We’re ready to start looking for our first home. We want to purchase in next 3 to 6 months. We have a 5 percent down payment saved but are not sure where to go from here. – NEW TO THE MARKET
DEAR MARKET: Congratulations on your decision to buy a home. Getting a foothold in the market can be challenging, so it’s great that you’ve saved your down payment already. You’ll want to budget for closing costs too, which typically amount to about 1.5 percent of the purchase price. You may not end up needing these funds as a first-time buyer, but most banks will want to see that you have them.
You may find that the First Time Home Buyer Incentive (FTHBI) is worth a look. This interest-free, no payment, shared equity mortgage from the Canada Mortgage and Housing Corporation (CMHC) can lower your mortgage payments without increasing your down payment. In a nutshell, CMHC will kick in 5 percent of the purchase price of your home, provided you pay back 5 percent of the home value when you sell (or in 25 years, whichever comes first). This boost can help first timers break into the market, though they’ll end up giving CMHC a taste of their bourgeoning property value.
To qualify for FTHBI, first time buyers will need a minimum 5 percent down payment and a household income no greater than $120,000. They may be able to borrow up to four times their qualifying income (to a maximum of $480,000) including mortgage, mortgage insurance and FTHBI. Lower earners may qualify for less.
PRO TIP: If you or your partner is a first-time buyer and a Canadian citizen, permanent resident or non-permanent resident authourized to work in Canada, I encourage you to discuss the FTHBI with your Realtor and mortgage specialist.
Our rural property is located an hour south of K-W and has been on the market for a while. We recently received a lowball offer, should we even bother to respond? — UNIMPRESSED
DEAR UNIMPRESSED: The real estate market throughout Southern Ontario is pretty strong. Even though your property is an hour out of town, I suspect it may be priced a bit optimistically if it has been sitting for any length of time.
I understand the offer you received didn’t knock your socks off. Still, I don’t think you should let it pass you by. I recently encountered a similar situation between a buyer and seller who seemed to be miles apart. By keeping the lines of communication open, two seasoned agents found a meeting of the minds over the course of several weeks. It’s easy to kick an offer to the curb when your feelings are hurt, but had we done so on this occasion, we never would have reached an agreement that worked for both sides.
PRO TIP: Buyers and sellers have opposite positions in every transaction: one wants to buy at the lowest price, while the other wants to sell at the highest. In this situation, let your Realtor work their negotiation magic. It’s what you hired them for. #AskDavid #Advice