12 first-time homebuyer tips

1. Don’t Rush

This first one isn’t a fun one, but it’s worth stating anyway. If you’ve started home shopping, the following scenario might sound familiar to you:

You see a house listing online or get one sent to you by your realtor. Before you even get a chance to visit, you fall in love with everything about the property from the layout of the kitchen to the size of the backyard. Your realtor tries to set up a viewing for you, but unfortunately, before you’re able to attend it you learn that the sellers have accepted a conditional offer.

As disappointing as this is, it’s a common occurrence (even more so in hot markets like today’s).Try your best to not get caught on the idea of the first, second, or even third house you see. And don’t get too down on yourself if your first few offers don’t go through. As hard as it is, it’ll help you in the long run if you exercise patience and trust that the right house will come along.

2. Be Realistic About What You Can Afford

When you’re gearing up to make a home purchase, there are some fun things, like deciding the style of house you’re looking for and the area you’d like to live in. And then there’s some not-so-fun-but-still-very-important things, like figuring out how much house you can afford.

When it comes to figuring out your budget, you can make it easier on yourself by being hyper-realistic about what your monthly expense look like. It’s painfully eye-opening, but necessary. Your $100 phone bill or $400 student loan payment may help you decide whether you should be looking to take on a $1000 or $1500 mortgage payment. Keep in mind that, depending on your situation, you may also have to pay closing costs.

3. Track Your Credit Score

Here’s one that should be on every first-time home buyer’s checklist but is often left out. Your credit score is one of the factors that the bank will look at when determining whether or not to lend to you. Fortunately for us, our credit scores do not remain static for our entire lives. If you have less than stellar credit, there are some things that you can do to improve your score, like improving your credit utilization rate and refraining from applying for any new credit accounts.

The catch is that these things take time, so you’ll want to start working on your credit a long while before you buy a house (preferably at least one year in advance). A free online credit monitoring tool like Borrowell or Mogo is a great place to start.

4. Save up for Down Payment and Closing Costs

The minimum down payment on a home in Canada is 5%. For example, a home that costs $400,000 has a minimum down payment of $20,000. Add to that closing costs (legal fees, appraisal fees, land tax, mortgage insurance, etc.) which account for anywhere between 2-5% of your mortgage and you have a significant challenge on your hands. It is important that you start early and put aside some cash every month towards your down payment and closing costs much before you approach a lender for a mortgage. As of April 2023, the Canadian government introduced the First Home Savings Account to help Canadians save for their first home.

5. Do Your Research

For this one, we don’t necessarily mean researching articles about how to buy a house (although that’s a good idea, too, and hey, we guess that’s why you’re here!)

The research that we’re talking about here is about your target neighbourhoods and cities. A house that lacks curb appeal might be worth the investment if it’s near a great dog park or down the road from your ideal elementary school. Similarly, a house that offers all the bells and whistles might not be worth the hour commute. If you’re able to, the best thing to do is to visit your potential neighbourhoods at least three times: during the day, at rush hour, and in the evening. This will give you an accurate idea of what it feels like to live there.

6. Make a List of “Must-Haves”

If you’ve ever watched a house hunting show on TV, you’ve likely picked up on how new homebuyers get caught up on small and easily fixable details like the colour of the walls or carpeting on the floors. Try your best to not get distracted by factors that are not dealbreakers—it could cause you to pass up on the perfect house when it’s right in front of your eyes! Focus instead of making a list of “non-negotiables” and “nice-to-haves”. You don’t have to compromise on everything that you want, or on the things that are the most important to you. But you’ll likely have to compromise a bit, so it’s important to check in with yourself and discover where your personal line is.

7. Secure a Mortgage Pre-Approval

A mortgage pre-approval doesn’t replace the actual mortgage approval, so you’ll need to be officially approved for a mortgage as well. A pre-approval is not a necessity, but it can be nice to have while you’re looking at houses. In fact, some realtors may ask that you have a pre-approval before they begin showing you houses. A mortgage pre-approval not only tells sellers and lenders that you’re a fiscally safe choice, but it also shows you are a serious buyer.

8. Consider a House Inspection

This one’s important for anyone, but especially those who are buying an older house. In many places, you are not legally entitled to a house inspection when you buy a house. While this saves you some at the time of purchase, it can end up costing you a whole lot in the long run if there’s a problem with the house that you didn’t foresee.

You can save yourself a lot of grief by paying for a home inspection. Be sure to hire your own independent home inspection who will be able to alert you to any ongoing or possible future issues with the integrity of the home.

9. Set up an Emergency Fund for Repairs

If you’re coming from the world of renting, you might be worried about the possible new expenses that can come along with owning a house. While you might get lucky and encounter no major expenses in your first year, it’s a good idea to set up an emergency fund for any house repairs. Psst: you should also be prepared to pay more in utilities (especially if you had an all-inclusive renting set-up).

10. Choose the Right Realtor

Choosing a realtor is a big decision—they can make or break your house hunting experience! When choosing the right realtor, try to not be influenced to go with somebody who is a friend or family member unless you’re sure of their ability. Try instead to shop around as much as possible, checking references and reviews and asking your prospective realtors a lot of probing questions.

11. Consider a Credit Union

If you have an unconventional career path (like a freelancer, business owner, etc), then you might find it hard to get a mortgage, even if you have great credit and a healthy down payment. This can be discouraging, but don’t give up quite yet. It’s worth trying to go through a local credit union instead. These operations are usually more understanding than big banks.

12. Shop Around for Mortgage Rates

Getting approved for a mortgage is exciting, but don’t let excitement talk you into signing the dotted line! Instead, you should do your due diligence and shop around for mortgage rates and conditions. A mortgage broker can help you with this process—otherwise you should be looking at least 3-5 mortgage offers.

Fortunately, it’s easier than ever to shop around for a mortgage online.