With the number of homes being bought across Canada, and the fall sales season beginning, first-time buyers have a rare opportunity.
There’s more choice than there has been since the start of the pandemic.
First-time buyers should feel optimistic that momentum has shifted a little in their favour.
Values in British Columbia and Ontario are struggling to hold their own, and the Bank of Canada has reduced the interest rate seven times since May 2024.
The cash rate now stands at 2.75%, making a five-year fixed term around 4%-5%, depending on your lender.
As you size up your opportunity, here are eight myths about the market that first-time buyers tend to believe:
20% down payment – Some loans can be secured with as little as a 3% down payment. According to a recent survey, 71% of loan officers found the 20% hurdle to be the biggest myth among first-home buyers.
Pre-approval is a guarantee – No, it’s not. It’s your lender’s preliminary position of what it might lend you. It’s grounded in data, but it’s not a promise. Your loan application will be assessed based on the prevailing interest rate when you settle, and also the lender’s assessment of the property you wish to purchase. You can lock-in a rate when getting pre-approved, but usually it lasts only 12 weeks.
Prices will get lower – Property values fluctuate, but waiting for the so-called bottom of the market is a flawed strategy. In fact, the Canadian Real Estate Association has just released data suggesting values are on the rise again. Please, don’t wait for lower prices.
Home, then loan – Get your pre-approval first because that will give you a budget. It will also ensure you can move quickly if you find your dream property. Sellers don’t tend to take buyers seriously if they haven’t got the cash lined up.
Lender loyalty – The idea you must take a loan from the company that gave a pre-approval is misplaced. You can shop around for the best deal even when you have that pre-approval in your pocket. However, don’t switch lenders once you’ve made an offer and you’re under contract. If that delays the process, the seller may look elsewhere for a buyer.
Fixer-uppers are bargains – Definitely not true. Many people overpay for this so-called opportunity and then face unknown renovation costs. Unless you’re a builder, or you partner up with one, you are venturing into the unknown. And it could prove expensive.
Student loans – This myth suggests lenders will not consider people with student loans. In fact, if you’re paying that loan back promptly, it will give your credit score a nice boost. However, any expenses will affect the final calculation that determines the size of your loan.
It’s a bad time – Don’t listen to anyone who says that fall and winter are bad times to buy. There’s never a bad time on the calendar to buy.