Buying your first home? First and foremost, congratulations on taking this huge step. Buying a home is a great achievement. It allows you to build equity, control your costs, and enjoy the security of living on your property. But with the excitement of being a homeowner comes the fear of making some common mistakes.
At MB Property Law, a real estate law firm in Toronto, we’ve seen first-time homebuyers make costly mistakes such as:
- Looking for a home before they start the mortgage application process
- Discussing the mortgage with only one lender
- Buying a bigger house than they can afford
- Focusing on the house instead of the neighbourhood
- Moving too fast
- Draining all their savings on this purchase
- Being careless with credit and using all their equity after buying the home
- Deciding purely based on emotions
These mistakes could cost you thousands of dollars. As a first-time homebuyer, you don’t have any experience, so you’ll need to take your time to learn as much as possible to avoid these mistakes. Consider this a journey with many learnings along the way. The more information you get about buying your first home, the better you’ll be at making the best decision for yourself and your family.
This article is dedicated to first-time home buyers. So, sit back, relax, and allow us to guide you on making smarter, strategic decisions for buying your first house or condo in Toronto.
How Much Is Your Bank Willing To Lend You?
First things first, unless you’re buying your first home with only cash, you need to pre-qualify for a mortgage. The mortgage pre-qualification process involves reviewing your income, debts, and down payment, as well as your credit history. You need to get your mortgage pre-approved in writing. Most banks will offer you a guaranteed interest rate for a specific period, typically 60 days.
The benefits of pre-qualifying for a mortgage are:
- You have a general idea of what you can afford before you start your search for a home.
- You eliminate the risk and uncertainty of securing financing once you find your dream home.
- It helps eliminate the unrealistic perception of mortgage payments that buyers may have after a quick online search. For instance, buyers can budget for property taxes, home insurance, homeowner’s association fees, and maintenance costs that come with owning a home.
- Pre-qualification may also put you in a better negotiating position with the seller. Sellers will know that ‘you mean business’ and worry less about the deal failing if your mortgage is already approved.
Understand What You Need And Want In Your Home
The next step involves developing your wish list. Have a clear understanding of what you need in a home versus what would be nice to have. For instance, it’s important to be clear on how many bedrooms you need, the kind of outdoor space that you’d want, as well as other details like flooring, appliances, and kitchen countertops. It’s impossible to get the ideal home if you’re not clear on what you want from the onset.
Find The Ideal Neighbourhood There are some great neighbourhoods in Toronto, and you need to consider several factors when selecting the ideal one. Ask yourself the following questions when looking for the ideal neighbourhood in Toronto.
- What types of homes are in the neighbourhood?
- How busy is the area? Do you prefer peace or quiet?
- How kid-friendly are the streets?
- What’s the walkscore of the neighbourhood?
- How far are grocery stores, convenience stores, gas stations, fitness centres, hospitals, and shopping options?
- What are the nearby transit options?
- What are the nearby day-care options?
- How far are the schools?
- What are the average prices of homes in the neighbourhood? Have these prices been increasing or decreasing?
- How is the buyer demand? Are homes in that area selling near the asking price, below, or above?
Don’t Do It Alone
When buying a home for the first time, you need a good team of professionals who will help you successfully navigate this process. This team should include:
- A real estate agent who is looking after your interests
- A lender (this could be your bank or mortgage broker)
- A real estate lawyer to assist with all the legal aspects of the process
With so many professionals out there in the real estate market, it’s important to do your due diligence and find people who are dedicated to helping you.
Six Tips To Find A Great Real Estate Agent In Toronto
- Hire a pro agent in your neighbourhood. A realtor who has worked regularly in the city or town you’re targeting will be more valuable than someone who’ll drive to Ontario for a commission cheque.
- Find out if the realtor is experienced in selling property in that area. How long have they been in business? How many homes do they sell a year?
- Selling old homes is different from selling high-end, newer properties. Hire a professional that is experienced in selling the kind of home you’re looking for. Some realtors are more experienced in commercial properties, others in residential homes.
- Avoid working with friends and family. Look for a realtor who works on their business full-time.
- Great realtors have great partners. You’ll need to hire lawyers, contractors, and other trusted partners. A good realtor will ensure that your relationship extends long after the closing date, and you can always reach out in case there’s a need.
- Always remember when choosing a realtor, you get what you pay for. While a real estate agent may come cheap, you may end up doing everything yourself because they only offer limited services. By listing with a full-service realtor, you enjoy staging, marketing, expertise, and strategy, among other services.
Start House Hunting For First Time Home Buyers
Once you’ve shared your requirements with the real estate agent, he/she will send you custom listings of homes that match your criteria. There are some good online tools that you can use to simplify your home search. Take your time to screen listings electronically and preview properties online before you finally go to look at the properties.
When you begin the actual house hunting process, you’ll find the need to refine your wish list. When you walk to your perfect home, you will feel it. This is not to say that a wish list is not important; it still is. It helps you to truly define your wants and needs.
Five Ways To Know You’ve Found The Right House
- First impressions are everything. When you find the right house, you’ll want to get inside immediately you pull up to the curb.
- After entering the house, you’ll feel a sense of comfort and warmth. The home will instantly invite you to explore.
- You may find yourself being defensive when the flaws about the property are mentioned. Just remember that it could be difficult to renovate/repair those flaws if you can’t live with them.
- The home checks the most important boxes to you, i.e., it has just the number of rooms you want, and it’s within your budget.
- You want to stop looking at other homes. You realize that other homes are no longer appealing to you and find yourself comparing every property you visit with that one.
Remember to avoid mistakes like sliding outside your budget or overlooking the additional housing expenses you can reasonably accommodate. A home is a long-term decision, and you must take your time before choosing one.
Handling The Offer Process
Now that you’ve settled on a home that suits your needs/wants, the next step is to make an offer. You have to make an offer in writing. Your real estate agent will help prepare the offer, which forms the Agreement of Purchase and Sale. This contract will contain:
- The amount that you are prepared to pay
- How much you are willing to pay as a deposit. It should be available within 24 hours after your offer is accepted.
- The closing date
- Any inclusions you’d want as well as conditions that have to be met for the deal to go through
The seller, upon receiving this offer, can reject, accept, or sign back a counteroffer. This may involve a lot of back-and-forth negotiations, but a good real estate agent will ensure you get what you need.
There are several conditions in your Agreement of Purchase and Sale that you will be required to meet. Some examples include:
- The financing terms
- A home inspection condition
- A seller assist condition (which may require the seller to pay for part or all your closing costs)
- Clarification on who pays the closing costs such as escrow fees, title search fees, and notary fees
- Home inspection contingencies
- Sale of an existing home (this applies to existing homeowners who are looking to sell their property in order to get funds for their new home)
Once These Conditions Have Been Met, You Can Now Wait For Your Closing Date
Closing date simply means that all the legal and financial obligations have been met, and the ownership and possession of the property have now been transferred from the seller to you. There are some closing costs that you need to be aware of from the beginning. Closing is a team effort that involves your lawyer, lender, and other contractors.
What To Expect From A Real Estate Lawyer When Buying A Home
You need the right professionals standing behind you when you embark on this journey of buying your first home. There’s just too much money on the line, and you must ensure that you have a credible legal representative to protect you every step of the way. A real estate lawyer will handle all legal matters pertaining to the purchase, so you never have to worry about understanding legal jargon or overlooking a clause in your agreement that turns out to be a costly mistake. This is particularly true if you are buying a home for the first time.
A real estate lawyer can help to:
- Review all legal documents during the transaction
- Ensure all property tax obligations are met by the owner
- Ensure there are no claims against the property before you buy
- Confirm if there’s a valid title
- Calculate any tax obligations such as the land transfer tax that you may need to pay upon closing
- Arrange for title insurance
- Prepare all mortgage documents
Additionally, you will need the real estate lawyer to close the transaction, ensure all legal and financial obligations are met, and exchange all legal documents and keys with the seller’s lawyer.
How Much Will A Real Estate Lawyer Cost?
A real estate lawyer is going to save you time and money in the long run. The amount you pay your real estate lawyer will largely depend on the type of property you’re purchasing as well as the complexity of the transaction. In some areas, real estate lawyers charge as low as $700, whereas others charge up to $2,000. Others will prefer an hourly rate.
Why Choose An Experienced Real Estate Lawyer?
In many cases, closing a real estate transaction involves two lawyers from both parties who exchange documents and register the transfer. A lawyer does a lot more than just closing. To start with, a real estate lawyer can help you negotiate the transaction. These professionals specialize in all matters related to property, from preparing legal documents to handling disputes between parties. Since they have access to the electronic registration systems, lawyers can quickly access the software, perform title searches and transfer land faster than anyone. A real estate lawyer will also represent your interests during closing. He/she will review all paperwork in advance and help you through the legal process.
Like any other market, real estate in Toronto can have its ups and downs. A good lawyer not only takes away the burden of dealing with lots of paperwork and legal jargon but also reduces the risk of losing money on the largest investment you will ever make. Lawyers with experience in real estate in Toronto will always be on their guard and quickly detect any potential issues that are easy for a layperson to miss. Your lawyer will ensure that your interests are protected throughout the transaction.