# First-Time Home Buyer



## adrienne (Mar 27, 2015)

Hello everyone, 

Well, my fiance and I are in the market to buy a home for our family. Suffice it to say that we've had little guidance from family nor information from them pretty much whatsoever, and we've had to start to do all of the research ourselves. 

That leads me to mention that I have found myself "down the rabbit hole" so to speak, in terms of all of this bubble talk about the market, and information about the crooked dealings within banks, far too many realtors in the marketplace, etc., etc. I feel like I've started to learn a bit too much and it is scaring me away entirely from the prospect of home ownership. Thing is, we want a home, not an investment. However, I still don't want us to be in the position of buying prior to a correction and essentially kissing our down payment (and maybe more) goodbye.

I mostly stay home with our little girl and we would qualify for a mortgage based solely off my partner's income (with maybe only 10,000 earned by myself added on per year). We want to own a half duplex as that is what is closest to a detached property but within our means. We want to get a mortgage for less than we could qualify for. We have no debt whatsoever otherwise. We live in Calgary. 

Now I have also been learning about collateral mortgages and it seems we really don't want that. There is SO much information and it's daunting. Part of me wants us to save another 20,000-30,000 to ensure we have the 20% down for our property, but then that might take a long while, and there is no way to ensure a price correction will occur. 

We don't have to buy right now but I feel like what if we don't and end up losing out? 

I want us to be well informed and not get duped. I've heard that getting a mortgage from another lender rather than one of the 6 big banks is a good idea. If we were in a position of needing more income I could work much more so to be honest I'm not too concerned about affording and keeping the mortgage. There is just so much to learn. I feel like I could just keep learning, though, and never doing! 

Any insight?


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## adrienne (Mar 27, 2015)

Just wanted to also mention that we have about 5% down right now as well as extra to account for closing costs and fees.


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## nobleea (Oct 11, 2013)

I would think that Calgary prices will be flat to down over the next 12 months as they are already heading that way. Buying in the spring is not a great time, since that's the best time to sell. If you can wait til Nov or so, that's probably the worst time to sell, so best time to buy (on a yearly basis). There is usually a 5-10% difference in $/SF selling price between spring and early winter. Here's the $/sf selling price for the past 7 years for Edmonton.
http://edmontonrealestateblog.com/files/2015/02/AveragePricePerSquareFoot1.png
I'm sure there's one for Calgary.
Regardless of which way the overall market is going, a smart seller would list in April-ish, and a smart buyer would want to close in early Jan.


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## CalgaryPotato (Mar 7, 2015)

I'm not a real estate expert, but I am a home owner in Calgary, so here are my thoughts.

The Calgary market is really tough to gauge right now. Lots of houses on the market, few sales, but the prices haven't dropped very much. You could say it's a buyers market, but the prices haven't corrected yet to truly represent that. I wouldn't buy here until this corrects itself one way or the other.

You won't lose out. You've already lost out, the prices here doubled-tripled between 2002-2009. It won't do that again anytime soon. 

Also how is saving $20,000 going to jump you from a 5% to a 20% down payment? Are you buying a garage or a duplex? 

If you are buying at these high prices with only 5% down, be prepared that the market could correct and you could be "stuck" in your house a long time. Make sure you know where you want to live. Understand the situation with the schools in the area (is there enough room, are they good schools, etc.)

Generally a mortgage is a mortgage, the cheaper the better. You can sometimes get a cheaper rate through a mortgage broker. But rates are cheap everywhere now. I don't see any need to go out of your way to avoid the big banks, unless the rates are higher.

Many people these days are selling with no realtor or with discount realtors. If you hire a full price realtor to look, it may limit some of your options.

It's a huge life changing decision, don't jump into anything if you aren't sure. I know in Canada we have this ideal that you don't truly have a home unless you own, but it just isn't true.


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## adrienne (Mar 27, 2015)

Thanks for the quick replies you two. 

I know there are a lot of factors to weigh in for sure. As far as I'm aware, collateral mortgages are not a good bet for most of us, and they don't even offer the best rates and you can never renew elsewhere, nor get out of them aside from bankruptcy. 

When I mentioned 20,000-30,000 extra, I meant on top of what we have already saved. (So 40,000-50,000). We are not buying large (ideally, anything that we want and fits our needs for less than 250,000). Obviously in Calgary, that puts us in a tight spot option wise. I have seen handful or 2 of such properties over the last year or so.

I really wish this correction would occur.


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## CalgaryPotato (Mar 7, 2015)

I'm not sure of the details but that is REALLY cheap for calgary. Might be major fixer upper. I think you should take some time, look around and consider your expectations even if the prices correct.


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## lb71 (Apr 3, 2009)

Some of your numbers don't add up. You say you have 5% now, but want to save another 20-30k to get to 40-50k to get to 20%. Doubling your savings doesn't get you from 5% to 20%. 

Regardless, do you have a handle of how far your money will go? By that I mean, if you are looking to by a $250,000 home, do you know what you will get for $250,000? Will you be living in a neighbourhood that works for you? You may want to start with MLS, put in your price range and parameters (# bedrooms, etc) and have a look at what you get. Where are these homes? What conditions are they in. Start going to open houses now. It's the spring selling season, and there are always open houses on the weekend, usually 2-4pm. If you plan it right, you can get into 4-6 open houses a day. (If you can get a sitter, you can get through more. Kids will slow you down.) This will give you an indication of how far your money will go. Visit homes at $200k and $300k. Look at a range of prices. Eventually, you'll get a sense of what you can get for your money. You'll also be able to determine if you need to increase your expectations.

Another thing to consider is your monthly cash flow. I'm assuming your paying rent now (or perhaps living with parents). Your rent will probably include most of your home expenses, but you may be paying for some utilities, cable etc, renters insurance. Once you own a home, you will have other expenses. Mortgage. Utilities. Cable/phone/internet. Home owners insurance (which is more than renters insurance). Property taxes. Home maintenance expenses (if the roof needs replacing, you need to pay for it). Home improvement expenses. You will need to make sure you understand what these things will cost you going forward. Chances are they will be more than what you are paying now. So having a good budget in place is key.


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## Plugging Along (Jan 3, 2011)

If you feel comfortable, you may want to post some more numbers.... 

First you have $40-50k now, or is that with the addition savings? I personally recommend saving 20% as you will save in CMHC insurance. 

You are looking for $250k duplex in Calgary. That's pretty low or you are going to be in a less desirable area or do you want a condo? 

You mentioned having a little girl. Is this place you are planning to buy where you plan to raise her? If so, you may want to check out the schools in those areas. Schools are one of the most important things, do not go in with out doing your home work. My kids can not get into the school that we back onto. Are your thinking of more children? Are you looking for a two or three bedroom? The questions posted by others are great questions to consider.

Also, what does your partner do? Is his job stable? Right now, with oil and gas very low, most industries even the ones outside of oil and gas are being impacted. Everywhere from retail, to childcare to executives to everything in between. 

If you use your current savings, will you have 3-6 months on an emergency fund with your new expenses? Or alternatively how easy or difficult is it for you to get a job in case your partner is layed off.

Currently, it is a buyers market, I think it's a good idea to just check out what you can get. Prices are dropping a little bit, but it is on the higher end homes. The million dollar homes are coming down. I don't think you will miss the boat on increased prices. They will be pretty flat. We have friends that bought places before Xmas to flip, and they are a little stuck right now. They haven't dropped down the price, but it isn't going up any more. 


I would work on saving the 20% down, but just keep looking. IF you find something that is in your price range and SEVERELY below market then consider buying, but don't buy the first one that meets this criteria. In the meantime, really spend time looking at places, and researching the areas. don't buy on the fear that things will go up.


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## dougboswell (Oct 25, 2010)

adrienne said:


> Thanks for the quick replies you two.
> 
> I know there are a lot of factors to weigh in for sure. As far as I'm aware, collateral mortgages are not a good bet for most of us, and they don't even offer the best rates and you can never renew elsewhere, nor get out of them aside from bankruptcy.
> 
> ...


Collateral mortgages are not as bad as you think. All it means is that you cannot switch to a new lender at the end of the term for free. A lawyer will need to be involved to discharge the mortgage. 2 clients in the last month have transferred to a new lender at the end of their term. The dollars they save by a new lower rate with a different lender far outweighs the cost of a lawyer. So you are not stuck in them forever. It is just you need to pay legal fees to do it.


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## adrienne (Mar 27, 2015)

Thanks for the reply.

We have 20,000 right now, so a bit more than 5% (if considering a 250,000 mortgage). So we'd def need to have 30,000 extra to achieve the 20% down. in that sense, we'd likely have a bit left if we entered into the market right now. But that is not going to happen.

I am engaged and we rent on our own. We are aware of the extra expenses and yes, we will definitely be budgeting when it comes the time to buy. Thanks for that reminder also. 

I think the suggestion to check out some open houses is a great idea as well. We are in no way rushing into anything. There is no need to. Saving more is never going to be a bad thing.


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## adrienne (Mar 27, 2015)

With collateral mortgages, I believe you also cannot pay it off before the end of the term? That is definitely not something we are interested in. When my daughter is in school I will be returning to work full time and so will definitely want to take advantage of additional lump sum or anniversary payments. Yes I am aware there is a fee, but why would I want to essentially lock myself into a mortgage, and then have to pay upwards of nearly 1000 extra dollars to switch? Not really. 

My thoughts are that we are going to go with a mortgage broker or smaller bank, etc., and look into the best conventional mortgage with the terms that work for us. I'd love to possibly be in the position to pay off a 25 or 20 year mortgage in less time than that as our financial situation improves.


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## adrienne (Mar 27, 2015)

Yes, I have seen a handful or more (half) duplexes within the last year or so that fit within this parameter. And in our area of preference (the NW quadrant).

But I really like the suggestion of checking out homes that are say 250,000 and then others that are 300,000. I think that is a good way to go right now for sure. We definitely want to buy something we love and want to live in, as we are not looking to buying for investment purposes nor intend to move later on.


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## adrienne (Mar 27, 2015)

Hey guys, 

Are town homes similar to regular apartment condos in terms of the kinds of risks associated with them? I know they even pay various "condo" fees and the like. Any info is much appreciated! Thanks!


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## dougboswell (Oct 25, 2010)

adrienne said:


> Hey guys,
> 
> Are town homes similar to regular apartment condos in terms of the kinds of risks associated with them? I know they even pay various "condo" fees and the like. Any info is much appreciated! Thanks!


Yes and no. Some townhomes are freehold. You own the property in front and back. If your roof needs replacing you replace your share. Other townhouse are registered corporations. They are similar to condos in that you pay a monthly fee. This covers some insurance, common areas being snow shoveled and the grass cut. However if there are 10 townhomes in the complex and someone's roof needs repair all owners help pay either through your reserve fund or a special levy.


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## dougboswell (Oct 25, 2010)

adrienne said:


> Just wanted to also mention that we have about 5% down right now as well as extra to account for closing costs and fees.


I don't know if you read about it but CMHC increased the mortgage insurance premiums last week if you have less than 10% down. It is about an extra $450 per $100000. That is over $1000 more on a $250000 home. If at all possible try to save up at least 10% for your down payment.

Also you can break a collateral mortgage anytime during the term. Then it is no different than a regular mortgage in that you will require a lawyer.

The big difference between a big 5 bank and other lenders is not always the rate. Any regular mortgage will give you 15/15 or 20/20 prepayment and increasing the payments option. There are super low rates out there but they are no frills and may only offer 5% lump sum payments. The big difference is how much it will cost you to break a mortgage during the term. Sometimes things happen during the mortgage term such as you need to refinance to do major repairs on the home or someone moves or gets a divorce etc. You need to be aware of how the penalty is calculated. It is the higher of 3 months or the interest rate differential. Big banks use the posted rate while smaller lenders use the actual day rate. this sets up big differences in the amount that is payable.

Before you take on a mortgage make sure you know what questions you need to ask. Read as much as you can prior to learn. You might want to take a look at Canadian Mortgage Trends. It is a source of day to date news on the Canadian mortgage scene. It is owned by CAMMP, one of the licensing bodies for agents in Ontario. All mortgage agents that are employed by a brokerage are licensed after training.


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