The Canadian Real Estate Association(CREA) has adjusted its projections for 2023, anticipating a decrease in both sales and prices due to escalating interest rates, particularly affecting the housing markets in Ontario and British Columbia.
As per their recent announcement, CREA predicts a 3.3% annual decline in the national average home price, estimating it to reach $680,686 by the year-end, a downward revision from their earlier forecast. This adjustment is primarily attributed to reduced sales activity in Ontario and B.C., recognized as Canada’s priciest real estate markets. The soaring cost of borrowing has put immense pressure on first-time home buyers, especially with the Bank of Canada’s unprecedented increase in the Overnight Lending Rate. Over ten hikes since March 2022 have propelled the rate from 0.25% to 5%. The governor of the Bank of Canada, Tiff Macklem, took a more aggressive position after the previous decision to keep borrowing prices at a 22-year high, stating that the existing interest rates may not be enough to control inflation to reach the objective. People rushed to lock in reasonable rates last year and hurried to get pre-approved and buy homes quickly. But if you’re new to it, buying a house in Canada might feel confusing. It’s not just about calling a realtor for a viewing. It begins way earlier when you decide to own a home. This blog will explore the pivotal questions for making informed decisions in your home purchasing journey. Each question is formulated to empower you with the insights necessary to navigate the Canadian real estate landscape confidently. From financial readiness to locality considerations, we’ve curated the critical questions you need to ask yourself before sealing the deal.
Are you ready to buy a home, and what's your affordability limit?
Being ready to buy a home involves assessing your financial readiness and determining your affordability limit. This involves evaluating your savings and figuring out how much you can afford to buy a house while taking care of the other expenses. Evaluate your finances, consider pre-approval for a mortgage, and establish a clear budget that aligns with your financial capabilities and future goals before stepping into the home-buying process.
What initial down payment can you manage?
Deciding the initial down payment you can manage is vital in home buying. Aim for a down payment that fits your budget and satisfies lender requirements. Typically, a down payment of 20% is ideal to avoid additional costs like mortgage insurance. However, various programs allow for lower percentages. Assess your finances, calculate a reasonable down payment, and strive for a sum that aligns with your financial comfort while meeting lender criteria.
Do you have a stable income for monthly payments?
A stable income to cover monthly payments is crucial when buying a home. Lenders evaluate your income stability to estimate your ability to manage mortgage payments consistently. Review your employment history, consider potential changes, and aim for a steady income stream covering the mortgage and other expenses. This stability reassures lenders and strengthens your position as a responsible homebuyer.
What are the current market conditions in your desired purchase area?
Understanding the current market conditions in your desired purchase area is critical before buying a home. Research the local real estate trends, analyze supply and demand, and assess factors like property values and inventory levels. This allows you to determine whether it’s a buyer’s or seller’s market, allowing you to negotiate better, time your purchase effectively, and estimate the potential for future property appreciation.
How will you secure home financing?
Securing home financing involves exploring various options. Start by researching lenders, comparing mortgage rates, and understanding loan programs suitable for your financial situation. Assess loan types (fixed-rate, adjustable-rate) and different lenders’ overall terms. This approach ensures you secure the best financing aligned with your needs and financial capacity.
Will you seek financing independently or with a mortgage agent’s assistance?
Deciding between independent financing and a mortgage agent’s assistance is pivotal in home buying. While independent research allows for a hands-on approach, a mortgage agent brings expertise and access to multiple lenders and can streamline the process. Evaluate your comfort level, time constraints, and the complexity of your financial situation. Consider consulting with a mortgage agent to leverage the industry insights and potentially secure better terms and rates, ensuring a smoother and more informed home financing experience.
Are there any upcoming developments or plans for the area where you’re considering buying?
Exploring any upcoming developments or plans in the area where you’re considering buying a home is crucial. Research new infrastructure projects, zoning changes, or planned constructions nearby. These developments can significantly impact property values, neighbourhood dynamics, and quality of life. Understanding future changes in the surroundings allows you to anticipate how they might affect your investment and lifestyle, helping you make a well-informed decision about purchasing in that location.
What potential concerns should you be conscious of while purchasing an old home?
When considering an old home, several potential concerns demand attention. Look for outdated electrical systems, plumbing problems, and roof and foundation conditions. Be vigilant about signs of mould pest infestations, common in older properties. Additionally, assess the need for renovations or repairs and factor in potential maintenance costs. Inspection by a home appraiser can help identify these concerns and provide clarity before making your purchase decision.
What should be your approach to finalizing the deal?
Finalizing the deal in home buying requires a strategic approach. Review the purchase agreement thoroughly, consider contingencies, and ensure all conditions are met before closing. Engage professionals like mortgage agents, lawyers, and inspectors to safeguard your interests. Plan for a final walkthrough to verify the property’s condition and resolve any last-minute concerns. Stay communicative, follow timelines, and be prepared for closing costs. This approach ensures a smooth and confident closure.
The Bottom Line
Establishing affordability limits, managing initial down payments, ensuring stable incomes, understanding market conditions, securing financing, and considering professional assistance all contribute to a confident and well-informed home purchase. By strategically approaching with the correct information, you pave the way for a smooth and secure closure, marking the beginning of your exciting homeownership journey in Canada. If you still need help deciding, seek advice from our expert team of mortgage agents at Pegasus. We’re here to assist you with any mortgage-related questions or concerns.