First-time homebuyers: What you should know
May 01, 2019
After their marriage in 2016, Mathew Hopkins and his wife Sarah knew they wanted to buy a home as soon as possible.
“We kept a close eye on the real estate market to get an idea of what we could afford,” says Mathew, a 36-year-old entrepreneur. “Then, we worked with a realtor and mortgage broker, who really walked us through the process and explained in detail what costs we would incur.”
In 2017, the couple purchased a three-bedroom-plus-den South Surrey townhome under construction for $635,000.
“We really did our homework, so we knew what our upfront costs would be going in,” says Mathew. “Having a really good realtor and mortgage broker really helped.”
Understanding the costs
Hopkins realized before he talked to mortgage lenders the importance of setting a budget. He and his wife tallied up their monthly expenses and subtracted this number from their net monthly income, which includes contributing to their savings account, entertainment / lifestyle expenses, and other things that are important to them.
“Forget what you need to save for transfer and property taxes. First-time homebuyers have to budget for their day-to day-expenses,” says Nicole Wells, vice-president at Home Equity Financing RBC.
“It can be a real shock to some when they start to realize how much they need to live on. You don’t want to be house poor, unable to enjoy a dinner out once in awhile … Really look at your budget beyond how big a mortgage you can afford.”
A good team now saves headaches later
Wells gives kudos to the Hopkins for “doing their homework and choosing the right people to assist them.” Homebuyers should consider the people they will be working with as their team and hire the best people that they can afford. The team will include many members – a realtor, lender or mortgage broker, inspector and a real estate lawyer. They should all be experienced enough to deal with any issues that arise.
“The importance of picking the right people cannot be overemphasized,” says Wells.
Buyers should Interview a few to make sure they are comfortable with her or him. Wells cautions prospective homebuyers to not pick a realtor because “They have a kid on the same team as yours, or you went to high school with them.” You can certainly interview that realtor, but choose one that has done deals in your area, and has some experience. The more knowledge, the more likely they have seen the good, the bad and the ugly in the neighbourhood you are interested in.
The same applies for the lawyer or notary that you choose to close the transaction for you. Make sure they have the know-how to handle your file. Phone around and ask for detailed quotes, but also ask about their experience and expertise, then make your decision.
One of the biggest mistakes first-time homebuyers make is not preparing for life’s inevitable “surprises.”
“What if one or another loses their job or falls ill, or the water heater needs to be replaced a few months later,” says Wells. “It is always smart to have money saved for these orother surprises.”
Then, add in the recent qualifying rules by the federal government, and the process can seem even more daunting.
On its website, the Canada Mortgage and Housing Corporation (CMHC), offers a free workbook, Homebuying Step by Step: Everything you need to buy a home in Canada.
This is a great tool, complete with worksheets, calculators and checklists, to help you navigate each step of the homebuying process.
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About Michelle Hopkins
Michelle Hopkins is a freelance journalist and corporate writer with extensive experience in development projects, home and business writing.