Take Charge When Buying a Home

If you approach the home buying process intelligently and with confidence, you are much more likely to buy a house you'll be proud to call home.

Approaching the task of buying a home can be overwhelming; there's so much to consider:

  • How much house can I afford?
  • How can I find the best loan?
  • Where will I come up with a down payment, and how much will I need?
  • Should I buy a new or resale home, and which will go up in value?
  • Should I work with an agent or look at homes on my own?

And these questions are just the beginning. Buying a home is one of the largest financial transactions in your lifetime - do your research so you know what you’re doing.

Here are the two most important things to remember no matter where you are on the road to home ownership:

1. You can and should understand everything that is happening in the home buying process.

There is nothing that is so complex that it can't be easily explained to anyone with average intelligence. Just because you don't apply for a thirty year mortgage once a week doesn't mean you have to take the first one that comes along. You'll need to learn some new terms, apply some new concepts and take the time to understand what you're getting into.

If, at any point, something happens that doesn't make sense to you, simply demand a full and complete explanation. If it still doesn't make sense, seek help from someone you trust like your CPA, your banker or maybe an online real estate columnist.

2. In the world of real estate sales, YOU are the most important person in the entire process.

It's easy to think that everyone else carries more weight than you. The agent talks fast and has an answer for everything. The lender may decline your loan application, and on and on.

But the truth is that you, the buyer, are the one person in the transaction that makes it all happen. If you decide to not buy, the entire process comes to a grinding halt.

So flex your consumer muscle and take command of this process. Surround yourself with a team of professionals that you have confidence in and make them work for you.

Approach home buying with intelligence and confidence, and by doing your homework, and you are more likely to buy a house you’re happy with and to know that you made the right decision.

First-time buyers plan: 8 steps to buying smart

Navigating the world of Canadian home buying


Step 1: Figure out how much you can afford.


Falling in love with a house you can’t afford can be heartbreaking. Avoid disappointment by figuring out your budget before you start looking.
 
  • First, decide how much you can afford for your down payment. The Home Buyers' Plan (HBP) allows you to withdraw up to $60,000 from your Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home. You must be a first-time home buyer or buying for a disabled person. The withdrawn amount must be repaid within 15 years. More on that here. The bigger your down payment, the less principal you will owe, and the less interest you will pay.
  • Don’t forget about closing costs, like insurance, legal fees, home inspection costs, land registration and land transfer fees. Add those to your moving expenses and service hookup fees, and they can add up surprisingly fast.
  • Your monthly housing expenses (mortgage, taxes, heat, etc.) shouldn’t use up more than 32% of your income. (If your combined monthly income is $5000, for example, 32% of that is $1600.) If you have car payments or credit card debt, the rule of thumb is that debt repayment shouldn’t be more than 40% of your income.
  • Get pre-approved for your mortgage. It’s a good way of finding out how much you can borrow – and it speeds up the process once you’ve found the home you want to buy.

Step 2: Figure out what type of home is right for you.


Sit down and make a list of must-haves and nice-to-haves. Be realistic, but be clear about the features you can’t live without. How many bedrooms do you need? Bathrooms? Do you want a home office? A garage? How about a big backyard? Hardwood floors? Eat-in kitchen? Consider your lifestyle and your stage of life. If you’re planning kids in a year or two, the studio loft might not be your best bet.

Step 3: Decide where you want to live.

Living in an area you like is as important as buying a home you love. Do you want a busy urban lifestyle, a house in the ‘burbs, or a quiet place in the country? Do you want to walk to work or are you okay with a longer commute? Do you need to be close to good schools? Rec facilities? Shopping?

Step 4: Start looking.

Go to open houses. Visit mls.ca. Check the classifieds. Drive around neighbourhoods you like looking for For Sale signs. Talk to your REALTOR® about your needs and start looking at properties.

Step 5: Build a team.

Put together the right group of experts to help you buy. Start with a REALTOR® you trust, then look for a reputable lender or mortgage broker, a lawyer (or a notary in Quebec), a home inspector and an insurance broker. Your REALTOR® works closely with all of these professionals, and will be happy to recommend people you can depend on.

Step 6: Make an offer.

You’ve found the perfect place – now it’s time to make an offer. An offer to purchase includes the purchase price you’re offering, chattels to be included in the purchase (like appliances or light fixtures), the amount of the deposit, the closing date and any other conditions.

Your REALTOR® will help you prepare your offer, and will present it to the vendor, who will either accept it or make a counter offer (which asks for a higher price or different terms). You can accept or reject the counter offer. If everyone agrees, the home is yours. If not, you can make another offer, or you may have to keep looking.

Step 7: Get a mortgage.

Once you’re approved, you’ll need to decide what type of mortgage works best for your needs. Will you go with a fixed or variable interest rate? Will your mortgage be closed or open? What will your amortization period be? Will you make payments monthly, biweekly or weekly? Your mortgage broker or lender can help you find a mortgage that suits your needs – and saves you the most money in the long term.

Step 8: Move in and enjoy!

Trademarks owned or controlled by The Canadian Real Estate Association. Used under licence.