The Ultimate First Time Home Buyers Guide

The Ultimate Guide for First Time Home Buyers in London, Ontario, Canada

Hey there, future homeowner!

First Time Home Buyers

Welcome to the first time home buyers club, here is your all-in-one, super-detailed guide for buying your first home in London, Ontario. I know, diving into the real estate market can feel like a plunge into the unknown. But don’t worry! We’re here to make this ride as smooth as possible for First Time Home Buyers.

 

Understanding the London, Ontario Market

First, let’s talk about the London real estate scene. As First Time Home Buyers, you probably know it’s a bustling market, but did you know that as of November 2023, the average home price year to date in London was $663,510? (Source: London St. Thomas Association of Realtors). This info sets the stage for what you can expect in terms of budget.

 

Budgeting: More Than Just the Purchase Price

Budgeting isn’t just about the purchase price as First Time Home Buyers. You’ve got to factor in property taxes (which in Ontario can range from 0.6% to 1.1% of your home’s value annually), utility bills, and maintenance costs. The 28%/36% rule is a lifesaver here: your housing costs shouldn’t exceed 28% of your gross income, and your total debts shouldn’t be over 36%.

 

The Mortgage Maze

The mortgage world can be complex. You’ve got fixed-rate mortgages, where your interest rate stays the same throughout the term, and variable-rate mortgages, where your rate may change based on the market. Each has its pros and cons, and your choice as First Time Home Buyers depends on your financial situation and risk tolerance. The Canada Mortgage and Housing Corporation (CMHC) is a great resource for understanding these options.

 

Your Credit Score: The Golden Key

Your credit score plays a huge role in the home buying process. In Canada, a score above 700 is generally considered good, but the higher, the better. A high score can mean lower interest rates and better mortgage terms. In most cases above 630 Credit Score will gain you access to some of the best mortgage lenders in the world of real estate.

First Time Home Buyers Ultimate Guide

Your Credit Score: The Golden Key

Your credit score plays a huge role in the home buying process, especially as a First Time Home Buyers. In Canada, a score above 700 is generally considered good, but the higher, the better. A high score can mean lower interest rates and better mortgage terms. In most cases above 630 Credit Score will gain you access to some of the best mortgage lenders in the world of real estate.

 

House Hunting in London: Finding ‘The One’

London is diverse. From the vibrant Downtown core of London to peaceful areas like Byron or Wortley Village, each neighbourhood of London Ontario offers something unique. When house hunting, as First Time Home Buyers consider things like proximity to work, schools, amenities, and the general feel of the neighbourhood.

 

The Art of Inspection and Negotiation

Found a house you love? Great! But before you make an offer, get a home inspection to check for hidden issues. Then comes negotiation. It can feel daunting, but it’s your right to negotiate for a better deal. This is not just a purchase; it’s an investment in your future.

 

Closing Costs: The Often Overlooked Expense

Closing costs often take First Time Home Buyers by surprise. In Ontario, they can be around 1.5% to 4% of the purchase price. These include legal fees, land transfer taxes, and more. For a $400,000 home, you could be looking at $6,000 to $16,000 in closing costs. As First Time Home Buyers you get a $4,000 tax break on the Land Transfer Tax, however, you will still be responsible for any additional on top of this amount.

 

Moving In: The Final Stretch

You’re almost there! But remember, moving costs money. Budget for movers, new furniture, and any immediate home improvements.

Tips for First time Home Buyers

  • Stay Informed: Real estate trends can change quickly, and being informed helps you make better decisions.
  • Be Realistic: It’s easy to fall for a dream home outside your budget. Stay realistic about what you can afford.
  • Take Your Time: This is a significant step. Don’t rush and take your time to make the right decision.

Step-By-Step Home Buying Process

  1. Understanding Your Needs: Start by listing what you need in a home – number of bedrooms, yard size, location, etc. If you don’t know yet, schedule a meeting with Austin D. Titus – Realtor Broker at Century 21 in London Ontario to assist you with narrowing down your needs and wants.
  2. Pre-Approval for a Mortgage: Before house hunting, get pre-approved for a mortgage. It’ll give you a clear idea of what you can afford and show sellers you’re serious. This will also ensure you’re set up for success from day one, offering on a home and then finding out you weren’t approved for a mortgage can be devastating as a first time home buyer.
  3. House Hunting: With your list and budget, start looking for homes that fit your criteria. Attend open houses, check online listings, and work with a real estate agent or broker that represents you as a first time home buyer to schedule private viewings. Remember that the Seller’s agent works for the listing and often isn’t responsible to look after your best interests or get you the best price.
  4. Making an Offer: When you find the right home, your agent will help you make an offer, negotiate the best terms and pricing. It’s crucial in this moment to have a game plan and stick to it as closely as possible. Purchasing with pure emotion is never a good idea.
  5. Home Inspection and Closing: Once your offer is accepted, have the home inspected if you choose and obtain a mortgage approval on the home. If everything checks out, you’ll move forward to closing, where you’ll sign a ton of paperwork with the lawyer and get the keys to your new home!

Navigating Financial Preparation 

Financial preparation is more than just saving for a down payment. It involves:

  • Understanding Mortgage Options: There are many mortgage options available for first time home buyers, from traditional banks to credit unions and online lenders. Each offers different rates, terms, and fees. Research and compare to find the best fit for your financial situation. In most cases it’s best to go with a mortgage broker or specialist. This will ensure you have an expert in the field working for you, and best part is that you typically don’t pay them out of pocket.

  • Improving Your Credit Score: A higher credit score can secure you a better mortgage rate. Pay off debts, keep credit card balances low, and always pay bills on time. Avoid setting up any new credit cards, lines of credit, or financing any larger purchases prior to purchasing a home. This can significantly reduce your buying power or ruin your chances of purchasing a home.

  • Saving for Additional Costs: Remember to save for additional costs as first time home buyer, items like moving, furniture, and immediate home repairs often aren’t correctly budgeted. These days, furniture and home good aren’t cheap!

The Importance of Location

When choosing a location in London, consider:

  • Proximity to Work and Schools: Consider your daily commute and the quality of local schools if you have or plan to have children.

  • Neighbourhood Vibe and Amenities: Each neighbourhood in London offers something unique. Do you prefer a bustling urban area or a quiet suburb? What about parks, restaurants, and shopping centers?

  • Future Developments: Research planned developments in the area, as these can affect property values and your lifestyle.

The Role of a Real Estate Agent and Broker

A good real estate agent is invaluable, especially for a first-time buyer. They can:

  • Provide Market Insights: Agents have in-depth knowledge of the market and can guide you to homes that fit your budget and preferences.

  • Negotiate on Your Behalf: Agents can handle negotiations, which can be intimidating for first time home buyers.

  • Help with Paperwork: They can demystify complex paperwork and ensure legal compliance.

Home Inspection and Insurance

  • Importance of a Home Inspection: Always get a professional home inspection, especially as First Time Home Buyers. It can reveal hidden problems with the structure, plumbing, or electrical systems. While home inspectors provide you with a list of items, it’s eventually your decision as a first time home buyers to move ahead or not. There is a common misconception that home inspections are a pass or fail.

  • Home Insurance: Home insurance is a must. It protects your property against damage and theft. Shop around for the best coverage at a reasonable price. When taking on a mortgage, home insurance is a requirement to protect the mortgage lender’s investment in your home. In many cases home insurance for a condominium is significantly less than home insurance for a single family home.

Understanding Real Estate Terminology

Real estate has its own language. Familiarize yourself with terms like:

  • Amortization: The process of paying off a debt (like a mortgage) over time through regular payments. In most cases your amortization period is between 25 and 30 years. The maximum length of amortization when you have a mortgage less than 20% down is 25 years, while over 20% you’re typically able to max out at 30 years amortization period. As First Time Home Buyers, I always recommend going for the longer amortization of 30 years if you can.

  • Term: The length of time that you are locked into your current mortgage lender. In most cases this is 5 years while some may opt for less time to have more flexibility should the market change or they wish to move.
  • Equity: The portion of your home that you truly own – your home’s value minus any debts like a mortgage.

  • Deposit Money: An amount that goes towards the purchase price of your property typically due within 24 hours of the acceptance of the offer.

Lifestyle Considerations

Your home as a First Time Home Buyer is more than an investment; it’s where you’ll live your life. Consider:

  • Space Needs: Think about how much space you need now and in the future. In some cases you may be looking for more space than you need. Too much of a home as First Time Home Buyers can be costly to maintain and overwhelming financially. It’s important to remember that your first home is often not your forever home.

  • Lifestyle Amenities: Do you need a big backyard for pets, a garage for hobbies, parking for multiple vehicles, proximity to nightlife or schools? It’s often that home buyers don’t consider school zones when purchasing. It’s not until thinking about kids that they begin to reconsider certain locations.

  • Community and Neighbours: Try to get a feel for the community. Are the neighbours friendly? Is there diversity in the area? Are there community events? These questions are extremely important to ensure you feel comfortable in your new home.

Financial Assistance Programs

There are several programs available to help First Time Home Buyers in Canada:

  • First-Time Home Buyer Incentive: This program offers 5-10% of the home’s purchase price to put toward a down payment, reducing mortgage costs.

  • Home Buyers’ Plan (HBP): This allows you to withdraw up to $35,000 from your RRSP to buy or build a qualifying home.

  • First Home Savings Account (FHSA): This program allows you to invest in a tax free savings account that decreases your taxable income. At the time of purchasing your first home, you’re able to use your investment towards your purchase.
  • Land Transfer Tax Credit: As First Time Home Buyers you have a $4,000.00 credit towards the cost of land transfer tax. This is a huge benefit and is automatically applied if you let your lawyer know and can confirm that you’re a first time home buyer.

Long-term Considerations As First Time Home Buyers

Think long-term when buying your first home:

  • Resale Value: Consider factors that might influence the future resale value of your home, like location, size, and layout. While it might be exciting to get a home with tons of character or a unique layout, consider that you may only be in the home for a short period. I always recommend to first time home buyers that you purchase a property which has a wide range of marketability.

  • Maintenance and Upkeep: Owning a home comes with ongoing maintenance. Ensure you’re ready for the responsibility and costs. Remember that buying a home is only one step, the additional costs of a roof, heating and cooling, up keep throughout the year and repairs can be expensive. 

Closing the Deal

Closing the deal involves several steps:

  • Final Walkthrough: Do this to ensure no last-minute issues. Throughout the final walk through I always recommend to use this time with First Time Home Buyers to answer their questions about the home and show essential components of the property. This also gives you the opportunity to ensure the property looks in the same material state as when you placed an offer on the property.

  • Signing the Papers: You’ll sign lots of documents. Read them carefully.

  • Paying Closing Costs: Be prepared to pay your closing costs, which include various fees, taxes and lawyer services. Typically mortgage lenders will require you to have 1.5 to 4% in addition to the down payment to show that you’re able to cover the closing of the property. 

Making Your House a Home

Finally, once you’ve moved in, it’s time to make your house a home:

  • Personalizing Your Space: Decorate and arrange your home to reflect your personality and style.

  • Meeting Neighbors: Introduce yourself to your neighbors and start building a community around your new home.

  • Regular Maintenance: Keep up with regular home maintenance to protect your investment.

Conclusion

Congratulations! You’re now ready as First Time Home Buyers to navigate the exciting journey of buying your first home in London, Ontario. It’s a process filled with learning, decision-making, and joy. Remember, every step you take brings you closer to the door of your very own home. 🏡✨

Posted on December 16, 2023

Post Categories Home Buyers | Featured Content

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