Tips for First-Time Home Buyers

If you are a first-time home buyer, navigating the purchase of your first property can be both an exciting milestone and an overwhelming process. From financial preparation to navigating the mortgage closing process and beyond, there are several factors to consider before you begin the search for your new home. In this guide, we will cover the top tips for first-time homebuyers in Canada, to help set you up for success.

Financial Preparation & Mortgage Considerations

When you apply for a mortgage, the top three factors impacting your odds of approval are your income, your credit score, and the size of your down payment. Strong, steady income indicates to your lender that you have enough financial flexibility to make your monthly mortgage payments on time. Furthermore, a strong credit score indicates that you have a solid history of repaying debt, increasing your lender’s conviction in your ability to repay your mortgage. Finally, the greater your down payment, the smaller your mortgage will be. The smaller your mortgage, the less income you need to qualify for approval. Therefore, putting down a higher down payment can improve your odds of approval .

To best prepare for your mortgage application, here are a few steps to consider:

• Establish a budget: Before beginning the house-hunting process, evaluate your financial situation and set a realistic budget. Consider your income, expenses, and any potential changes in the future. Determine how much you can comfortably afford for a down payment, monthly mortgage payments, and other homeownership costs.
• Improve your credit score: A good credit score is essential for securing a favourable mortgage rate. In Canada, credit scores range from 300 to 900, but you will need a minimum score of 620 to qualify for any AAA lender. Take steps to improve your credit by paying bills on time, reducing debt, and correcting any errors on your credit report. This will increase your chances of qualifying for a mortgage with competitive terms.
• Save for a down payment: Save diligently for a down payment, aiming for at least 20% of the home's purchase price. While there are options for lower down payments, a larger down payment can lower your monthly mortgage payments and potentially eliminate the need for private mortgage insurance (PMI).
• Get pre-approved for a mortgage: Before beginning your home search, get pre-approved for a mortgage from a reputable lender. Pre-approval strengthens your position as a serious buyer and helps you get a better sense of your ideal price range.

Finding Your New Home: Offers and Negotiations

Once you have established your budget, gotten pre-approved for a loan, and determined your price range, it is time to begin making offers. Here are a few of our best tips for this stage of the process:

• Define your needs and wants: Make a list of your essential criteria for a home, such as location, size, number of bedrooms, and desired amenities. This will help you narrow down your search and focus on properties that meet your requirements.
• Hire a reliable real estate agent: Partnering with an experienced real estate agent can save you a lot of trouble, especially as a first-time buyer. An agent will assist you in finding suitable properties, negotiating offers, and navigating the entire home-buying process.
• Conduct thorough research: Once you identify potential properties, conduct thorough research on the neighbourhood, local amenities, school districts, and property values. This information will help you make informed decisions and avoid potential surprises down the line.
• Make a competitive offer: When you find your dream home, work closely with your real estate agent to submit a competitive offer. Consider factors such as market conditions, recent comparable sales, and the seller's motivations. Your agent can guide you in crafting an offer that is appealing to the seller while protecting your interests.

Understanding the Mortgage Closing Process

Once you have secured a home, put down an offer, and both parties have agreed to the sale, it is time to begin the closing process. Here are a few of our best tips to help you through this leg of your homebuying journey:

• Review closing documents: Once your offer is accepted, you will move into the mortgage closing process. Take the time to carefully review all loan documents provided by your lender. Understand the terms, conditions, and any associated costs or fees. For more information, check out our guide on understanding your closing documents .
• Conduct inspections: It is crucial to conduct home inspections before closing to identify any potential issues or repairs needed. Hire a professional inspector to thoroughly evaluate the property's condition, including structural components, electrical systems, plumbing, and more.
• Secure homeowners' insurance: Before closing, you will need to secure homeowners' insurance to protect your investment. Shop around for insurance providers, compare coverage options, and ensure you have adequate coverage for your new home.
• Work with a professional: because this is your first time going through the closing process, it may be easier to consult a professional broker with years of closing experience. By working with a Clover Mortgage broker, you can ensure the terms outlined in your closing documents are fair and favourable, and help the process run as smoothly as possible. Contact Clover Mortgage to schedule a free consultation, and take the first step towards homeownership—today!

FAQ

Who qualifies as a first-time home buyer in Ontario?

The classic definition of a first-time home buyer is as expected: a person who has never previously bought or owned a home. However, there are luckily a few government incentives for first-time home buyers that follow much laxer definitions. The Home Buyer's Plan (HBP) is an incentive that allows first-time buyers to draw money from their RRSP in order to fund the purchase of their home— without incurring the typical fees. Under the HBP definition, a first-time homebuyer is someone who, in the past four years, you did not occupy a home that you owned, or one that your current spouse or common-law partner owned.

How much do you need to make to buy a house in Ontario?

The amount of money you need to make to buy a house in Ontario can vary depending on several factors, including the price of the home you are considering, your down payment, your credit score, current interest rates, and other financial obligations you may have. Generally, when determining how much you can afford to spend on a home, it is recommended that your housing costs (mortgage payments, property taxes , and insurance) should not exceed 30% to 35% of your gross monthly income.