A Guide to Buying Your First Home in Today’s Market

A Guide to Buying Your First Home in Today’s Market

I will never forget the first time I bought my first home… and then the second.  It was full of stress, confusion and emotions from start to finish. For many, a home purchase can be one of the biggest decisions of your life. As a 24 year old who had been living at home for her entire life, I had no idea what home ownership meant. This process should be FUN, its an exciting time so why can I only focus on trying to understand what the words “Debt-to-income ratio” means? This is one of the main reasons I got into real estate. I believe that every home ownership experience should be a positive one and I am here to make that happen.

With multiple interest rate hikes and inflation this year, todays market is even more stressful. Its important to identify if home ownership is right for you. Compare the difference in cost between renting and owning and understand the costs along the way. If you have determined that home ownership is the right step for you, read on!


Step 1: Save For a Down Payment

In Ontario, you will need to have at least a 5% down payment for purchase prices under $500,000. For houses between $500,000 and $1,000,000, your minimum down payment is 5% on the first 500k, and 10% on the remaining amount. Finally, for houses over $1,000,000, your minimum down payment is 20%. Having a large down payment of at least 20% in any circumstance will allow you to have added flexibility and it will save you thousands of dollars in interest payments and mortgage insurance. At the same time you should be building your credit score (higher credit= better interest rates & lending options!)


Step 2: Checking Your Affordability

Your down payment amount, along with your credit score and income all go into what you can afford in a home. Understanding not just what you can afford, but how much you are comfortable spending is crucial in finding a home that you can feel good about. No one wants to be house poor.


Step 3: Determine Where to Buy

Once you determine how much you can afford and what you are comfortable spending on a home comes deciding where to buy. Factors such as commute time, public transit, neighbourhood amenities, safety and school rankings tend to be top of mind for many new homebuyers. Keep in mind neighborhood factors that will increase the value of the property (i.e. new construction).

Step 4: Estimate the Closing Costs

Generally, a good estimate of how much to budget for closing costs when buying a house in Ontario tends to be between 3-5% of the purchase price. The two largest components of closing costs include Land Transfer Tax, and Lawyer & Legal Fees. Additional fees include Property survey, home inspection fee, appraisal fee, just to name a few.

Step 5: Get a Mortgage Pre-approval & Look for the Best Rate

Getting a mortgage pre-approval before looking for a home provides the stability of locking in an interest rate for up to 120 days, while providing an estimate on how much of a mortgage you qualify for. A pre-approval acts as a written contract between you and your lender. However, getting pre-approved also does not mean you cannot shop around for rates.

Step 6: Find a Good Real Estate Agent

Connecting with a real estate agent that fits your needs and has a strong understanding of the market you're looking in is crucial. Especially for first-time buyers, having an experienced agent can provide much needed clarity in a brand new situation.

Step 7: Look for Properties in your Price Range

Although it can be tempting to expand your search outward and raise your budget, it's important to continue to look for homes you can both afford and see yourself living in. This search starts online, with websites like your area MLS Page and through what your real estate agent finds to show you.


Step 8: Make an Offer

When you’ve found the home you want to buy, it’s time to make an offer to the seller. Your realtor will put this together with your help.

With rising interest rates you especially may be wondering how to buy a house in Toronto’s expensive housing market. As prices decrease, many markets are rebalancing and affordability is improving. The housing market helps the Bank of Canada battle inflation. We expect the slowdown to alleviate inflationary pressures sufficiently for the Bank to reverse some rate rises next year. This will increase affordability when Canada's housing market stabilizes next year. Such events should set the stage for a durable recovery.

I hope you found this information useful! As a realtor specializing in the Liberty Village and Toronto real estate market, I am here to help guide you through the entire buying or selling process. Grab a copy of my FREE Toronto guide by reaching out to me on the Contact page or on my social media. Look forward to speaking with you!