Welcome to our latest installment of Dear Urbaneer, where we dig deep into our vast experience and housing knowledge to help guide our clients as they navigate the channels of buying and selling homes. This time around, our client puts us to the test, not just with one question, but with a series!
Dear Urbaneer:
As a first-time house hunter – and hopefully soon first-time Buyer – I’m super excited but also a little nervous about what’s to come. I feel like I have so many questions, I don’t even know where to start. I also feel that there are many details, and that this is a significant, weighty decision. I’m worried that I’m going to miss something! Am I overreacting? Do other first-timers ask as many questions as I? In a nutshell, what do I need to know when buying a house?
Dizzy with the Details
Here’s our response:
Dear Dizzy:
Firstly, let us reassure you that absolutely what you are experiencing is normal. Buying a home, especially if it is your first time around, can be an overwhelming task. It’s a huge responsibility, from getting your financing pre-approvals to understanding what you’ll need to do to maintain the property. And then there is the process of finding and buying the home. It’s totally normal to feel the way you do.
Rest assured, your best strategy to calm your fears is to arm yourself with as much knowledge as you can. The more you know, the more unlikely it is that you’ll be caught off guard. And part of what we delight in doing at urbaneer is sharing our vast, comprehensive knowledge with our clients. We are invested in your happiness, beginning, middle, end and beyond when embarking on your house hunt.
For your reference, we’ve compiled some of the most common questions that we hear from house hunters. Chances are, your questions will be answered below. But if not, don’t be shy. We can handle the tough questions!
1 – Where Do I Start?
While the obvious answer to that question is “at the beginning”, your house hunt should actually start in a meeting with your lender. Your mortgage financing is what will ultimately lay the ground work for your house hunt. It will set your budget limits and allow you to have discussions about what you can comfortably afford. It will also give you a chance to explore your down payment options as well.
It’s also a very wise move to have a pre-approval in hand before you even surf the property listings. In a hot market like that in the city of Toronto, things can happen very quickly once you enter into an offer situation. Having your pre-approval in hand means being able to act as swiftly as you need or want to. It will also provide you with a rate guarantee. Here’s one of our past posts called Five Reasons Why Getting A Mortgage Is Harder To Obtain.
2 – How Much Do I Need For A Down Payment, Anyways?
When it comes to your down payment, home buyers have a number of options and it can alter your whole budget planning for your house hunt. We’ve touched on this a few times before in some of our past blogs, including, Should I Use My RRSP As My Down Payment? where we talk a bit about the government backed Home Buyer Plan for first timers and Should I Max Out My House Hunting Budget With CMHC Insurance?.
As of December 15, 2024, the federal government increased the price cap for insured mortgages from $1 million to $1.5 million.
A first-time buyer putting less than 20% down in Canada can purchase a home up to $1.5 million, provided the property is eligible for an insured mortgage, which requires mortgage default insurance. The minimum down payment for a home under $1.5 million is a combination of 5% on the first $500,000 and 10% on the remaining amount above $500,000.
3 – What Does A Realtor Do? Do I Really Need One?
At the risk of self-promoting, yes, the service that a Realtor provides you – from reassurance (like we are doing here) to helping provide advice in an aggressive market by deciphering the market values of properties based on location, size and condition (unfortunately that list price is often significantly lower than it’s final sale price in today’s market), to sourcing suitable properties which can be purchased within your budget, to steering you through the process of making a property purchase, whether that means negotiating an offer or navigating a bidding war. A Realtor is a professional who can help your home-buying experience be the best that it can be and hold your hand when the stress is potentially overwhelming. A top-producing realtor who has both the professional training and “in the trenches” experience can explain Why The Toronto Real Estate Market Is So Hot, Why The Millennials Are Having Such A Challenge Securing Freehold Property and A Winning Bidding War Strategy. With over 25 years of experience, we have a lot of insight which can give you an advantage.
And another question that is commonly asked is how much it costs to use a Realtor as a home buyer? In many cases, you actually pay nothing directly out of your pocket. The commission fees are frequently (but not always) paid for by the Seller to the listing agent or your realtor through the proceeds of the sale.
For homes $500,000 or less: You need a minimum down payment of 5% of the purchase price.
For homes $500,001 to $1.5 million: You need 5% on the first $500,000 and 10% on the amount above $500,000.
Example: For a $750,000 home, the down payment is $25,000 (5% of $500,000) + $25,000 (10% of $250,000) = $50,000.
4 – What Are The Closing Costs To Buy?
Good question – and you are wise to ask it. Reason being that many people, when setting out their house hunting budget, fail to account for all of these costs, and can sometimes be short – or scrambling at the last minute.
We’ve covered these off at length in this past Dear Urbaneer post called What are the Closing Costs for a Property Purchase?
In a nutshell, you need to remember costs for legal fees, closing adjustments, appraisal costs, Land transfer taxes, HST, Title insurance, Property/Fire insurance, interest adjustments, home inspection and a status certificate fee. You may not be subject to all of these, but that is something else a Realtor can do for you: help determine what your closing costs are going to be. And if you’re buying a condominium pre-construction, there could be a lot of additional hidden expenses in that Agreement of Purchase and Sale, which we address in this post called On Buying A Toronto Condominium Pre-Construction.
5 – How Long Does It Take To Find The Right Property?
While this varies widely, depending on a number of factors, including how specific your needs are versus the available supply of properties that meet your requirements, in the Toronto real estate market, it does require patience. For some, it can take upwards of six months to find the right place, and for others, the perfect place may present itself within weeks. Once you successfully negotiate a purchase, your closing date may be as early as 30 days from submitting the bid, up to around 90 days, though keep in mind the actual time frame depends on what you and the Seller agree upon.
Here’s a post which explains the process of how Urbaneer Will Help You Make The Right Real Estate Purchase.
6 – What’s Your Best Advice For A First-Time Homebuyer?
Prudence, process and patience. The Toronto real estate market is complex, with variations that differ for both freehold houses and condominiums, as well as their respective micromarkets, based on location, condition, and size. It’s critical you Understand The Macro-Economics Of Our Market Momentum, as well as the current climate, which we explore in Urbaneer’s Real Estate Forecasts. You should Understand The Six Essential Layers Of Property, how to Choose A Winning Location, if you’re purchasing a condominium, factors like Five Points To Ponder Before Buying A Condominium and Understanding Condominium Common Element Fees. It’s essential you take the necessary steps to be educated, informed and supported on the real estate process before you secure a property. And this can take time. Essentially, the more you know, the more prepared you will be. At urbaneer.com, we believe that the best purchases are the prudent ones, which is effectively what happens when you do due diligence by researching and asking questions.
** Addendum ** Since this post was first posted in March 2016, here’s some additional posts of merit worth reading:
The Psychology Of Real Estate, Housing & Home
The Four Values Of Real Estate For Bidding Wars And Bully Offers In Any Market Climate (Plus Cats!)
Maslow’s Hierarchy Of Needs And Toronto Real Estate For Buyers
Dear Urbaneer: About Holdbacks On Offers, Bully Offers & Bidding Wars For Buyers
Since 1989, I’ve steered my career through a real estate market crash and burn; survived a slow painful cross-country recession; completed an M.E.S. graduate degree from York University called ‘Planning Housing Environments’; executed the concept, sales & marketing of multiple new condo and vintage loft conversions; and guided hundreds of clients through the purchase and sale of hundreds of freehold and condominium dwellings across the original City of Toronto. From a gritty port industrial city into a glittering post-industrial global centre, I’ve navigated the ebbs and flows of a property market as a consistent Top Producer. And I remain as passionate about it today as when I started.
Please consider contacting me at 416-845-9905 or emailing me at Steve@urbaneer.com. It would be my pleasure to assist you.
We’d love to introduce your services to you.
Serving first-time Buyers, upsizers and downsizers, and people building their long-term property portfolios, our mandate is to help clients choose the property which will realize the highest future return on their investment while ensuring the property best serves their practical needs and their dream of “Home” during their ownership.
Are you considering selling? We welcome providing you with a comprehensive assessment free of charge, including determining your Buyer profile, ways to optimize your return on investment, and tailoring the listing process to suit your circumstance. Check out How Urbaneer’s Custom Marketing Program Sold This Family-Friendly Home In Riverdale to learn more about what we do!
Consider letting Urbaneer guide you through your Buying or Selling process, without pressure, or hassle.
We are here to help!
-The Urbaneer Team
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-800
– we’re here to earn your trust, then your business –
Celebrating Thirty-Five Years As A Top-Producing Toronto Realtor
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