If you're a millennial and you're looking to buy your first home in Ontario, then it is no secret that buying a home in Toronto is a challenge. The city's housing market is competitive, and prices have soared over the past fifteen years.
The right approach when investing in Toronto real estate can make a tremendous difference in your adult life. This goes for both buying as an investment or primary residence, and it's important that you take the time necessary to avoid making mistakes that will cost you later down the line.
So, to help you get started on your homeownership journey, we've put together a few tips for buying your first home in Toronto.
1. Do your research
The first step to buying a home in Toronto (or anywhere, for that matter) is to do proper research and not rush into things. It's important to be aware of the different neighbourhoods in the city, as well as their pros and cons. For example, you might want to be close to downtown for easy access to work and nightlife, but you'll have to pay a premium for that convenience.
You should also research the different types of homes available, from detached houses to condo units. Each option has its own set of advantages and disadvantages, so it's important to decide what's most important to you before beginning your search.
2. Get pre-approved for a mortgage
Once you know how much you can afford to spend on a home, the next step is to get pre-approved for a mortgage. This will give you a better idea of what your budget is and will make the home-buying process much easier. Keep in mind that you'll need to have a good credit score in order to qualify for a decent mortgage rate.
If you have bad credit and want to buy a home, options are still available. You can get a cosigner for your mortgage, or look into credit home loans that specifically help individuals with bad credit. However, this is a much more complicated process and you will have to pass multiple stages of screening prior to getting approved.
3. Work with a real estate agent
While you're not required to work with a real estate agent when buying a home, it's definitely recommended. A good agent will be familiar with the Toronto housing market and can help you find the right home for your needs and budget. They'll also be able to negotiate on your behalf and handle all of the paperwork involved in the home-buying process.
4. Be prepared to make a quick decision
Though it's important to take your time exploring options, when you find a home that you're interested in, it's important to be prepared to make a quick decision. The Toronto housing market is highly competitive, and homes often receive multiple offers. If you wait too long to put in an offer, there's a good chance that someone else will beat you to it.
5. Have a down payment saved up
In order to get a mortgage, you'll need to have a down payment saved up. The minimum down payment for a home in Canada is 5%, but if you can afford to put down more than that, it will help you get better mortgage terms.
6. Consider a fixer-upper
If you're having trouble finding a home within your budget, you might want to consider buying a home that needs a bit of work. These homes are usually much cheaper than move-in-ready homes, but they'll require some work on your part. It's important to factor in the cost of renovations when considering a fixer-upper.
7. Get a home inspection
Before making an offer on a home, it's important to get a professional home inspection. This will help you identify any potential problems with the home that you might not be aware of.
A proper home inspection prior to purchase should include:
- A thorough examination of the home's exterior, including the roof, gutters, downspouts, and flashing
- An inspection of the home's interior, including the walls, ceilings, floors, windows, and doors
- A check of the home's HVAC system
- An inspection of the home's plumbing system
- Inspection of the home's electrical system
- Structural integrity and foundation
8. Get homeowners insurance
Once you've bought a home, it's important to get homeowners insurance. This will protect your home in case of damage or theft. Homeowners' insurance is typically required by mortgage lenders, so be sure to shop around and compare rates before choosing a policy.
9. Prepare for the financial stress test
As of October 17, 2016, a new financial stress test is mandatory for all insured mortgages in Canada. This applies even if you make a 20% down payment or more! The requirement was put into place to ensure that Canadians can afford their payments even when mortgage rates go up, which has happened recently due to increases in historic lows across many countries including our own Bank Of Canada.
You can prepare for the financial stress test by:
- Calculating how much your monthly mortgage payments would be if interest rates increased by 2%
- Make sure you have enough money saved up for a down payment and other closing costs
- Plans and intent on working on improving your credit score
10. Make sure you find the right mortgage professional
You will want to be sure you are getting the best mortgage terms available in Toronto, which is why working with the right mortgage professional is key to successfully purchasing your new home. Choosing the right lender will help you understand all of your options and make sure you are getting the best deal possible for your home.
Canadalend is dedicated to getting you the best rates and services available. Our agents ensure that we always provide our clients with competitive, high-quality products tailored specifically for them so they can feel confident about their decisions while enjoying a seamless mortgage process!