If you’re a first-time home buyer in Guelph, rising inflation and increasing interest rates may seem intimidating, but this could actually be your chance to enter the Guelph real estate market. With rental prices in Guelph climbing to record highs each month, more and more renters are questioning whether it’s better to continue paying rent or start building equity through homeownership.
The answer may surprise you. If you can secure one of the best mortgage rates in Guelph and keep your payments close to what you’re already spending on rent, now might be the perfect time to buy your first home in Guelph and start investing in your future.
Jump links:
What is the process of buying a home?
What tools can first time buyers use to find and view houses
First time home buyer tips and tricks
Tips related to looking at houses
What is the process of buying a home?
Becoming a first time home buyer is a daunting experience – especially in a market like Guelph which has become extremely competitive in the past few years. Below, you’ll find our list of some of the best resources and apps to get you started.
The first step is finding a local Guelph real estate agents who can navigate you through the process. Once you become familiar with the details, it becomes far less intimidating (and, actually fun!).
What tools are first time buyers using to find and view houses?
Since first time buyers are new the market, they generally don’t have a real estate agent. Often times they will receive a recommendation from a friend or family member.
Many first time buyers attend open houses in Guelph to get exposed to the home purchase process and better understand what their budget would buy them. Some buyers even use this as an opportunity to informally (and secretly) interview agents.
Another popular tool is HouseSigma, a real estate app that provides sold prices of homes. HouseSigma also predicts sale prices for potential buyers. This app is great tool for first time buyers, because it has much of what you’d be looking for on your own time.
You can also start to familiarize yourself with what prices are in your desired range.
What are some first time buyer tips should be doing before viewing houses?
Looking at houses isn’t actually the first step. Buying a home is far more than just signing a contract to buy and there are a few things you can do to give yourself a competitive edge.
Get pre-approved
Before buying a home in Guelph, always start by talking to your bank or mortgage lender. An online calculator isn’t enough, true pre-approval considers your credit score, income and financial history to show exactly what you qualify for.
Meet with both a local bank and a mortgage broker to compare mortgage rates, terms, and options. Brokers are especially helpful for self-employed buyers, those with credit challenges, or unique properties like cottages or mobile homes. Don’t just chase the lowest interest rate, look at penalties, terms, and payment flexibility too.
Once pre-approved, you can confidently shop for homes. When making an offer conditional on financing, your lender will calculate your exact monthly payments, property taxes, and closing costs. Keep your credit score at 650+ to maximize your chances of approval.
Determine the source of a deposit and downpayment
When talking to first time buyers, many don’t factor in both a deposit AND downpayment. These are two completely different requirements that will require some planning.
Related: our blog post on the difference between deposit and downpayment
A deposit is the amount of money you must provide within 24hrs of having your offer accepted. It needs to come in the form or a bank draft or wire transfer. A personal cheque will not do in most cases. A deposit and then the downpayment are typically the largest challenges first-time buyers face- not the monthly mortgage payment.
How much is a deposit on a house in Ontario?
This means that the funds have to be accessible in very short notice. It’s recommended that if you are actively looking at homes, ensure you have the funds easily available. The amount of the deposit is roughly 3-5% of the purchase price, but each listing is different.
How much is a downpayment on a house in Ontario?
A downpayment is the amount you are required to pay to your bank versus what the bank is going to lend you for a mortgage. This could be as low as 5% or as high as 20% (you can even pay more if you’d like) depending on the usage and price of the property.
As an example, homes with a sale price over $1,000,000 are required to put 20% down payment ($200,000) in order to get a mortgage loan.
The downpayment is required on closing (you’ll likely need to give it your lawyer within a week before the day you take ownership)
Note that the deposit forms part of the downpayment loan amount.
Closing costs to consider when buying a house for the first time
A major concern of first time home buyers are the closing costs related to the transaction. And rightfully so, because you haven’t bought a house before! It’s reasonable to wonder how much more you have to pay.
Closing costs for a buyer include legal fees, land transfer tax, land title search and other miscellaneous fees. There are generally no real estate commission fees as a buyer (these seller pays these). A safe estimate is about 2% of the purchase price will go towards closing costs.
As a first time home buyers, there are a variety of programs that you may qualify for. This includes land transfer tax rebate or other first-time home buyer programs. Details of that are here.
Tips related to looking at houses
OK! So you’ve got a pre-approval! You know where you’re getting your deposit and downpayment from. Now it’s time to look at houses!
Know what market you’re looking in
Buyers choose a city or town to live in because it meets their needs. As an example, buyers in Guelph choose Guelph because maybe they just received a new job here (congrats!). Maybe their child is going to the University of Guelph (another congrats!).
Maybe you work in Guelph but like that Kitchener is cheaper than Guelph. The commute is reasonable and it’s worth it for you. However, some buyers who are not familiar with the area may also like the cheaper prices in London but still work in Guelph.
This may look great in a budget spreadsheet, but traveling from Guelph to London on a daily basis may get old quickly, especially in the winter months. You should narrow down your market before you start looking by being realistic about what your own time is worth and what you can afford.
Be realistic with market pricing and expectations
Buying a house in southern Ontario has been tricky over the past 5 years. Bungalows for sale in Guelph that were selling for $500,000 in 2019 were selling as high as $900,000 in 2021. Now in fall 2022, those prices are back to $800- $850,000. But, who knows what to expect in the new while with Guelph housing prices.
Your Guelph real estate agent should know the price of houses in Guelph, from detached homes, to semi-detached to townhomes and condos. If your budget is $500,000 and you want a magazine worthy detached house in Guelph, the reality is that this is no longer an option. However, there are many condos that are in this price range that offer great value.
Use a local realtor
If you’re buying your first home in Guelph, do yourself a favour and find a good real estate agent in Guelph. The purchase of your first home is not the time to be using family members from another city.
Specifically, those who 1/ are physically in Guelph and 2/ are active and help many buyers in the Guelph market. They’ll know the right neighbourhood, meeting your wishlist and buying (or selling for sellers) the house for the best price.
Beth and Ryan don’t represent clients who want to buy a house in Toronto or London. Why? Because we don’t know the nuances of a city and neighbourhoods and can’t properly advise a client there.
It’s the same in Guelph. Don’t use a Mississauga agent or Toronto agent if they don’t know Guelph. We help many, many out of town buyers buy a house in Guelph with great success.
Be strategic with your offer
This blog heading could change in coming years if the market changes! However, if you’re reading this in 2022 it’s unfortunately a valid heading for buyers.
Pricing strategies for the first time buyer buying a house
In a seller’s market, homes move fast, but as we approach a buyer’s market, first-time homebuyers have more options. Some buyers make the mistake of putting in unrealistically low offers—like offering $700,000 on a house listed at $850,000. This rarely works and can signal to the seller that you’re not serious.
One of the biggest advantages a skilled realtor in Guelph can offer is expert negotiation. A confident realtor can help you secure a fair deal, bridging the gap between buyer and seller for a win-win outcome. Most sellers know their home’s true market value, and while some may test the market, a savvy realtor ensures you’re purchasing around that value.
Sellers who must sell quickly, often indicated by a vacant home are more open to negotiation. Recognizing these opportunities can give buyers a real advantage in a shifting Guelph real estate market.
Don’t get emotional about the purchase
First- time home buyers tip here: Don’t get FOMO (fear of missing out) and get too emotionally invested in a particular house. Have limits and stay within them. We’ll also coach you if we think you’ve gone too far.
Remember, your bank will have an home appraisal and want to ensure you’re paying fair market value for the home. In most cases, the appraisal will come in just fine as long as you can justify the offer price with recent comparables.
Buying a house with conditions
In this market, having a seller accept a conditional offer on financing and inspection is completely reasonable. However, less conditions in an offer with a lower price may be more attractive to the seller. Again, it comes back to working with a realtor who is effective at negotiation on your behalf to get you the best deal.
As first time home buyers, let’s assume you’ve sorted out your finances prior to putting in an offer. Your lender may say that you’re OK to go in at a certain price without requiring this condition.
In regards to a home inspection, there may be an option of doing a pre-offer home inspection. This way, you know the state of the home but no longer require this condition.
A first time buyer will generally want to know major issues that could exist within a home.
For older homes some of these issues could be lead paint, asbestos, knob and tube wiring or galvanized steel plumbing. The other major expenses could be foundation cracks, older HVAC equipment (furnace, AC) and a new roof. However, you can resolve most of the above at a cost.
Just make sure you hire a professional!
The only real downside is that you’ve spent $500 on a home inspection with no guarantee that you’re actually getting the house.
Think of the future
When we bought our first condo in 2007 in Toronto, it was a 690sf tiny space. Why? Because when we bought it in 2005, it was pre-construction and we had no idea how big 690 sf was. However, what we didn’t consider was future needs.
Beth got pregnant in late 2005 and by the time we moved into the property in summer 2007, we had a 1 year old! We then had to sell that property and consider our current and future needs: we planned to have more children.
The first time home buyer tip here is that you should consider your current needs, but also your future needs.
Don’t get us wrong, buying for your current self is fine. If it’s just a single person, you don’t need so much home as 3 bedroom, 1900 sf single-family homes provide. But you should consider your future when you’re looking. And even then, “future” doesn’t mean the rest of your life. It may be 3-5 years, 5-15 years or even the rest of your life.
The other major factor that can be a huge advantage is to look at neighbourhoods that may have a bright future on the way. It’s known as gentrification and it’s when a neighbourhood turns over from bad to good. Those who have the foresight to see this change coming can get in before the public realizes the change.
In the end
The homebuying process can be a fun, rewarding and exciting process! The key to the home-buying process is to do your homework and trust your Realtor.
Also, remember that you need to open accounts for Guelph utilities. You’ll need to do this before moving in!
Not all Realtors are the same, so if you’re interviewing Guelph real estate agents to work with you, you should call us!