Congratulations on your decision to buy your first home. Though the first-time home buying process is exciting and new, it can also be daunting if you don’t know what to expect. Prepare yourself for the journey ahead with these seven helpful tips.
1. Have Your Down Payment
The first (and often longest) step to purchasing a new home is to save your down payment. In Canada, all new home purchases under $500,000 require a down payment of 5%. The down payment is deducted from the home’s overall purchase price, and your mortgage covers the remaining amount. Helpful tips for saving for a down payment include:
- Paying down your debts
- Putting your money into a Tax-Free Savings Account (TFSA)
- Putting financial windfalls, bonuses and raises into savings
- Cutting excess spending and paying cash instead of debit
- Taking advantage of home buying programs and incentives (more on that below)
2. Look Into First-Time Home Buyer Programs
The Government of Canada offers several programs and incentives geared towards making home buying more affordable for first-time buyers:
The Home Buyers’ Plan – The Home Buyers’ Plan allows qualifying home buyers to withdraw a maximum of $35,000, tax-free, from their RRSPs to buy or build a home. If you’re buying a home with a partner, they may also be eligible to withdraw for a total sum of $70,000.
GST/HST New Housing Rebates – First-time buyers may be eligible for money back after buying or building a new home. A great way to recoup costs, the rebate equals up to 36% of the GST paid for homes of $350,000 or less.
The Home Buyers’ Amount (HBA) – The Home Buyers’ Amount also helps first-time buyers offset some of the costs associated with a new home purchase through a non-refundable tax credit. Valued at $1,500, the HBA helps reimburse buyers for closing costs, moving costs, legal fees, etc.
First-Time Home Buyers’ Incentive – The First-Time Home Buyers’ Incentive is a shared equity mortgage between the buyer and the Government of Canada. The government will lend you a certain amount based on your home’s purchase price, ultimately helping you reduce your overall monthly mortgage payments without saving more for a down payment.
3. Check Your Credit Score
Your credit score is the largest determining factor regarding:
a) whether you’ll qualify for a mortgage, and
b) how much mortgage you’ll qualify for and at what interest rate.
According to Equifax, a good credit score typically falls between 660 and 724. If your credit falls below this range, here are a few easy steps you can take to boost it:
- Pay your bills on time
- Make more than the minimum payment
- Focus on the account with the smallest balance first
- Pay purchases off immediately
- Keep your current cards and accounts open (this helps improve your utilization rate)
- Get a copy of your credit report and dispute any errors
4. Get Pre-Approved
A mortgage pre-approval is a commitment from the lender to loan you a certain amount for your new home’s purchase. The lender will take a detailed look at your finances, including income, debts, and assets, to determine how much they’ll be willing to loan you and at what interest rate. This is a critical step in the first-time home buying process, as it lets you know how much home you can afford while ensuring you’re taken more seriously by sellers and home builders.
Note: A mortgage pre-qualification is not the same as a pre-approval. Instead, a pre-qualification will tell you how much a lender might be willing to lend you based on your current financial situation.
5. Decide Which Home Style is Right For You
Inevitably you’ll need to decide between a new construction home or a resale (previously owned). Are you interested in a brand-new condo? A resale townhome that you can fix up and make your own? Here are a few things to consider:
New Construction Homes
- As the first owner, everything is fresh and new without the need for repairs, renovations or changes.
- New homes are built to the latest standards and are more energy-efficient (i.e. lower utility bills).
- Brand new systems, appliances and a comprehensive new home warranty mean less maintenance for you.
- The potential to personalize your home’s features as you see fit, including countertops, flooring, cabinetry and more.
- Brand new neighborhoods near established amenities.
- Resale homes are located in more mature neighborhoods.
- Depending on the home style and location, resales tend to cost less upfront.
- Resale homes are move-in ready without the need to worry about construction timelines or delays (though most builders have quick possession homes available).
6. Research the Communities
When it comes to your overall quality of life, the Edmonton neighborhood you choose is vital. Of course, your ideal community will depend on your unique needs and lifestyle, but be sure to keep the following in mind:
- Distance to work
- Proximity to shops and services (i.e. grocers, medical services, etc.)
- Recreational amenities such as parks, walking trails, gyms or leisure centers
- Restaurants and entertainment venues such as movie theaters, live music venues, pubs, etc.
- Schools (property values tend to be higher in neighborhoods with schools).
Other things to consider are the sights, sounds and smells of a prospective neighborhood. For example, nearby highways, flight paths, poorly maintained infrastructure, and unpleasant aromas (i.e. a wastewater treatment plant, farm or factory) will likely affect your future happiness.
7. Be Prepared for Additional Costs
Last but not least, you’ll need to prepare for the additional costs associated with buying your first home. Besides the down payment, home insurance, closing costs and other purchase-related expenses, you may be required to buy furniture, hire movers, pay installation costs (i.e. internet, cable, etc.) and more. Other costs may include:
- Condo fees
- Renovations or repairs (if opting for a resale home)
- Landscaping and maintenance tools (i.e. lawnmower)
Are you thinking about buying your first home near Edmonton? As a premier Edmonton land developer, Landrex offers a range of new and affordable communities suited to every buyer and budget. Contact us today to see how we can help you make your first home dream a reality.