When you’re considering buying your first home, it’s tempting to spend hours looking at online listings, virtual tours and neighbourhood guides. However, there are certain resources for first-time home buyers that you should be looking at.
In fact, the Canadian Mortgage and Housing Corporation (CMHC) found that 83% of first-time home buyers begin their search online (while stats from CREA and NAR show as many as 90% of buyers start their search online). And why not? Online resources are valuable. But this doesn’t mean that a buyer can or should only rely on online information. Just as useful as the resources found on the Internet are industry professionals who work in the real estate marketplace. These on-the-ground experts can give advice tailored to your situation and continue advising you throughout the home buying process.
The problem is that as a first-time home buyer, it’s hard to know exactly which professionals to talk to and when. To help, we put together a cheat sheet. Consider this your quick-reference go-to guide on what you can expect from each professional you talk to during your first-time home buying process.
1. Find a home buyer’s agent
More than likely, a property seller will be working with a real estate agent. In a transaction that requires hundreds of thousands of dollars, it’s important to get some insight, context and advice and that’s what a good Realtor can certainly provide.
Truth is, as a buyer, you need someone who is in your corner. A smart buyer’s agent will start by listening to your needs and wants. From there, they will try to find a neighbourhood and home that fits your priorities — if you don’t already have a community and housing type picked out. Remember, as the agent working for you they will point out where expectations are different from reality and will back up this assertion with facts. For instance, if you have your heart set on a two-bedroom condo in downtown Toronto for less than $300,000, a good agent will help you see how and why this is not possible. Remember, your real estate agent is your local expert. They can help you find housing options that best meet your needs, point out districts or buildings to avoid (and why) and offer alternatives.
At the start of the process, consider using your agent as a way to assess the market: What can you realistically afford and in what neighbourhoods? After reviewing the options, sit down with your agent and talk openly about your needs, wants and budget. This is the moment when you need to think about current needs and future wants. Discuss with your agent about possible plans, such as starting a family or needing a guest bedroom for out-of-town family members or because you’re starting a business from home. This is when the agent’s expertise will help you define the most important criteria to focus on during the stressful home-search process.
Also, don’t be surprised if the buyer’s agent starts talking about representation — they may ask you to sign a contract — as well as additional funds required for down payment, taxes and other closing costs. Remember, the agent will do a lot of work to help you find a place and with no guarantee of getting paid (no commission if you don’t end up buying), so it’s in their best interest to make sure you are fully prepared to work exclusively with one person and that you prepared to follow through on an offer to purchase a property.
To find an established and professional buyer’s agent, research through friends and family or contact brokerages that match your needs.
2. Talk to a mortgage broker
A mortgage broker is there to offer you advice, not just on what home you can afford, but how to best prepare when trying to qualify for a mortgage. What does this mean? Talk to a mortgage broker early on in your home-finding search. Be honest and open about your plans. The more information your mortgage broker has the better chance of this professional being able to help.
From your mortgage broker, expect to develop a realistic house-hunting budget. Plus, your mortgage broker can prepare you by telling you what type of documents you will require. This is important, as some documents take time to collect. For instance, in large firms, a Letter of Employment can take as long as three weeks to obtain from the firm’s Human Resources department. A mortgage broker can also advise you on the steps to take to position yourself as an ideal borrower (in the lender’s eyes). This may mean taking steps to improve your credit score or working with the broker to get your debt-levels down, or it could mean shopping around for the best mortgage options for your particular situation.
It doesn’t stop there. Most mortgage brokers will also have information about first-time homebuyer grants and plans, such as the Canadian Home Buyers Plan (HBP) which allows you to use your RRSP savings to purchase your first property. They should also be able to tell you about tax breaks you may be eligible for once you buy your home. (Only expect the most general information from your broker. More detailed information will come from your legal representative.)
To find a broker, consider going online. Try looking through mortgage rate consolidator sites (such as RateHub, RateSpy.com or RateSuperMarket.com), or go online to the Mortgage Professionals Canada which offers a directory of mortgage brokers that are in good standing (completed education requirements and paid association fees that require them to adhere to national ethical standards). Another option is to ask friends and family for recommendations (just be sure to ask their reasons for recommending as “nice” just doesn’t cut it).
Once you find a mortgage broker, work with them to get pre-approved for your maximum mortgage amount and then re-examine based on your own budget. It’s quite realistic to assume that you will drop your maximum housing purchase price by 10% to 20% in order to realistically afford the purchase.
During your home search, consider talking to your mortgage broker about closing costs. This finance professional should find it easy to help you compile a list of expenses you have to pay once you buy a property — which can include property taxes, home insurance, home maintenance and utilities, legal fees, among others.
Remember, a good mortgage broker will encourage you to consider your financial stability. Consider this professional your “sober-second thought” when it comes to the financial side of your home buying decision. While they are there to help make a financial work, they are also there to help you find realistic limitations.
3. Find a professional home inspector
Luckily for first-time buyers, your real estate agent will likely have connections with home inspectors and can introduce you to one they trust. While a home inspector will look into your prospective property to try to find hidden problems, first-time homebuyers will be especially grateful for the other advice they can offer. Consider asking your home inspector which kinds of repairs are the hardest to make, or which cost the most. It is also imperative to ensure that the home inspector you choose has certifications through the Canadian Association of Home & Property Inspectors (CAHPI) or the Canadian National Association of Certified Home Inspectors, Inc. (CanNACHI).
4. Find a professional contractor
Approximately 25% of first-time homebuyers will buy a new-build property. The remaining purchasers will select a resale home — and, often, that means having to deal with issues that come with an ageing property. Since remodels, upgrades and repairs all cost money, it’s a good idea to find and work with a professional contractor prior to buying the property. This way you can get a realistic cost and time estimate from a professional that’s in the business, rather than some spitball cost from someone who isn’t intimately familiar with zoning bylaws, permit applications and remodel issues.
While many contractors will be quite reluctant to come and offer free advice on a property you don’t yet own, you could get around this reluctance by offering to pay the person a per-hour or flat-rate fee for a property consultation. While a few hundred dollars might feel steep at the time (you don’t even own the house!) it may go a long way to helping you avoid a money pit.
5. Find a real estate lawyer or notary
Real estate transactions can be complex. Even with all the aid from a knowledgeable Realtor, a helpful mortgage broker and a trusted home inspector, it’s still difficult to navigate the contractual obligations of a property purchase without legal assistance. A real estate attorney or a notary that specializes in real estate transactions can walk you through the legal process for the transfer of ownership of property.
A great legal representative will be upfront about what to expect, when you can anticipate paperwork or money to be prepared or transferred, and what your obligations are as a home buyer.
The best part, the fees for a real estate professional are usually set. In Canada, you can expect to pay $800 to $2,000 in legal fees for a simple, straight-forward property purchase (with one mortgage lien). This price may increase if there are legal issues with the property Title or if a situation occurs that requires dedicated, personalized service.
Using these real estate pros
Armed with the honest advice of these five professionals, you will have a realistic budget and will be looking at first-time home options that truly fit your needs and match your budget. No one wants to end up with a lemon, which is why industry professionals are necessary.