Tips for First Time Home Buyers in Canada: What You Should Know When Buying Your First House
As a first-time home buyer in BC, there’s a whole lot to learn! This is likely the biggest investment you’ve made to date – and you’re probably feeling like a fish out of water. So sit back, put on your big girl (or boy…) pants, and prepare to learn how to buy a house, townhouse or condo. The more you know, the better your decisions will be, but remember – never be afraid to ask questions. You’ve never been this invested in buying a home so we understand you want to make sure you don’t overlook anything. These are Bridgewell’s top first time home buyer tips and everything you should know about buying a home.
First Time Home Buyer Tips: Our Top 9
Tip 1: Get pre-approved for a mortgage & talk to a mortgage broker first
You do not want to look at homes above of your price range and find out you have to settle for something below it and less desirable! Establishing a realistic price range is essential to the home buying process, and talking to a mortgage broker or your bank to determine how much you can afford is the first step towards finding your new home! The mortgage broker is there to look at your income, look at your assets/debts, determine your liquid cash and how much or how little you can put as a down payment, and then give you a better idea of what you can afford. There are other expenses to budget for and you can find some of them in our post Costs of Buying a Home in BC.
Shopping for a home with no expectations or goals in mind is no different than going to a grocery store without a list or budget. You may spend 6 months looking at luxury homes when you find out you can only afford a $300,000 condo! Not only will you end up extremely disappointed, but you’ll also end up wasting your own time. By having a strong grasp on the style of home, size of home, neighbourhood, market prices, and what you can afford you will save a ton of time and ensure that you’re purchasing a home that you can afford comfortably and realistically. If you’re looking for a mortgage broker, see our list of “People We Trust.”
Tip 2: Find the right realtor to work for your best interest
If you’re planning on just using the home seller’s REALTOR, remember that that person first signed a contract that makes them have a fiduciary duty to the home seller and has to work in their best interest. Buying a home is a very large milestone in life. It’s not something that should be done without the help of a trained real estate professional. Your REALTOR will be helping you to determine what you want, write your contract for you, negotiate on your behalf to get the best price, review all documents with you, and make sure the process from acceptance to completion is smooth. With them being such a large part of the process, it’s important that you make sure that you find someone that has experience, understands the market, you trust, and you know has your best interests at heart.
What’s more is to hire someone that you feel is going to educate you along the way and make sure you feel confident in your decisions. You absolutely need to be aware of what’s going on, and not just feel like a fly on the wall! It is YOUR investment.
Do you pay a commission when you’re buying? We can’t speak for every one, but when you hire Bridgewell the buyer does not pay a commission. How is this possible? Because on the listing contract that the seller signs, there is a section that stipulates the gross commission. From that gross commission, there is a split for the buyer’s agent and the seller’s agent. Thus, the seller typically pays the buyer’s agent.
Can you just buy with the listing agent? You can, but it’s probably not the best idea. Think about it this way… the seller’s goal is to get the highest price, but the buyer’s goal is to get the lowest price. How can you have one agent working in both of your best interests, when the goals of each client are on complete opposite sides of the spectrum!? It’s practically impossible. If you do choose to work with the listing agent, and have them “double end the deal” as we say in real estate lingo, you’ll most likely be put under a customer relationship, and they won’t have to uphold the same duties to you as if you were under a client relationship. To make sure you’re in the best situation for yourself, and the most protected – hire a buyer’s agent to represent you and only you. Are you interested in more information about what the buyer’s agent does? See our post on “What Does the Buyer’s Agent Do?”
Tip 3: Separate your needs & your wants – setting priorities
“You can’t always get what you want, but if you try sometimes you’ll get what you need!” Words to live by, from the Rolling Stones! Write a list of your top 5 absolute needs (i.e. # of bedrooms, bathrooms) – things that you cannot live without, and then write a list of your top 5 wants – things that would be nice to have, but aren’t absolutely necessary. Remember to be realistic and always consider your budget. Having something that you want may feel good in the short term, but being stretched too thin and not being able to pay your bills because you over-extended your wants can be a very uncomfortable place to be! Buying a home can turn really emotional – this exercise can make sure you are on track and make the right decisions.
Tip 4: Choose the right neighbourhood – get educated.
Sometimes there’s a neighbourhood you have never been to before but fits the lifestyle you need – don’t rule out nearby neighbourhoods because you’ve never been there before. Start with a type of home, then re-evaluate your budget with closing costs factored in, then select a city, and from there narrow it down to a subarea within that city. This can greatly determine the resale value if you decide on selling the home in the future. Consider transportation, school, noise levels, your favourite restaurants, what you like to do, the demographic of people, etc. It’s more than just about price.
Tip 5: Determine all closing costs upon completion & possession
It’s not just the purchase price you’re paying for – there are other small fees that can come up during the home buying process.So now you know how much you can afford (your mortgage broker’s told you…) and you’ve found an awesome REALTOR that has helped you to separate your wants and needs and help you find your first home. What else is that REALTOR there for? To help you determine your closing costs and any other “surprises” that might pop up along the way.
The real estate process is so much more than just the price. You have to account for lawyer/notary fees, appraisal fees, CMHC mortgage insurance fees (if applicable), annual property taxes, and so much more. We want to make sure you’re not stretched too thin, and that you won’t be stressing out on the completion date and will be able to pay your monthly bills and setup fees once you’re in!
Tip 6: Figure out whether there are any incentives or grants available
As long as you’re a Canadian citizen or permanent resident, first-time home buyers are typically exempt from property transfer tax. To learn more about this, see our post on “When do I Pay PTT?”
If it’s a new build home, you may be eligible to receive 36% of the GST total (5%) on the home. To learn more about this, see our post on “When do I Pay GST?”
Ask your lender, have them prepare an estimate statement of adjustments for you so that you can think about allocating your incentives/grants towards your other closing costs. You can also use our tax calculator by clicking here.
Tip 7: Know The Home Buying Process
If you haven’y fully discussed with a REALTOR on what to do, here is a quick overview of what to expect on your journey towards your first home. This can surely minimize some of the surprises!
- Figure out WHAT you need & your price range.
- Understand the terminology – offer, deposit, completion, possession, adjustment, subject removal, mortgage, amortization, interest rate, title, firm… the list goes on and on.
- Find a home that meets your needs and is within your budget.
- Write an offer that stipulates the dates you’d like to move in, price you’re offering, deposit scheme, subjects, and other terms/conditions (i.e. washer, dryer, fridge, stove, microwave, etc. all included in the purchase price). Once your offer is submitted, the seller can accept it as is, reject it all together, or counter offer. The counters can go back and forth, and both sides may need to compromise on small things, but a good REALTOR will work hard to get you what you need and want. If you both come to an agreement, you’ve now landed an “accepted offer” pending subject removal and move to the next step!
- Begin the subject removal process. What is subject removal? Subject removal is typically a 7 day long period that occurs once the offer is accepted. These subjects are included in a sales contract and state that certain events must be met before the contract is valid. Examples of subjects may be receiving and approving financing, inspection reports, strata documents, a property disclosure statement, and/or a title search. For example, if the buyer conducts an inspection during the subject removal process and finds out that the home has had a fire they are able to pull out of the deal and it “collapses”. On the flip side, say you conduct all of the subjects and you are satisfied with all of them. You then say that you are going to “remove subjects” and the deal is now firm!
- If all conditions are met and you choose to remove subjects, hand in your deposit. The deposit is typically 5% of the purchase price. Depending on what the contract states, the deposit is typically due upon subject removal or within 24 hours of subject removal by form of bank draft in trust to the buyer’s agent’s brokerage. The deposit will form a part of your down payment.
- Prepare for the completion date and you move in date! Closing is the point at which the ownership of the property are transferred from the seller to you. It takes place once all the legal and financial obligations have been met. Closing the purchase will be a team effort: in addition to yourself, your REALTOR, your lawyer and your lender will all be involved in helping close the deal.
- Move in to your new home!
Tip 8: If you’re buying a strata home understand it & make sure you have all of the strata documents
What’s a strata? Simply, it’s a condo or townhome. It’s more than that but we’ll keep it there for now.
Most first-time home buyers are purchasing an attached home – which means a condo, townhouse, or duplex. It’s where you usually enter in to the market because typically it’s on the more affordable side of real estate.
Find out the strata fees. You have to pay monthly fees to the strata for maintenance and well-being of the building. Check and see if there are any upcoming special levies or assessments that will be money directly out of your pocket, and not the contingency reserve fund.
Make sure you have a copy of all of the reports on the home. There should be strata minutes for every month where you can review the meetings held by the strata regarding the building. There may be depreciation reports and engineering reports detailing what needs to be done for the building immediately, in the near future, and far down the road. These are just a few of the documents you need during the subject removal process. Have your REALTOR dig these up for you so that you can review and approve them together.
Tip 9: As a first-time home buyer, NEVER BE AFRAID TO ASK QUESTIONS!
You’ve never been this invested in buying a home before and have not been exposed to the process. Keep asking your REALTOR questions if you aren’t too familiar with some of the concepts or even just terminology. The above advice and tips are extremely important to first-time home buyers. When you’re dealing with one of the largest assets of your life, it can make the process not seem as “daunting” or difficult! A first-time buyer needs to understand and feel comfortable with the professionals they are working with – “no question is a dumb question!”
It is so important to us that you feel empowered and educated throughout this process – so if you’re a first time home buyer reading this post and have questions, give us a call, text, or email with any question you have! We can answer all of your questions, and give you specific first time home buyer tips related to the contracts, home searching, and more. We’re here to help.
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