What to do when buying your first home

Buying your first home can be both an exciting and overwhelming process. There are so many things to think about, from what type of loan you’ll qualify for to how you’ll need to adjust your expenses to pay for your new home.

As you make your way through this guide to buying your first home, think about all the options available to you. Make sure to go through every step carefully, so you don’t miss anything.

Research the market

The first step on your checklist for buying your first home should be to research the market and look at what houses are going for right now. Think about what type of home you’d like, how much space you intend to get, and what features you’d like to have in your ideal home.

Here are some of the things to consider when researching the market:

Buyer’s vs. seller’s market

In general, the housing market will either be a buyer’s market or seller’s market, favouring one group or the other. Fully understanding the difference between these two, as Forbes Advisor explains here, can help you make more informed decisions.

During a buyer’s market, the prices of homes decrease and they remain on the market a little longer. This creates favourable conditions for buyers, hence the name “buyer’s market”. You can undercut the cost of homes and lower your offers to try to get the best deal.

During a seller’s market, the prices of homes increase and homes fly off the market quickly. This is when a seller has more control and can hang on without accepting lower offers. You’ll want to offer the asking price or even more during this time.


How much home do you need?

Figuring out how much space you need — bedrooms, bathrooms, storage, and more — is crucial to finding a great first home.

Obviously, as the size of the home increases, so does the price. The size of your ideal home can also impact the type of home you get and the location of it.

If you’re looking to live in the middle of a big city, you might have a hard time finding a 250 square metre home, whereas out in the country, that’s no problem.

Research the market, see what is available in your ideal area, and check to see if that’s affordable according to your budget.

Location, location, location

This wouldn’t be a guide to buying your first home without talking about location. Everyone has an ideal location in mind when it comes to buying their first house. When you add in a variety of other factors, it can sometimes knock the homes in your budget outside of where you want to live.

Look at your ideal location and see what the average house is selling for. One great way to figure this out is to first see what size home loan you’re eligible for.

Then, take a look at recent sales in the neighbourhood of your choice that are the same size as the home you want. If the homes that are selling are within your budget, then chances are you can afford that neighbourhood.

Figure out how much you can borrow

This is one of the most important tips for buying your first home. Once you’ve researched the market and you have an idea of what kinds of homes are out there and how much they cost, it’s time to figure out what you’ll be able to borrow.

Using our borrowing calculator can help you get started.

The amount that you’re eligible to borrow is based on your income, your current debts, credit history, and any other loans you might have open.

For example, if you make a lot of money but you have a high car payment, another mortgage loan, and a lot of outstanding credit card debt, your debt to income ratio will be too high. Many lenders won’t see you as a great fit for a loan.

It’s important to get a good idea of what you’re able to borrow before you start looking at homes, so you know what your price range is.

Create a budget and set savings goals

Buying your first home can really get you on track financially, because it can make you more disciplined.

Once you have an idea of how much home you can afford, you can begin figuring out what your mortgage payment will be. This will allow you to start budgeting and potentially saving some money for unexpected costs that come along with home ownership.

It’s important to also save money for a deposit. First time home buyers are sometimes seen as high risk lendees, so you may be required to put more money down. However, there are options available to reduce the amount of money needed. We can help guide you on these options in a non-committal discussion about your situation and needs.

Educate yourself on different home loan types

There are two main loan types that you’ll need to know about when buying your first home. Fixed rate interest and adjustable rate interest are the two types.

With a fixed rate mortgage loan, you’ll lock in a set interest rate and that will not change throughout the life of your loan. If the market conditions change, your interest rate will stay the same and as a result, your mortgage payments will stay the same.

With an adjustable rate mortgage, the interest rate will change as the market conditions change. So, if interest rates rise, your mortgage repayment will rise. Lower rates mean lower repayments, however. This is why it’s important to use our buying calculator to make sure you’re not getting more home than you can afford.

Fixed rate mortgage loans are simpler overall. If interest rates are low at the time of application, you can lock in a low interest rate so you don’t have to worry about rates going up over time. If you get into a mortgage loan when rates are high, you can refinance down the road and lower your rate.

Speak to a mortgage broker and apply for a pre-approval

The first step to buying your first home is to speak with someone and get pre-approved. The home loan pre-approval process is an important step. It provides you with information about how much you can afford and it shows sellers that you’re serious.

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