Canada ended 2020 with a record-setting month for both home sales and prices, according to data from the Canadian Real Estate Association. The previous record for homes sold in a year was set in 2016. The association also forecasts that national home prices will rise by 16.5 per cent in 2021.
Those statistics can be intimidating for a first-time homebuyer looking to get into the market, even with the current low interest rates. According to Nick Da Silva, president of Northwood Mortgage in Markham, Ont., the result is a market driven by panic buying.
“Someone who is looking to get into the market should consider that they need to buy a house to live in rather than saying, ‘Oh my, I’m not going to be able to afford a house,’” he explains. “These homes are meant to be a long-term investment. If you’re looking to get into the market, timing it is never going to work out. Right now with the low interest rates, now is a good time get into the market.”
Ready to make those home ownership dreams a reality? In partnership with Northwood Mortgage, we take a look five key steps to take before you buy your first house.
Get IDs and bank statements organized
The first thing any potential buyer should do is get organized. That means obtaining a letter of employment or proof of contracts if you’re self-employed, gathering two forms of identification, tallying up any current debts (line of credit, credit card, vehicle loan, etc.) and figuring out how much you can afford for a down payment. Proof of where that down payment is coming from is also essential.
“Canadian-born buyers whose families are here, we know where the money is coming from, and that’s great,” Da Silva says, adding that if money is coming from outside of the country, would-be purchasers may have to do more paperwork.
Speak with a mortgage broker about how much you can afford
Qualifying for a mortgage can be confusing, but that’s where a broker comes in. Unlike a specialist at a bank, who can only offer the products available at that bank, mortgage brokers are able to access a variety of lenders. Often that’s key in finding the lowest possible rate, Da Silva says, and it also gives buyers more power, because brokers know the different qualifications each lender requires.
“There are the lenders out there that brokers can get to that the banks can’t,” Da Silva says, citing a recent example of getting a client a 2.25 per cent rate after they were quoted 2.75 per cent by a big bank. “They also keep the banks honest with regards to interest rates.”
Talk to a real estate pro
Once a buyer knows how much they qualify to borrow, the next step is to speak with a realtor. There are many public listing sites on the internet, but realtors are experts in their areas and are able to assess potential properties from top to bottom, Da Silva says.
“They’re the ones who can point out deficiencies to properties. They can point out where the nearest school is, any noise factors, whether you’re near a highway,” he explains. “They’re the ones who are going to be able to search a property for you.”
Make a decision about where to buy
Realtors also help their clients narrow down where they want to buy and help them consider all factors, such as commute times, before settling on an area. Is it more important to have access to a backyard or to a quick transit line? If kids are involved, has the purchaser considered the local sports programs and schools available? Are they looking for a young neighbourhood or a more established space? These are all questions to ask before delving into an area.
Once a buyer has decided where they want to live, a realtor can set them up to receive notifications of all available listings in their desired neighbourhood, helping them jump at any opportunities when the right place goes on the market.
Consider your future needs
Da Silva points out that many purchasers are so eager to get into the market that they don’t always stop to consider their future needs. If renovating a home is something a buyer doesn’t want to wait on and would prefer to do right away, for example, he says they should add another $80,000 or so to their budget.
He also recommends that purchasers think about whether current loans are worth the expense. It might make more sense to get rid of the boat, motorcycle or other item with a loan against it, and potentially increase a down payment.
Whether a younger buyer is considering a family should also come into play. Da Silva maintains that clients should purchase something that will make sense for them in the long run whenever possible, and not plan on trying to purchase again in a few years. The same goes for older parents who are expecting their children to leave in a few years.
“No one wants to buy a two-bedroom house or apartment when they’ve got four kids,” he says. “On the flip side, no one wants to buy a big house when it’s just the two of them. It doesn’t make any sense. It’s just wasted space.”
Ready to take the real estate plunge? Visit Northwood Mortgage for more information on how a mortgage broker can help.