Looking for some first time buyer tips? Buying your first home is a daunting experience – especially in a market like Guelph which has become extremely competitive in the past few years. So where do you even start your search? Here, compile some of the best resources and apps to get you started.
Your Guelph Realtor should be able to help you navigate through the process. Once you become familiar with the details, it becames far less intimidating (and, actually fun!). Here are a few pages that will get you started from our blog library:
Who are first time buyers in Guelph these days?
Of course, it’s hard to categorize everyone who is a first time buyer. Everyone has their own situation
49% of first-time home buyers are Millennials (25-34)
61% of first-time home buyers purchased a detached home
50% of first-time home buyers felt price was the most important factor to consider
85% of first-time home buyers spent the most they could afford on their home, versus 68% of repeat buyers
A large percentage of buyers are coming from the Greater Toronto area (GTA), in particular Brampton, Mississauga and the City of Toronto.
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. Or, alternatively they turn to the internet to provide a recommendation of a top Guelph real estate agent.
Prior to COVID, many first time buyers would attend an open house to get exposed to the home purchase process and better understand what their budget would buy them. However, since COVID many open houses are no longer happening.
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 a great first time buyer tip, because it has much of what you’d be looking for on your own time.
Realtor.ca is a common tool for buyers to view homes and it is fairly accurate in terms of timing. However it doesn’t provide you with sold prices.
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.
The first step is discussing the process of buying a house with your bank or mortgage lender. This step is inevitable- you either need to do it before buying a house or after. However, in a competitive market like Guelph, it should ALWAYS be done first.
An online mortgage approval calculator is not sufficient because it doesn’t factor in everything. It online provides a top-level estimate of what you might qualify for. A true pre-approval is detailed process that requires factors such as your credit score, income analysis and more.
Meet with a lender (it’s recommended to meet with a big bank AND a mortgage broker) to understand your options, rates and type of mortgage you’d like. Need recommendations? No problem, just ask!
Determine the source of a deposit and downpayment
When talking about first time buyer tips, this is something that many first time buyers don’t factor in: deposit and downpayment. These are two completely different requirements that will require some planning.
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 tranfer. A personal cheque will not do. 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.
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 ($200,000).
Closing costs- things to consider as a first time home buyer
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 no real estate commission fees paid by a buyer (these are always paid by the seller). A safe estimate is about 2% of the purchase price will go towards closing costs.
As a first time buyer, you also may qualify for a land transfer tax rebate. Details of that are here.
If you have any questions or concerns about the home buying process, get in touch!
First time buyer tips related to looking at houses
OK! So you’ve been pre-approved and know where you’re getting your deposit and downpayment from. Now it’s time to look at houses!
There are a few first time buyer tips that are helpful here:
Know what market you’re looking in
Usually, buyers have a specific reason to be a certain market. 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!).
Some buyers may also like that Kitchener is cheaper than Guelph and may want to look there as well. No problem. However, some buyers who are not familiar with the area may also be enticed by the cheaper prices in London and 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. You should narrow down your market before you start looking.
Be realistic with market pricing
Most of southern Ontario has realized major price increases over the past 5 years. Bungalows in Guelph that were selling for $500,000 in 2019 were selling as high as $900,000 in 2021. Although we don’t believe the market can continue at this pace in 2022, we don’t believe there is any big crash coming either.
Your real estate agent should know the price of houses in Guelph, from detached, to semi-detached to townhomes and condos. If your budget is $500,000 and you want a 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.
Unfortunately for buyers, we are in a strong sellers market. This means sellers are in full control as there is far more demand for housing than available supply. “Scoring a deal” in Guelph is almost impossible these days, because there is usually more than one person willing to pay full asking price or more for a home.
Prepare to be aggressive 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.
In a sellers market, sellers know there is demand for their home. So, they’re going to position it so that they can get the best market price for their home. This is typically done through a strategy of “holding offers”. This means that the seller puts their house on the market and is only going to review offers 5 days later at 5pm.
This strategy means that they’re hoping to get more than one offer on the house and create a bidding war to sell to the highest buyer. However, in order to successfully implement this strategy, the seller needs to price their house slightly below market value. Otherwise, if they priced it at market value buyers would see much reason to compete.
If you’re active in todays market and want to buy a home, one of our most important first time buyer tips: ignore what the list price of a home is. You need to look at what homes have been actually selling for. It’s not unusual for a house that has a market value of $700,000 to be listed at $599,900 and it sells for $710,000 with 20 offers. Beth and Ryan have represented more buyers in Guelph than almost anyone else in 2021; we know what market values are and how to get our clients a home!
Don’t get emotional about the purchase
First time buyer tips here: Don’t get FOMO (fear of missing out) and go crazy if you’re competing. 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 appraisal and want to ensure you’re paying fair market value for the home. If you’ve paid substantially more than market value (not list price), than you may be required to have a larger downpayment.
In years past, having an offer accepted that was conditional on financing and inspection was completely reasonable. And that market may come back. But while we’re in a sellers market, having conditions in an offer puts you at the bottom of the pile, regardless of what your price is.
However, let’s assume you’ve sorted out your finances prior to putting in an offer. If you want a home inspection, there may be an option of doing a pre-offer home inspection. As in, you do the inspection before your offer goes in. The upside is that you still get a home inspection and you know about any issues the home may have. As well, your offer now doesn’t need this condition, so you’re very competitive!
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. 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 buyer tip here is that you should consider your current needs, but also your future needs. Stretch yourself a little on your budget now, because it will save you another move later. Young couples that are starting to have families are a perfect example of this (like us!). We bought for our 30 year old self, not our eventual 45 year old self with 3 children.
Don’t get us wrong, buying for your current self is fine. If it’s just a single person, you don’t need a 3 bedroom, 1900 sf home. But you should consider your future when you’re looking.
In the end
Buying a house can be a fun, rewarding and exciting process! The key is to do your homework and trust your Realtor. Not all Realtors are the same, so if you’re interviewing real estate agents to work with you, you should call us! We’re never too busy for new clients.