5 Tips for First Time Buyers in London Ontario

If you hoping to make the plunge into home ownership in the next year, you may feel slightly overwhelmed by what you can/should do to get prepared ahead of time. Here are 5 tips to help get you on the right track.

Learn about the pro's and con's of high ratio mortgages. Generally any time you are borrowing over 80% of the value of the home it's a high ratio mortgage and will need separate insurance by a company like CMHC.

Premiums go down based on the percentage down you are able to provide. 5% down is an attractive option to many buyers (and can make home ownership possible!) but it might be worth crunching the numbers to find out how much you would save by putting 10% down instead.

I'm not saying to put off buying a home until you can pay for it in cash (let's get real, housing is affordable in London, but it's we're not living in the 50's) but if you HAPPEN to have the extra sitting in an RRSP you could pull out using the homebuyers program (spoiler alter- that's the next tip) here is a simple example:

Play around with the calculator here and talk to your mortgage broker for advice on your situation.

Look into Canada Revenue Agency's program to sock your down-payment funds away in an RRSP to avoid paying/ defer paying income taxes on your savings. Seek guidance from the CRA or a qualified accountant to find out how this program works and if you have enough time before your planned purchase for it to make sense. You will have to repay the funds to your RRSP, generally within 15 years.

While you're at it, check for local/municipal programs that will help you with down-payment funds. Unfortunately the program run by the City of London seems to have run out of funding (as confirmed by I call I made earlier this month to the city- as the information had completely vanished from the website)- but some outlying municipalities (like St Thomas and Woodstock) may still have programs available.

Really take the time to get out in different communities, walk the streets at different times of days, eat at the popular dining spots, find out about community events and attend them. Find out what your friends like (or don't like) about where they live.

Using the time you are preparing to buy your home to shop for a neighbourhood will make sure you are much happier with where you end up. You can change a LOT of things about a house- but location isn't really one of them. While you're at it- why not check out my quiz to narrow down your neighbourhood selection.

(and can handle). Do you want a house that needs some love? Hoping to gain some equity? If you don't have any experience with renovations see if you have a friend who is finishing a basement or building a fence and offer to lend a hand. You'll gain some valuable experience and maybe even a favour to call in at a future time. You'll also learn pretty quickly if you're the type of person that loves getting their hands dirty and seeing the fruits of your labour- of if you'd prefer something to be a bit more... move in ready. Same goes for having a shared driveway, pool care, air conditioning, and other things you may (or may not be) considering as a future homeowner.

It may not always be possible to "try before you buy" but do your homework, have honest discussions, and think carefully about the lifestyle impact that these features will mean for your family. Some things are relatively simple to change later on when time or funds allow, some things aren't, pay close attention to the things that will be hardest to change about a home.

I'm not advising you go into house hunting with a laundry list of deal breakers, but being pretty specific about what you are looking for and avoiding properties that really won't work for you will save you time and make your search more fruitful.

While we're on the topic: don't overshoot the runway: It's easy to get drawn into the idea of finding the perfect and to get wrapped up in the idea of all the stuff we want our first home to be. Focus on the journey. Your first home can be an amazing opportunity to stop paying rent, build some equity and personalize your space, and be a stepping stone. By making a smart purchase and having the time, means and motivation to take good care of it, you are setting yourself up to succeed. Too much house or too much work can make even the most ambitious home owners feel strapped of time and money to take care of it.

Budget for your lifestyle, if you like to travel or have a big appetite for entertainment or hobbies: keep your housing modest and lower maintenance so you can continue to enjoy your life while also getting the perks of home-ownership.

Sit down with someone like The Mortgage Teacher to get educated on your credit score and what it means for getting a mortgage. My experience with Mike at The Mortgage Teacher is he will pull your report/score and go through it line by line- giving you specific advice on increasing your score each month. Did I mention it's free?

Increasing your score gives you a better selection of lenders and potentially lower rates. The specific behaviors needed to increase your score aren't always logical- but aren't hard to implement once you know what to do. Once you understand the key to getting and keeping your score high- expect to save on interest rates and have an easier time getting financing with other things (like cars, lines of credit) too- WIN!

I hope these 5 tips proved useful! I love working with first time home buyers and if you want any more information or have any questions- don't be shy. I'm here to help.

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