Being a first time home buyer is exciting, truly! It’s like entering a new stage of your life filled with a bright future ahead. In all of the excitement, you’ll find yourself asking the tough questions like: should I buy a condo or a single family home? Do I need two bedrooms, or should I get four for the future? Is outdoor maintenance something I really want to spend my free time doing?
While these questions aren’t as poetic as a Shakespeare piece, it is important to make informed, practical decisions during the biggest transaction of your life. Let’s break down the 5 steps separating you from first time home ownership.
Step 1: You can never start saving soon enough.
Your parents have probably been telling you that for years – they’re not wrong. Save as much as you can and start as early as you can. Other sources of down payments could be a gift from your parents, an existing line of credit or you can borrow the down payment from your RRSPs.
Step 2: Get pre-approved and be money smart.
Online mortgage calculators will never take the place of a professional Mortgage Specialist and it’s not enough that you think you know what you qualify for. That’s not to say we want to burst your bubble because you should be energetic and excited as you embark on this journey! However, you need to know what’s realistic before you start shopping. The best way to prepare is by completing a pre-approval with your bank.
Understanding your Down Payment.
According to RBC, you’ll need a 5% downpayment for properties valued up to $500,000 which works out to $25,000. But, let’s say you find the perfect home for around $200,000 – your down payment would only need to be $10,000. A down payment may seem like a lot of money but remember – it’s never too early to start saving. Even if you’re several years away from making the decision to purchase your home it’s better to save now and be prepared for later. Your worst case scenario if you don’t end up buying a home is having a big savings account!
Take Advantage of Government and Mortgage Programs
Home Buyers’ Plan:
Withdraw up to $35,000 tax-free from your RRSP to buy your first principal place of residence and repay the amount withdrawn within a 15-year period. Note that you may be eligible for this program even if you’ve owned a home before! For example, if in 2017 you sold the home you previously lived in, you are still entitled to partake in this program in 2022. To find out if you’re eligible for this program, explore the requirements here.
First Time Home Buyer Incentive:
This is a financial incentive available for all first-time home buyers with annual incomes of $120,000 or less. This incentive allows you to borrow 5% of the purchase price of a home without interest and will reduce your monthly mortgage payment without increasing your down payment. More information on eligibility can be found here.
First Time Home Buyer Tax Credit:
In Alberta, eligible first-time home buyers, and their spouses or common-law partners, can claim up to a $5,000 non-refundable income tax credit on a qualifying home. When tax season comes around, you can include the $5,000 amount on Line 31270 of Schedule 1 on your tax return and receive up to a $750 tax rebate. Check your eligibility here.
CMHC Green Home Insurance Refund:
CMHC provides a partial refund on the cost of mortgage loan insurance if homes are built to R-2000, Built Green, ENERGY STAR, LEED Canada for Homes, CHBA Net Zero Ready or Net Zero home standards.
Avoid New Debt.
In addition to saving the right amount of money it’s important to tighten up your finances by avoiding unnecessary debt like a new car or recreational vehicle and staying on top of any monthly credit card payments.
Have an Emergency Fund and Plan for Closing Costs.
Save a little extra cash for any emergencies that come up during the home buying process and to cover your closing costs/legal expenses. If you buy in Meadows of Morinville, closing costs are quite minimal. Closing costs would include fees such as lawyer’s fees (our local lawyer’s office offers a flat rate for legal fees), adjustment for property taxes (you will owe the seller for your share of the taxes, which would be from the possession day until December 31st) and an adjustment for the monthly lease rate.
Step 3: Let the home shopping begin!
Once you have a clear financial picture of what home ownership looks like to you – hit the road and start touring homes. Some prompts to get you thinking about where you want to live include: building type, if you want a yard, the level of maintenance you’re comfortable doing, if entertaining guests is important to you, and whether or not your family will be growing in the near future.
By process of elimination you’ll have a better idea of what your dream home will look like. Let’s use the Meadows of Morinville as an example. Did you know that you can own a detached single family home for less than the average condo price in the city by choosing Meadows of Morinville? In our community you can check off the following boxes:
- Affordable home ownership.
- A detached space with no shared walls.
- Done-for-you landscaping with easy maintenance.
- Easy access to big city amenities without sacrificing peace and quiet of small town living.
- Complete turnkey package
You can learn more about how Meadows of Morinville could be a fit for you on our website.
Step 4: Make your dream home decision
Narrow your favourite options down to a short list. Cross out anything you’ve looked at that doesn’t suit the lifestyle you’re creating and make your decision from there.
After making your decision, you’ll then move to the contract stage.
Step 5: Condition Removal
This is when you can really celebrate. Condition removal means your financing has gone through and the house is officially yours (insert happy dance here)! You can contact your utility provider and get those logistics organized for the last and final stage.
Step 6: Possession Day and Living Happily Ever After
Now that’s a happy ending we can get behind! You’ll swear you’re never going to move again after hauling and unpacking dozens of boxes filled with things you meant to throw away. But, hey – it’s all part of the game!