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Attention New Home Buyers in today's Market

Hello new home buyer, I know that you are frustrated with today's market. Trust me when I tell you that I have been where you are. I know how exciting it is to have finally saved up that 5% down payment for your first home and start looking at properties you can finally afford to purchase. I know how disappointing it is to be beat out on homes over and over again in bidding wars where buyers with cash or more money than you have the upper hand. I want to share with you some options that can help you be successful in purchasing your first home. All of these are items I have learned from personal experience. If you ask any retiree what is the best investment they made with their money, most will tell you it was their home. Owning a home in Canada is still a stable and viable way to invest in your own future. Please consider the following ways that can help you get there faster.

  1. Use an EXPERIENCED realtor that is an EXPERT in the area your are shopping.

This is one of the first and biggest mistakes that people make. They use a realtor that they know and trust, usually on a recommendation from a friend of the family member. You absolutely should use a real estate agent that you trust. You should use someone that is experienced and in the market, not someone who does only a couple transactions a year. The most important thing you should consider when selecting a real estate agent to buy with is how well they know the area in which you are buying. In a hot market like this you need to work with an agent who knows what a home will sell for, this is of the utmost key to your successful purchase. We have highly recommended realtors in several areas across the GTA that we can recommend should you need a few suggestions of who to interview to start your home buying process. Using a skilled, experienced and qualified realtor will increase your chances of success in a seller's market.

1. KNOW your maximum budget and look at homes under it.

BEFORE you start looking at homes it is of the utmost importance that you know exactly what you can afford. You need to be pre-qualified by a mortgage broker (like myself) or your bank. The pre-qualification consists of an assessment of your income, liabilities, assets and credit score. In this market you need to know exactly what the maximum dollar value is that you can offer for a home. Knowing that the housing market in the GTA is currently lending itself to bidding wars and lots of competition for buyers should make you prepare for the battle. If you know you are going to be asked to offer higher and that homes are being listed lower than what they expect. Never offer over what your Mortgage Broker has approved you for or what your Real Estate Agent informs you the home is worth. Doing so can leave you on the hook for the difference, this is not a predicament you want to find yourself in.

2. Maybe buying a little farther away can save you money

The farther you drive from the core of the city the more home you get for your money. If you want to buy in Pickering and you aren't happy with the homes in your price range, consider driving 10 more minutes to Ajax or Whitby and looking there. Your realtor will be able to advise you on what communities are great opportunities just outside of your search area for new home buyers. The brilliance of this is approach is that you often end up purchasing in a community of people who are in the same boat as you. That is how I ended up in a subdivision full of families with children the same age as mine. At the time this will seem devastating to not buy where you had envisioned but it may be a decision you looked back on and were thankful for. In the mortgage industry we have a running joke that you should start in the center of the city, then get in the car and drive outwards until you qualify for a home. I am suggesting that you do exactly that.

3. Look at a home that needs a little work

In the GTA there is always going to be more competition for a home that is move-in ready. With so many people in the world being visual, it is easiest for our type to picture ourselves in homes that are staged to do just that. Some people can't look past an ugly paint colour or a horrible smell in a home, these are the houses you should be seeking out. Several lenders have a mortgage program called 'Purchase Plus Improvements'. This mortgage allows you to purchase a home and borrow the money to improve its value from the lender. You can use this program for items like new flooring, windows, doors, finishing an unfinished space, upgrading an electrical panel or renovating a outdated or hideous kitchen or washroom. It works for projects that will increase the value of the home. By accessing this program you can look at homes that will have less competition with other buyers. This is a way for you to be able to avoid bidding wars and be more in-control of your home purchase. Talk to a Mortgage Broker or lender about how to use this program if you are looking at buying. It could be the key to you getting the home you want at the price you want and renovating it to look just like your dreams.

4. Consider purchasing a duplex and living in half

A duplex is a home that has two legal units in it, this could be built side by side, stacked, or be a legal accessory dwelling unit built in the basement. Having a home where you rent a section of it can allow you to purchase a home at the top end of your budget knowing that you will be gaining rental income which can be used to help pay that mortgage. By taking advantage of this scenario you may find yourself able to get into a home earlier than what you had originally planned or able to purchase a larger home than what you had originally been looking at. There are lots of advantages and tax write offs that you can take advantage of if you have a portion of your home being rented out. There is also the disadvantage of paying capital gains tax on the rental portion when you sell the property. To weigh the pros/cons of this option we encourage you to speak to an accountant that specializes in rental properties to see if the pros outweigh the cons for you.

5. Be skeptical of FREE Advice.

My last and final suggestion is the biggest key to your successful real estate purchase. do not ever take the advice of people who have not done exactly what they are telling you to do with their own money. What do I mean? If you want to know what it is like to select or deal with tenants then ask an experienced landlord or the landlord self help center. If you want to know how much it will cost to renovate an ugly home then get some quotes from licensed contractors. If you want to know what a home is worth then ask a real estate agent or appraisal company that does a lot of transactions in that area. Lots of people in your life will have all kinds of opinions and helpful tips, take them all and thank them. In the end please make your decisions based on experts who know what they are doing and will not lead you astray or up the creek without a paddle.

The above are just a few ways that you can be prepared and think a little outside the box to be successful in purchasing your first home. I hope that you find some of it helpful and useful as you prepare to enter the always changing and ever interesting GTA housing market. Good luck and welcome to the party.

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