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Attention First-Time Buyers: How to buy a house in today’s ever-changing market

The process can be quite daunting, so it’s time to get creative!
List with Lovatt_Oct 2021

It’s time to get creative, says REALTOR® Christine Lovatt. “The one thing I always say to couples—it’s what I did when buying my first house—is to try to live on one income and bank the rest. Just save, save, save,” she says. “You have to work hard and save everything you can. That may mean giving up eating out, coffee every morning from Starbucks and most of the extras.”

She offers these other creative suggestions as well.

Buy smart

If you buy a duplex or a triplex, you’ll have additional income coming in. You could also buy a property that allows you to eventually build a second dwelling on it. “That’s a new option a few people have started to do,” Lovatt explains. “It’s almost like a little house on your lot, a secondary dwelling on the property. It used to be that you could only put so many square feet on a certain sized lot, but many cities are changing the bylaws to allow that now. You could put a small 1- or 2-bedroom house in the backyard.”

Her own son’s first purchase was a duplex; he lived upstairs and rented out the basement. Eventually that made him enough money to buy another house, because he was able to use his equity in the home to buy a second. That first purchase became a building block that got him to the next one. Mom helped get him his first mortgage by providing a little extra money and co-signing the mortgage. Eventually he got approved on his own and took her off the mortgage.

There are a lot of houses that have a legal suite in Barrie, and this can help you pay off your mortgage faster. They’re not hard to find either; there are a many of them, says the REALTOR®, and more people are putting in legal second suites. 

Buy with others

Another option? Buying a house with a sister, brother or other relative, or buying something together with friends. You have to be really careful about contracts though, so work with a lawyer to lay out all of the possible eventualities. “All sorts of things can happen and you have to be prepared for that,” she says.

“It’s tricky to buy with somebody else because of personalities, having an equal share, who gets the good room, etc.,” says Lovatt, though it’s something she would personally do if she was a first-time buyer. “I would buy with my sister or my brother. I used to live with them and share rent so it would be similar.”

Accept help

More and more parents are helping their kids out by letting them live with them rent-free. Lovatt knows many people who are living with their parents and saving almost all of their income for a down payment.

Other parents are taking some money out of their own equity. Their houses have at least doubled in price, so they’re able to take some of that and gift it to their kids. Some have to pay it back, others don’t. 

Tap into your savings and take advantage of available incentives

If you have an RRSP, you can use part of it as a down payment. There might also be money available for first-time home buyers through government programs; as a first-time buyer, for example, you pay just half of the land transfer fee and enjoy a bit of savings.

Expand your search

First-time buyers have to be willing to look further afield. Lovatt’s buyers who were initially interested in Barrie are now considering Victoria Harbour, Midland and parts of Orillia. 

Consider a longer mortgage

A longer mortgage of 30 years can certainly help with affordability. They’re easier to qualify for and allow you to stretch your payments out.

If you’re able to put down 20 per cent of the purchase price, a 30-year mortgage becomes a possibility. If your down payment is less than 20 per cent, the maximum mortgage term is 25 years.

“I am of the belief that you should just ignore your mortgage,” laughs Lovatt. “You know in the old days how people used to want to pay off the mortgage and that was the goal? To me, money from the bank is so cheap right now; use the bank’s money to get the lifestyle that you want and also to make money with real estate. That’s my goal.”

She helped one client buy an investment house. He was always worried about paying off his mortgage, but she suggested he use his equity and buy another property. In just a couple of years he has made $200,000 on his investment, which will probably pay off the mortgage on his first house. “You can use the money that the bank is offering for such a low interest rate,” she says.

Get pre-approved

The most important thing you need to do is to get pre-approved. This doesn’t mean that you automatically have the green light to buy any house; the bank has to check out the house you want to buy and appraise it first. Instead, it can let you know the price range of homes that are in your budget. Also, remember that there are closing costs you’ll be expected to pay, such as legal fees, adjustments, land transfer tax, moving costs and other taxes. 

Choose your REALTOR® wisely

Look for a really good realtor who is used to working with first-time buyers. Sit down with someone right at the beginning of your home search and go through the whole process with them. Find out what you can expect, explain what you’re looking for, ask questions and find out what things you should be looking for in a house.

Lovatt has a helpful First-Time Home Buyer booklet that goes through all of the steps involved in buying a house. Take time to read it through so you understand the process!

A REALTOR® should be patient, protective and a good negotiator. “You have to protect your First-Time Buyers from making silly mistakes. Don’t rush them to buy something,” says Lovatt. “Some people get impatient and don’t want to show more than five houses.”

“With some First-Time Buyers I’ll show them 20 houses, maybe even more sometimes. Especially with this market of multiple offers, you need to know how to handle them, what to go in at and how not to overspend—that’s how you get protected by your REALTOR®.”

What does it cost to work with a REALTOR®? 

The Seller pays a commission, which is split between the Listing Brokerage and the Buyer Brokerage. The service for a Buyer is free. There is one thing to watch out for, however; with some listings offering less commission, a Buyer may be expected to pay the difference—but that will be spelled out in a Buyer Representation Agreement. Make sure to read through all contracts and know what they mean! 

Most important, have fun and enjoy the process. Buying your first home is something you never forget!

 For more information, visit List With Lovatt.