Preparing to buy a house in Toronto is a lot to do and consider. It can be an overwhelming experience for any first-time buyer.
If you’re looking to get your best deal in Toronto real estate you need to be calm, aware and in control so that you can make the best decision for your short and long-term futures.
That’s why we’ve created a comprehensive step-by-step process for preparing to buy a home in Toronto
With some thought provoking considerations, that’ll maximize the worth of your purchase and get you your best deal in the market.
Is entering the Toronto real estate market right for me?
This is probably your toughest question.
So tough I don’t even know how to precisely tell you how to determine such a fact.
You’ve come this far and it would be a disappointment to turn around now on the fantasy.
But that’s it right there!
Is buying a home in Toronto a fantasy or is it a reality for you?
A fantasy being that impulsive and misdirected want to own Toronto property, say metaphorically for the sake of posting to Instagram and Facebook a dozen times, even though you barely can afford it.
Or is this a reality and necessity?
A reality being that want and need to live in the city, not only because you love Toronto, but say because:
- you work in the city or it’s proximity
- you want to raise your kids in a good neighbourhood with an amazing school district
- you want and can afford the lifestyle you imagine living
- you know that it’s time in your life that you upgrade your home or finally enter the market and lock in an investment asset
- you literally need the luxury of Toronto living as much as you want it
The real question to ask: “is this something I really want and is it sensible for me to buy property in Toronto over renting?”
Well it’s always sensible to buy property over renting, but is it economical for you?
Would the cost of renting be a more stable monthly expenditure than a mortgage payment?
Don’t confuse that for saying that a higher monthly mortgage payment than a rent is a bad thing.
While you may be saving money on a rent, you’re literally tossing away thousands a year.
With ownership all the money you pay towards the mortgage is going towards the loan you used to get that beautiful asset investment property in Toronto.
Is this the right decision for you?
How do you answer such a question?
It’s not a question of whether or not you can afford it at this point, but is this the right time for you to enter the market?
As far as the market goes it’s on a slowdown and in decline. That’s a good thing for you, new home buyer. That’s a market transitioning from one that favours the seller to one in the buyer’s favour.
What does a buyer’s market mean?
It’s in your favour, that one thing for sure, but what makes it so?
- Less competition.
- Less bidding wars.
- Way more houses to select from.
- And a market that is cooling off and correcting itself. A cheaper market for you by an average of $10-100,000
So just because the market is currently out of reach that doesn’t mean it could be soon.
You’re fantasy could become a very doable reality
In the coming months the correction of the market could work in favour of your future reality in Toronto realty.
Buyers Summer 17 conscious note
Just because the market is in a current cooling correction doesn’t mean that your desired property will see a continued severity in its correction.
The past two months have been a correction caused by a surge of listings that rejuvenated the market with supply followed by a buyer drop-off in light of a cooling market.
The market will see a small or steadier correction this month as the surge in listing begins a decline in new listings in reaction.
Don’t expect the market to correct the price of homes much more than we’ve currently seen.
In the coming months the market cooling will be steadier in reaction to a decline in new listings.
Get the best home value. Know what you want! Know what you need!
This one’s pretty easy, unless you can’t make up your mind.
The easiest way to complete this step is: close those beautiful eyes of yours, clear your mind, relax and imagine standing in front of your dream home.
Is it a cozy tucked away bungalow, a tall spacious townhouse, a stone 2-storey detached house?
Or maybe it’s a towering monument of a condo building or it’s warm lit long halls that you’re thinking of.
But let’s not get too focused on the aesthetic symbol of your homes physicality.
No, we need to focus on the inner details, on the home that you’re going to be living in.
Ask yourself: “What am I looking for in a home?”
What are you planning to do with your new house?
- Is this a home that you plan to live in?
- Is it a house that you want to invest in and/or renovate (living in or out)?
- Is it a property you’re looking to rent space out for investment or mortgage purposes?
Then you want to consider the homes inner amenities.
- How much space do you want?
- Do you need a study?
- What type of kitchen are you looking for?
- Does it include an island?
- Do you want a walk-in closet in your bedroom?
- How big do you want your backyard or balcony?
No I can’t promise you that you’ll get your dream home instantly or exact.
It’s far more proficient
to be looking for a house
rather than looking at houses.
The way you’re going to get the best deal is if you know exactly what you want and you make it a clear goal to achieve, there’s no wasting money on what you need, want and will use.
You’re going to be paying for and living in this home for years to come.
It’s best to know what type of home and what amenities and features you’re looking for in that home.
It’s you’re first course of action to ensuring that you get the best deal on your new home.
It wouldn’t be a deal if you didn’t want it or it was lacking anything you needed.
Know the best Toronto neighbourhoods for you!
Just like knowing what you want, knowing where you want to live is just as important.
Knowing the best neighbourhoods comes with a little bit of research and as much as we’d love to tell you what’s the best neighbourhood for you, that comes down to a variety of variables.
- Do you need school districts for your kids?
- Where’s the most convenient for you to get to work or reach TTC?
- What place inspires the euphoric beauty you see in this world?
- Where’s the area you’re going to enjoy living in the most?
Answering questions like these doesn’t just come with a load of research and reading, your best thing to do is get to know each neighbourhood that you’re interested in.
Go visit each area.
Park the car, get out and spend some time walking around. You’re always going to experience so much more of a neighbourhood when your not enclosed in a frame of metal and glass, you’re going to literally feel the place.
Nothing worse than going for your first stroll after moving in and realizing somethings that you didn’t like about your neighbourhood.
Like the busy intersection with no crossing signal or lights and now you’re panicking about your kids and this street.
It’s best to consider trying to experience a neighbourhood in a variety of routine settings, like the morning, afternoon and evening along with getting a good sense about the vibes during the week and weekend.
So imagine this:
You move into your new home and it’s a long weekend in September. The late Summer air fills your house with a twilight silence and a calamity you’ve become to aware of in the serenity of your new Toronto home.
You hear a pounding crescendo. You’re a little alert as you feel it resonate through your feet.
Someone naked runs by your kitchen window, at least you thought.
Another one, naked runs by but this one screaming and laughing.
Little did you know that your neighbourhood was littered in frat houses and almost every weekend from September (especially September) to April you’re going to experience the rowdy qualities of the rising generations and bask in their red cup fetish and pounding EDM and dubstep.
It’s very importsnt to know your neighbourhood, so that there aren’t any surprises.
Once you’ve decided: that buying a home in Toronto is the right choice for you, what you want in a home, and where you want to live.
It’s time to decide on a lender.
Find a mortgage lender or broker that suits you.
Finding a lender is a big step and process on it’s own.
You’re going to be shopping around for one.
The first thing you have to consider is your credit score.
Depending on what that is, it’ll define the parameters of your bargaining room.
Can you believe it? Before you even get to look at houses you’re shopping for a lender.
You’ve got some homework to do because to get the best mortgage you’re going to need to compare for your best option.
You have two options:
find a lender or find a mortgage broker.
The difference between a lender and a mortgage broker is a lender directly lends you the money while a mortgage broker doesn’t directly lend you money, they find you a lender.
If you can’t be approved by a lender, a mortgage broker is always an excellent option to get rates.
A mortgage broker gets deals on their loans, they literally work in the market and they have access to a large range of rates, allowing them to find one that suits your needs.
A mortgage broker really does the shopping around for you, but that doesn’t mean that you shouldn’t shop around for a mortgage broker.
When you’re shopping around you want to:
- get at least three options to choose from Yo
- meet with the lender or broker
- even let them know they’ve got some competition.
There are a variety of lenders out there, it’s best to shop around for the one that suits your budget, credit score and needs.
The Canadian Government recommends asking your lender about:
-the interest rate
-the amortization period
-the fees you have to pay
-your payment options
-your prepayment options
-ways you can save on interest
-penalties if you sell your property before the end of your term
-options if you want to pay your entire mortgage off early
-transferring the remaining amount of your mortgage and the terms to a new property without paying a penalty if you sell your home
-registering the mortgage with a standard or collateral charge
Get qualified for your mortgage.
Getting qualified for a loan is the first real step after all that thinking and research.
The step where you glance over to your special someone and give them the reflecting look “We’re really doing this!”
Getting qualified is an important step because not only does it literally officially confirm your upcoming big move but it’s also a setting standard of the range of price for property that is available to you.
Basically to qualify for a mortgage you’ll have to prove to your mortgage lender or broker that you can actually afford the amount that you’re asking to borrow.
A broker or lender will calculate what you can afford by calculating your total monthly housing cost and total current debt.
According to the Canadian government lenders will consider this information:
- your income (before taxes)
- your expenses (including utilities and living costs)
- your debts
- the amount you’re borrowing
- the amortization period
Lenders use qualifying interest rates to determine if you qualify for a loan and how much you can afford.
To determine such a qualification, they check to see if you qualify against the highest interest rate of:
- the Bank of Canada’s conventional 5-year fixed posted mortgage rate
- your negotiated interest rate or the one in your contract
Basically, you must qualify for the higher interest rate even if you’re looking to qualify for a lower interest rate.
To see if you qualify for a mortgage loan there are two things to consider before the final equation.
You have to consider your [gross debt service ratio]
Your total monthly housing costs and it shouldn’t exceed more than 32% of your gross household income.
The gross debt service ratio includes:
- your mortgage payments,
- property taxes,
- and in the case, 50% of condo fees,
Now you have consider on top of that your [total debt service ratio]
This includes your total monthly costs combined with all your other debt.
this other debt includes:
- credit card payments
- car payments
- lines of credit
- student loans
- child and spouse support payments
- any other debts
This debt shouldn’t accumulate to more than 40% of your gross monthly income.
Considering these two ratios there is a way to see if you qualify using this handy mortgage calculator.
The mortgage value figured by the calculator is very handy way to check if you qualify.
Look at the price range of the home you expect to buy and combine it with all additional costs, if that is a lower result than the mortgage value given by the calculator. You most likely qualify.
Get a Pre-Approval Letter
The pre-approval letter is like the most important step in this whole damn process.
I know we’re only at number six but you’re almost out of the thick of the woods with all these lenders.
Once you’ve decide on one you’re on the next step to locking in an interest rate offer for 60 to 120 days.
A pre-approval letter not only locks in a rate but it locks in the maximum amount that you can borrow.
Though it doesn’t promise any mortgage loan, it will let you know what you’re capable of receiving.
That’s some important information because now you know you’re cutoff when you finally get out there and start looking at properties.
The actual approved mortgage amount will be depend on the cost of your home and the amount that you have for your down payment.
is a big step of handing over a lot of much needed verification.
Here’s a list of all the information that you’ll need to prove to your lender or broker to get pre-approved.
- proof of employment
- pay stub or letter of employment to prove salary
- your title and length of time with your organization
- if you’re self employed (like me) Notices of Assessment from the Canadian Revenue Agency for the past two years
- proof that you can afford the down payment and the closing costs
- bank statement
- information on your assets
- information on your debts or financial obligations
- credit card balances and limits
- child or spousal support amounts
- car loans/leases
- lines of credit
- student loans
- other loans
Before you get pre-approved for anything there are some important questions to ask your lender or broker.
How long am I guaranteed the pre-approval rate?
This is an important question because it sets the time limit you have to get a house with that mortgage and rate of interest, but that doesn’t mean they can’t be extended.
Can the pre-approval be extended?
Another excellent question to really get a good idea of the type of time you have with the pre-approval.
Most places will offer a rate for 60 to 120 days, but some might have extensions.
Will I automatically get the lowest interest rate if the rate goes down while I’m pre-approved?
That’s another excellent question.
An important note!
Just because you get the pre-approval doesn’t mean that they will give you a mortgage loan.
Before a lender approves a mortgage loan, they’ll want to confirm that the home you’re buying is worth what you are paying for along with meeting a variety of standards that differentiates from lender to lender.
Now that you’re pre-approved you’ll need to start doing a little number crunching in the next two steps.
Budget accordingly and realistically for your life in Toronto
This one’s a conscious provoking step.
A step that asks you to consider the costs of your big move.
You want to consider:
- your moving costs
- your closing cost
- your maintenance costs
- your aesthetic and furnishing costs
With all that in mind you want to get a good estimate of what that total will look like.
This will help prepare you so that you don’t look for something seemingly in your price range.
You’re not going to get approved for that mortgage if you don’t consider the whole cost.
Basically, if you’re not going to be realistic about your new Toronto home, the lenders will.
Calculate a monthly payment range
You want something realistic, something that isn’t going to heavily burden you but is a justifying monthly deposit into your new asset investment and future.
You’re going to be looking at an estimate.
Now that you have your pre-approval letter you’ve got a good estimate of your loan size and now you can figure what rate of payment suits your budget best.
Consider the realities of being a first-time home buyer or a buyer upgrading.
Your next big step in life will bring a change of scenery and space with your new home.
You can expect a coming evolution of your life-style.
So take into account, not only the current costs of living, but the expected costs of your coming life.
But don’t get discouraged there’s always a way to make an affordable and realistic budget with discipline.
It’s an important thing to consider before taking a big step or just another chapter in your life.
Speaking of new chapters, the pre-approval letter is like the blank key to your new home, you basically have a new home.
The only thing is you don’t have it.
Shit you haven’t even seen it.
That’s why you’ll need a Toronto realtor.
For the love of anything reasonable, please get a Toronto realtor if you’re buying a home in Toronto
I know what your mother said.
Yes, your cousin Heath is a really nice guy and he’s a realtor in St. Catharines
But mom’s empathy and your cousins enthusiastic help isn’t going to get you a good deal in Toronto real estate,
a Toronto realtor will.
A Toronto real estate agent lives here, your cousin doesn’t.
A Toronto realtor knows here, it’s literally the epitome of their success.
Your cousin is stuffing peoples mailboxes with flyers across St. Catharines.
A Toronto agent works in Toronto year-round.
Your cousin has never worked in Toronto, let alone he can’t even drive in the city. He literally almost killed someone getting off the streetcar the other week!
If $10,000 is worth going on a field trip with your cousin, then so be it.
For serious players, those looking to play the game right, looking to get the best deal on their Toronto dream home. I highly recommend getting yourself a proficient Toronto realtor.
Sign a buyer rep agreement with your agent
Okay, so you don’t trust your agent.
Nah, it doesn’t mean that, but you should do it.
Buyer representation agreement is basically an agreement between the client and the agent.
In detail it’s a written agreement that you are the brokerages client and that as a client the agent has a responsibility to achieve your wants, needs and instruction, provide in your best-interest and protect your confidential information.
The written agreement will list the expectations and conditions of both parties (client and agent).
It’s an excellent document for figuring out the best realtor.
A great way to to find someone that’s going to meet your expectations and represent you in the most proficient means.
Now you don’t need to sign a BRA (Buyer Representation Agreement)
You can always opt for a CSA (Customer Service Agreement).
Note that this type of agreement only binds the realtor to providing the services of buying a house, one that will lack advise or the same commitment.
That doesn’t mean that a client under a CSA would not be represented as fairly as one under a BRA.
It means that there are less conditions for both parties.
Why is it important to have buyer representation agreement?
It’s important because it helps protect you and your money to get what you want. It’s the most optimal way to ensure that your agent is representing you with all their resources and knowledge.
You’re going to want some long-term knowledge on Toronto real estate.
Keep track of new listings on the market
In this important step you now have your pre-approval letter, you know what you are looking for, you have your proficient Toronto realtor and you’re now at the best part.
Looking for your dream home!
You’re not going to find the perfect home for you right away, though that’s not to say it’s impossible. but just like we will discuss in our last point, be patient.
What you want to do is give all the specifications of your home to your agent.
Get them to provide you with a regular list of houses that meet your needs and wants. Keep getting active listings.
Go see plenty of houses, it’s a good way to get familiar with what is normal and what is a feature in a home.
Hold out for the house that calls out to you.
That’s important right? Just jumping at the house you love? But please do responsibly.
In light of that we currently are experiencing a market that is a state of flux from a seller’s market to that of a buyer’s market.
The key term being flux.
We are not yet out of a seller’s market and we are not quite in a buyer’s market.
So the best thing to do when searching for your new home is to be patient.
Know when to enter the market [Patience the key to your new home]
In light of a hyper-active and hot Toronto real estate market breaking into 2017 with early market heights that have cooled into late Spring and early Summer.
Considering that we are seeing a market in a state of transformation, a Toronto market trend that is literally headed towards a buyer’s market.
If it isn’t already. It’s a market with a lot of supply compared to it’s past couple of years.
We’ve seen a market correction and we can expect in the coming months to see a continued decline in the average value of Toronto property, as home buyer’s hold out for a better market.
So dear home buyer now you’re here, you’ve got everything prepared.
You’re at the edge of a tall diving board, you’re looking at the forest from the trees and like a falcon you wait for your market dive.
So when’s the right time to jump in the market?
Honestly I’d recommended getting that advice from your realtor who personally will know your needs as a client.
But as a general idea of when it’s safe to cross the street and become a homeowner is truly when the market value seems best for you.
I know but sometimes it’s the simple things we need reminding of.
If you enter the market and it still declines, you’re not loosing because you have years to sit on that asset and watch it’s value get better.
You want to consider your finances but you want to consider that there is no reason to not spend all that money on a house that you actually want.
You didn’t come this far to just settle.
But that doesn’t mean that you should ignore the reality and the economic coming of the market.
You’re probably anxious about spending too much for the house you want, when you could have a got a better deal in a another month of market correction.
That makes sense and it’s honestly impossible to be sure.
You do want to look for the signs and curvature that statically speaks and says, the market is slowing down in its average price decline, a sign of coming growth due to returning buyer demand in a renewed and corrected market.
There is no rush to beat, Toronto realty will be here for awhile and the truth is you’re better off being patient about your decision.
Be weary of some media, real estate news is hard to sell if the title doesn’t scream some disaster for potential home buyers or homeowners. It’s a big market to scare and they obviously make enough doing it.
That’s not labeling everyone.
Don’t only inform yourself on Toronto real estate through the news. It’s important to read a variety of blogs and also get involved in some online forums.
You don’t need to be scaring yourself with short content that’s aimed to report a consenting idea through panic-bait titles.
No, the news is not evil, but you don’t need to only listen to the extravagant chorus, one they’ve been singing for too long, one that faded from Toronto real estate when they realized all their predictions and heralding titles claiming to the evident coming doom of Toronto real estate was a false and saturated period of news reporting.
Let’s not logically talk about it, let’s just assume it’s going to plummet into the economy shattering lows that are nominally possible.
Listen, a real estate market crash doesn’t happen in a day it happens over the course of at least a year to a couple. There is no immediate sign of a coming one.
Yes, the media will inform you of the top layer, but in today’s world you have to be your own journalist, you’ve got to uncover your own truths.
There is a lot of information out there so I recommend that you choose wisely that why we’ve created a short list of excellent other sites that are excellent for informing first-time buyers.