Your home is probably your greatest financial asset, if not the greatest. Having a solid team in your corner will make a significant difference in your experience. I’ve summarized 10 tips for first-time homebuyers as they tackle the home-buying process.
- Pay off all debt and build a contingency fund: owning a home is expensive, much more expensive than renting because when you own a home, you’re responsible for all the maintenance and upkeep costs.
- Determine how much you can afford: It is important to check your monthly budget to determine how much house you can afford. There are monthly housing costs (taxes, insurance, maintenances, etc.).
- Save a down payment: Normally, at least 20% of the down payment of the total price of a house is reasonable so that you won’t have to pay for private mortgage insurance.
- Save for closing costs: On average, closing costs are about 3-4% of the purchase price of your home. Your lender will give you a specific number so you know exactly what to bring on closing day, including appraisal, home inspection, credit report, legal fees, and homeowner’s insurance.
- Preapproval for a loan: Once you’re confident you have enough cash saved to pay for closing costs and 20% of your home, you’re ready to handle the other 80% by talking to a mortgage lender. Preapproval shows sellers that you’re a serious buyer, which is a great way for first-time homebuyers to get ahead in a competitive market.
- Find a home for sale in your price range: Find homes you like online and send them to your real estate agent so they have a good idea of what you’re looking for. Then they can use a multiple listing service (MLS) to find homes that meet your criteria in your desired areas.
- Research neighborhoods: After you’ve found some homes for sale in your price range, be careful not to make a decision based on the property alone. Homebuyers are more willing to compromise on a home’s condition (20%) and size (17%) than on the quality of its neighborhood (6%) and distance from a school (2%). So make sure you factor neighborhood quality and location into your decision.
- Attend open houses and think long term: Once you’ve narrowed down the neighborhoods, attend a few open houses. Looking at homes that are for sale—even if they’re not a perfect fit for you—is a great way to learn more about the area. When you do eventually find a house you love, you’ll know how your place compares to better or worse homes in that neighborhood.
- Make a competitive offer: Let’s say you found the home you want and can afford. Since you’re already preapproved for a loan, you’re ready to make an offer. If you’re a first-time homebuyer, it may be hard to know how much you should offer. That’s when you can rely on the expertise of your real estate agent.
- Prepare for closing: Once a seller accepts your offer, the closing process will begin. Keep things running smoothly by knowing what to expect when closing on a house. The average closing process takes 43 days, which gives you plenty of time to tackle closing items. A real estate agent will schedule the remaining steps from the home inspection to the final walkthrough, and they’ll keep you informed about any roadblocks.
When you purchase a presale home, it means you are paying for a home that has not been built yet. Therefore, a presale is when a developer offers a property for sale before construction of the building has started. You would need to pay the deposit up front, and it normally ranges in amounts of 15-25% deposit schedule paid over a period of time throughout the building project. Importantly, your mortgage payments don’t start until the building is complete. The presale condo deposit is simply there to secure the property until it is built.
In addition to the property transfer tax, if you are a foreign national, foreign corporation or taxable trustee, you must pay the additional property transfer tax on your proportionate share of a residential property transfer if the property is within specified areas of B.C. If the property transfer is registered on or before February 20, 2018, and is within the Metro Vancouver Regional District, the tax amount is 15% of the fair market value of your proportionate share. If the property transfer is registered on or after February 21, 2018, and is within the following areas, the tax amount is 20% of the fair market value of your proportionate share: Capital Regional District, Fraser Valley Regional District, Metro Vancouver Regional District, Regional District of Central Okanagan and Regional District of Nanaimo.
To qualify for a full exemption, at the time the property is registered you must: be a Canadian citizen or permanent resident, have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years, have never owned an interest in a principal residence anywhere in the world at any time, have never received a first time home buyers' exemption or refund. And the property must: be located in B.C., only be used as your principal residence, have a fair market value of $475,000 or less if registered on or before February 21, 2017, or $500,000 or less if registered on or after February 22, 2017, and be 0.5 hectares (1.24 acres) or smaller.
To qualify, the property (land and improvement) transfer must be registered at the Land Title Office after February 16, 2016, and you must be: an individual, a Canadian citizen or permanent resident (you will be asked to provide your Social Insurance Number (SIN) or proof of permanent residency and your birthdate) and the property must: be located in B.C., only be used as your principal residence, have a fair market value of $750,000 or less, and be 0.5 hectares (1.24 acres) or smaller.