BUYING A HOME THIS 2021? HERE ARE TIPS TO GET IT DONE

Across Canada, money-savvy millennials are taking the plunge into homeownership, knowing that it’s one of the best long-term investments that they can make. 

Whether you’re buying a house, condo, or townhome, the process can be a bit daunting, and you may not be sure of where to start. Don’t worry! Here are tips to smoothly find your dream house.

Prepare for Sticker Shock

Yes, if you’re prepping to buy a home in 2021, expect to be shocked, and not in a good way. At this point, home prices have eclipsed old all-time highs in many parts of the country.

 

And even if they haven’t yet, there’s a good chance you’ll be paying more than the Zestimate or Redfin Estimate for the property in question due to limited inventory and strong home buyer demand.

 

In short, expect to shell out a lot of dough if you want a home in 2021, and that could often mean paying over the asking price, even if the original list price seems high.

Save for a Down Payment and Other Expenses

Before you start shopping for real estate, your first step is to save up money for a down payment. A “down payment” is the amount of money that you put towards the purchase of a home. In general, the larger your down payment, the easier it is to obtain a mortgage. As you start saving, you might ask: how much do I need to save for a down payment? The minimum amount depends on the home’s purchase price. In Canada, people typically spend between 5% and 20% of the purchase price on a down payment.

Prepare Your Finances 

Get your finances in order before cruising the real estate listings. This process will help you estimate how much you can afford to buy, as well as organize critical documents required to support a mortgage application.

Check Your Credit Score

A credit score is a rating (between 300 and 900) used by lenders to assess the amount of risk they face in extending credit to you. In general, the lower your score, the less likely you are to be approved for a loan. Checking your credit rating allows you to see where you fall on the scale and figure out how to improve your credit score before submitting a mortgage application.

Research First-Time Home Buyer Incentives 

Speaking of saving money, don’t forget to take advantage of these first-time homebuyer incentives in Canada. It could save you some serious dough.

Organize Your Documentation

There are three things a lender will look at before giving you a mortgage: your current assets (what you own), your income, and your current level of debt. During the application process, here are a few items that your mortgage lender may request from you:

Government-issued photo identification (driver’s license, passport, etc.)

Proof of employment and income (pay stubs, T4s, income tax returns, bank statements, etc.)

Proof of a down payment and where it will come from (e.g. savings account, RRSP, the sale of another property, gift, etc.). If a family member is contributing towards your down payment, you will also need a signed letter from them acknowledging the purpose of the gift, and confirming that it is non-repayable.

Information about any other assets

Information about your debts (e.g. credit card balances, car loans or leases, lines of credit, student loans) or financial obligations (e.g. spousal/child support)

Having these documents handy is a house-hunting hack – it will ultimately prevent you from scrambling to get your act together at the last minute.

Get a Mortgage Pre-Approval

With your finances in order, the next step is to figure out how much you can afford. A mortgage calculator is a good place to start, as you can factor in the amount of your down payment, your amortization (repayment) schedule, total selling price, and so forth to come up with a budget.

Using a mortgage affordability calculator can help you estimate how much mortgage you can afford by crunching the numbers for some, or all of these factors.

The Best Time to Buy Might Be Later in the Year

Before you get too excited, or worried that time is running out, it might actually be in your favor to slow play this one.

Per Zillow, the best time to buy a home may be in late summer, including the months of August and September.

Basically, you’ve got the slow, cold months at the start of the year where there isn’t much inventory, followed by the strong spring housing market where everyone and their mother wants to buy.

Then you get a lull and perhaps even a dip in home prices during summer, which could be an attractive entry point.

You might even get lucky and snag a price cut with a lot less competition while other prospective buyers are on vacation.

That being said, get pre-approved NOW and set up your alerts for new listings ASAP and just be ready to pounce whenever.

Start House-Hunting!

You’ve got some money in the bank and a pre-approval in your hands. This is the exciting part of the home buying process – when you can start perusing the Canadian Multiple Listing Service (MLS) site in earnest.

Now hosted at Realtor.ca, this MLS provides a nationwide compilation of available real estate listings that you can filter in any number of ways: by location, size, type, amenities, price, and more.

If you aren’t sure whether a home you’re interested in is fairly priced or not, consider typing the address into Properly’s Home Value Report tool. This tool is designed to give homeowners an accurate snapshot of their home’s value, but can also give buyers valuable insight into recent sales data for their ideal neighborhood. Best of all, it’s free.

Learn more about the Properly

It’s at this stage that you’ll want to seriously consider working with a real estate agent. This is not mandatory—buyers are allowed to manage their sales—but it’s advised, especially for first-timers.

Real estate agents have expert information on every step of the process which can help relieve stress, and they are also part of a professional network of inspectors, insurance agents, and so forth who may become part of your team.

Buying your dream house can be a daunting experience for anyone. Long before the fun part—the actual search for your dream home—you have to figure out your finances, identify and exploit saving opportunities, get pre-approved for a mortgage, and hire your real estate agent, lawyer, and other professionals.

It might seem overwhelming, but  it’s worth it to become a homeowner with your dream house. This guide will help you get one step closer to having the keys to your new home in hand. Good luck!