are endless search options and criteria. Matthew Slutsky of BuzzBuzzHome.com says 'using our search engine, you can refine your queries by price, city, neighbourhood or even maintenance fees.' A next step might be to find a realtor who can direct you to homes of interest and guide you through the home buying process. At the very least, drive around neighbourhoods you are interested in and look out for 'for sale' signs. You might just get lucky!

Stay tuned next time for a more detailed overview of mortgage financing options, and happy house hunting!