1st Time Buyers in the Toronto Real Estate Market

It's one of the most exciting experiences of your life...buying your first home, condo or even a loft. You have spent all this time saving for this moment but it turns into a disaster, an agent that does not teach you the process, endless views of homes, the excitement of the first place you love, then the disappointment of it ending up out of your price range.

How do we make this adventure a pleasant, in fact, a positive and enjoyable voyage?

The Toronto real estate market has made it a challenge for the first time buyer to find their perfect dream home. Managing expectations is important as we have seen the average price of a home rise to about $600,000. You do not want to put yourself into a stressful situation by buying more than you can truly afford.

So what are the steps involved in being prepared to start looking for a house or condo:

1. You need to understand what you can afford, what mortgage suits you best, and feel comfortable with the lending agency you are going to work with, as this is a very long term relationship.

2. Interview real estate agents.  Find a good fit, someone who is patient with first time buyers, one who will take the time to teach you each step and one that will not force you into situations that could hurt you in the end. Make sure you are prepared with questions when you begin the process. AND make sure you are working with a fulltime agent that will meet every need.

3. Talk about where you want to live. What neighbourhood fits best with your needs and lifestyle and of course can I afford it. Sometimes its not worth the price to be in the perfect neighbourhood.

4. What type of house or condo is best for you? There is a real difference in costs with each of these decisions.

5. Learn about other costs like lawyers, house inspectors, renovations if needed.

Over the next month I will put together these 5 articles in assisting 1st time buyers have an enjoyable and successful house hunting adventure in Toronto.

My first question when looking at purchasing my 1st home is “What Agent do I go with?”

This is a very tough decision as you will have everyone you know to go with an agent that they had worked with. The first inclination is to go with a family member of friend. The question that you must ask yourself is how would they be with a first time buyer? Just because your parents were successful selling their million dollar home with an agent does not mean you will have the same experience with this agent when you are looking for your first home.

The first question you have to ask is the agent strong with 1st time buyers. Especially in the Toronto market you need a very patient and well versed agent that will take the time to explain every step in buying a home, possible government grants, type of properties and neighbourhood options. The agent should be explaining the different types of mortgage companies you can use and what all the extra costs will be through the process.

I find with my 1st time buyers the most common theme is that they had a fun experience throughout the whole process. This really is a very personal process and it is vital that the end result is you have chosen an agent that you feel comfortable working with.

You have to make sure that you are number 1 in the eyes of your agent and will take the time to send you listings daily and talk to you about the positives and negatives of each property. If you are looking at condos the agent must explain the differences between pre construction and older buildings and the maintenance fees for each building. You want an agent that will have no surprises at the end of your buying process.

Make sure as you interview your agents you are prepared with questions, that there is a pleasant feeling (yes warm and fuzzy) and you truly believe they are not just out to earn a commission but truly want to work with you.

Your agent is critical towards the success of buying your first home make sure you do the research to make the best experience possible.

How Do I pick the Right Mortgage as a 1st Time Buyer?

Buying a home is an exciting and important life event. Being a first time home buyer means that you will have many decisions to make - and just as many questions that need answering. To help simplify this process, I have compiled a wealth of information just for you, the first time home buyer. No matter what stage in the home buying process you're at, we have all the information you'll need along the way.

The hardest part of your first mortgage to decide is who do I talk to? Don’t limit yourself to one person. Do your research of who you can get a mortgage with. There are many options such as financial institutions, a mortgage broker or agency.

The next question is to figure out your finances, what am I approved for and discuss the best type of mortgage. Most first times buyers tend not to know about the different types of mortgages they can work with such as Fixed, open, closed, variable we are even seeing blended mortgages out there. In the past we have seen a lot of open mortgages but lately we have been seeing more closed due to how low the mortgage rates are and where they may be a few years from now.

So now we understand how much and the type of loan, we now must look at do I need mortgage insurance? This is not for everyone though I find most 1st time buyers go for it based on how long their mortgage is. Next, what term is best for me. There are many terms right up to 30 years again this is based on your personal situation.

Most agents work with mortgage brokers and can at least point you in the proper direction and assist you with what questions to ask when you get there.

Make sure you are in control of your mortgage situation don’t just do what all tell you. Do some research to know all scenarios when in the initial meeting with a mortgage broker?

Condos and Housing types

What are the pros and cons of condos?

A condo is a lifestyle.  It is a carefree way of ownership.  You do not have to be bothered with maintenance, and daily upkeep.  You can go away to work or a cottage or holiday and not have to worry about cutting grass, shoving snow, cleaning windows or even picking up newspapers or flyers left at your door.  Everything is done by the condo corporation.  In fact, besides paying your mortgage and taxes, your maintenance may be the only other thing that you have to pay. Your maintenance can cover everything including heat, hydro, water, repairs and cable TV.  The con is that you do not own your own land and you live very close to your neighbours.  You do not make up your own rules; you live by the condo corporation’s rules.  Also the amount you have to pay in maintenance fee could allow you to increase your mortgage.

Buying a townhouse, semi or detached?

Once you are purchasing a townhouse, there are two differences.  You can purchase a freehold townhouse which is very similar to a house except you share walls.  The advantage to this is that your heating is usually cheaper than for a detached house because it is not escaping to the outdoors.  It is being shared.  These homes are usually smaller and cheaper to purchase than detached homes.  The con is that you share walls and roofs with your neighbours so it is good if you get alone, not so good if you don’t.  You are responsible for maintaining your own townhouse’s upkeep and maintenance.

With a condo townhouse you are also responsible for paying a maintenance fee (which varies from townhouse to townhouse).  Some include exterior maintenance and upkeep, water, insurance etc.  This gives you the freedom of not have to do for yourself, but also someone else is in control of these things.  The con is that the maintenance cost could also increase the amount you are paying towards your mortgage (however, not always).

A semi-detached home or detached home are very similar except for the fact that a semi-detached home could share a wall, which could make it a little less expensive.  They are also usually smaller in size.  You usually do not find large luxury homes semi-detached.  Again the con for a semi is that the walls and roof can be shared.  This is a problem when you need to do repair and your attached neighbour doesn’t want to.  If you want to go away for a period of time, you may need to get someone to watch your property.  However it is wonderful to own your own home and have the freedom to do what you want to with it.

Where should I buy?

When you are ready to purchase your first home after so many years of saving, where should you buy?  Is Toronto the place for you, perhaps elsewhere in Vaughan, Thornhill, Richmond Hill or Durham?  Is a condo the right fit? Should I purchase a townhouse, semi-detached or detached house?  Should I buy a newer home, an older home or a fixer up?  There are so many questions, where do I get the answers?

I am going to try to answer some of these questions by giving you the pros and cons of each type of property. Remember the final answer to these questions has to come from you and your specific needs.  As everyone’s needs differ, remember to choose an agent that you feel very comfortable with because they are going to be you partner in this chapter of your life. Choose an agent that will listen to you and help you answer all of your questions.

Location

Area or as known in real estate-location! Location! Location! I cannot stress enough how important location is in real estate.  It is the determining factor to pricing. The rule of thumb is usually the closer to the core of the city, the closer to the subway lines and the larger the home and the lot size, the more you are expected to pay. With this in mind, you have to consider your own personal needs and how much space you need, where you work and what area of the city you spend most of your time.  The next thing and most important factor to deciding where you purchase a home is what can you afford and what are you willing to compromise?  Most people and especially first time buyer usually have to make compromises.  If you can be realistic of the above, the process will be much simpler.

A new home vs. an older home

The main advantage to buying a newer home is that usually you will not have to do repairs for a while.  A newer home can usually go five to ten years or longer without needing repairs or updating.  If you are buying from a builder or building yourself you can usually choose your own finishes to your own taste.  Usually once a newer area gets grass especially in a subdivision the value goes up and usually by more than in an older area.

An older home will usually need repairs or updating.  If the updating is done it may not be to your taste and if it is not done you may have to go through the pain of living through a renovation.  However, if you are handy you may be able to find a property that needs work (a fixer up) at a great price and make the changes you want to your own taste.   Also older areas are more established.  They may have better or known schools and they have streets and parks with shade trees.