Last Updated on October 24, 2023 by Heather McDowell
In this age of seemingly soaring interest rates, first-time homebuyers are uniquely disadvantaged. While everyone is feeling the pinch of recent announcements from the Bank of Canada if first-time home buyers couldn’t catch a break during the times of remarkably low-interest rates, what hope do they have now?
Well, we at Canadian Real Estate Wealth are pre-destined to cheer for the underdog. In that vein, we thought we’d share the best advice we can offer and tapped Toronto real estate titans and top-notch REALTORS ® Aleksandra Nowak and Tony Sbrocchi of The Condo House for the insider information that they share exclusively with their first-time home-buying clients.
Advice From The Trenches
You can shop once you know the amount of the mortgage you are eligible for. Based on this sum, only consider homes that you are certain you can afford. Don’t be lured into looking at properties well beyond your eligibility amount by thinking the seller will take less in this market. To put it another way, don’t fall in love with houses you can’t afford.
Beyond that, you’ll be looking for the ideal mix between the home’s features, location, and overall condition. Remember that this is your first foray into the real estate market and that your dream home might not come up for sale right away.
Many people are unaware of how many details of a sale are negotiable. Unable to obtain your price? Find additional bargaining chips that can let you go with a new house and be content. To only consider price is a grave error.
Ask your agent for expert recommendations; contrary to what you may have heard, agents serve as ministerial fiduciaries who prioritize your needs over their own. Be prepared to contact reputable contractors or house inspectors who frequently collaborate to ensure a home’s condition.
In this market, go for the home inspection; even if it’s a pre-inspection. An inspection report may uncover structural damage or issues with critical systems that would be too costly for the buyer to undertake. It’s not uncommon for a thorough inspection to reveal unanticipated defects. If found, don’t be afraid to instruct your REALTOR ® to ask for a reduction.
Apart from understanding all of the closing costs (psst… your real estate salesperson can help with this) and lawyer’s fees, being a homeowner requires having a rainy-day fund. This is for repairs and other expenses that may arise, such as when your furnace breaks down in the middle of a frigid winter night.
Another piece of invaluable advice comes from the indelible and astute agents, Aleks and Tony. The must-do advice that they share with their first-time home buyer clients is:
Do not shop your credit once the bank provides you with the pre-approval. One of the biggest mistakes we see is first-time buyers going out to shop for their new home prior to taking possession and doing so on credit, ie. Leon’s don’t pay a cent event. This could lead to actually having your firm approval denied at closing due to debt services ratios increasing.
The Landmines To Avoid
We’ve corralled a list of common mistakes first-time home buyers make so that you, our loyal readers, can benefit from knowledge gained by others in their missteps.
Here’s a short list of things to avoid when house shopping.
5. Falling in love with home staging. We all know this but still, we do it. Take 3 minutes and map out your furniture in each room of the house. If it doesn’t fit or fit in but you’re still lovesick about the house, factor your new décor into your budget.
4. House shopping while distracted. People often bring other folks when house shopping, be it children, parents, or friends. Consider doing this for only the short-list ones and on your second pass. Children can make it difficult for parents to have the opportunity to look into all of the nooks and crannies. Parents are often critical of a starter house.
3. Not investigating the neighbourhood. You buy the house, but you marry the neighbourhood. Make sure you’re ready for the long-term commitment of it. If there’s a small nuisance that you find irksome at the time of your showings, it’s only going to become a big nuisance once the home is yours.
2. Neglecting to ask for comparables. Actually, you should expect an offer of this from your real estate salesperson for each of the properties that you’re serious about.
The number one gem of items to avoid comes from the sage minds of Mr. Sbrochi and Ms. Nowak. It is as follows:
1. Don’t let the glitz and glam fool you as we don’t have the ability to see what’s behind the walls. Homes that have been recently renovated or updated should be checked to ensure permits were pulled for major work and ensure they have been closed by the municipality.
Finding Funds
Lastly, while it’s not necessarily free money, here is a list of some government programs meant to lessen the burden specific to first-time home buyers:
- The Canada Mortgage and Housing Corporation (CMHC) First-Time Home Buyer Incentive is a program that offers access to an interest-free loan, to help first-time home buyers get into their first real estate investment. They’ll top up your down payment by 5% on most homes or 10% on new builds — for a shared-equity mortgage. For more information visit, cmhc-schl.gc.en
- The Home Buyers’ Plan (HBP) allows people to purchase or construct a home, you can withdraw money tax-free from your registered retirement savings plan (RRSP). The HBP allows each borrower to withdraw making it ideal for first-time purchasers, particularly couples. Starting two years after the withdrawal, homeowners have 15 years to repay the money they borrowed interest-free.
- Most provinces and territories have some variation of land-transfer tax rebates for first-time home buyers. Since it varies in amount and eligibility requirements by region, we’ll let you dig into the specifics for your area. However, we’re confident that you’ll find the research puts some well-earned money back in your pocket, so it’s time well spent.
In Conclusion
Perhaps the single best piece of advice that Canadian Real Estate Wealth can offer its valued readers is to assemble a team you can trust, REALTOR ®, Lender, Lawyer, and Inspector. Ask friends and family for local recommendations or interview candidates to be sure you are a good fit. There is plenty of proverbial fish in the sea. For the single largest purchase in most people’s lives, you need someone with which you can put all of your faith. If it’s not a good fit, just move along (without feeling guilty about it).
If you or someone you know is a first-time homebuyer and looking for trustworthy and supportive agents to make navigating the home-buying process a breeze, consider reaching out to Aleksandra Nowak at aleksandra.nowak@century21.ca and Tony Sbrocchi at tony.sbrocchi@century21.ca to start the process on the right foot.
Heather McDowell is a mother and a REALTOR®. Heather has spent most of her real estate career selling residential real estate, and its leasing and has dealt with the additional complexities of the cottage, timeshare and rural properties, and condominiums. She has dabbled in new construction and is expanding her portfolio to include commercial sales and leasing. Heather is also a dedicated volunteer for both the local women’s shelter and a national hospice organization and is an emerging playwright.
Heather describes her focus as diversifying real estate content that not only addresses national matters but explores those issues unique to each province and territory.
You can contact Heather at heather@crewmedia.ca or find her on socials at:
Facebook – https://www.facebook.com/thestoreytellingcompany/
LinkedIn – www.linkedin.com/in/heather-mcdowell-98134118b
Instagram – https://www.instagram.com/hmcdowellrealty/
