This post is sponsored by DUCA. Learn more about DUCA’s Community Hero mortgage, the first social purpose mortgage in Canada. 

The top 5 things to consider before buying your first home.Buying a home is nothing like what you see on HGTV. If you think that you’ll be able to hum and haw over buying house #1 because it has those granite countertops you’ve always dreamed of, or house #3 because it has a bonus room, you need to turn off your TV and pay attention right now.

The reality is, buying your first home has everything to do with making a sound financial decision, and nothing to do with hardwood floors or double sinks.

When my husband and I started our search for our first home this summer, a friend of ours who owns several rental properties asked us what our main goal was — to own a home that we wanted to live in, or to own an investment property. Our response? Both.

It’s easy to see how it could be one or the other when you get caught up in trying to find your “dream home,” but if you conduct your search like you’re making the most important purchase of your life and keep these 5 things in mind, you’ll be able to find that unicorn property just like my husband and I did.

1. What’s Your Real Budget?

It should seem obvious, but for most home searchers setting a budget is the last thing they think about. Instead, they focus on what they want their first home to look and feel like, instead of how much it’s going to cost them.

Here’s the thing, without a real budget that makes sense for your goals and the lifestyle you want to live, you’ll end up buying the wrong place for the wrong price. I’ve seen it too many times during bidding wars. People will have a budget in mind, then throw it out the window and spend an extra $80,000 just so they can “win” their dream home. That sounds pretty close to a gambler who doesn’t know his limit, am I right?

Instead, sit down and take some time to really craft your budget. Only you can truly know how much you can afford.

2. Are You Okay Living in a Neighbourhood That’s Still Gentrifying?

Do you want to live in the city or the suburbs? What neighbourhood do you want to live in? And why? You can absolutely have a personal preference when choosing where you want to live, but more importantly you need to choose a location that will increase the value of your home in the long term.

For instance, my husband and I knew we wanted to live in Toronto’s west end. We’ve lived in the area for 3 years and absolutely love it. But our realtor kept on suggesting we look further north of the city where a number of new developments were being built. Although they were nice and fit within our budget, it felt a bit far from downtown and we couldn’t see the neighbourhood really growing into a high-demand area anytime soon.

So, we kept looking in Toronto’s west end and eventually found a townhouse that totally fit our bill. Our realtor was surprised because the area was much more urban than the area he kept referring us too. But we knew it had way more potential. Not only is it close to a main city road, it’s also walking distance from the subway and train. There are also several high-end townhouse and condo developments under construction, which will help gentrify the neighbourhood even more.

For us, this just made too much financial sense to pass up. Fingers crossed we made a smart decision and bought a place in one of the last affordable neighbourhoods in Toronto.

3. Are You Willing to Spend Hours Commuting to Live in a Bigger Place?

The big reason we didn’t want to move outside of the city (or even further north in the city) was because of our unwillingness to commute. Yes, had we moved further away, we could have afforded a house with a yard and plenty of space. But we would also be more car dependent (I currently transit everywhere), we’d be further away from our friends, and I would have to spend at least 2 hours per day commuting to work.

In order to shorten our commute and stay in the city, it meant we’d have to sacrifice square footage. But again, this decision made the most sense for the lifestyle we wanted to continue living. My husband and I don’t put that much value on having a guest bedroom or a basement for extra storage. We value experiences more than stuff, so we were completely willing to live in a smaller space.

4. What Type of Place Can You Actually Afford to Buy?

We didn’t have our sights set on buying a townhouse. In the beginning, we really wanted to see if we could buy a house. There were a number of smaller houses listed within our budget, and we thought if we just spent some extra time and money on updating it, we could actually own a house in one of the biggest cities in Canada.

But that’s not what happened. After looking at a long list of properties and participating in one incredibly stressful bidding war, we decided to switch gears. Buying a house was not in the cards for us, and honestly my gut was telling me that it wouldn’t be a good investment anyway. Yes, we’d own some actual land, but we’d be house-poor for years to come.

That’s why we decided to look for a townhouse instead. It was basically the perfect balance between a house and a condo, and prices were much more reasonable. I’m so glad we decided to change routes, because not only are we now homeowners, we can still afford to enjoy the home we live in. Also, we don’t have asbestos in our walls which is nice.

5. Where & How Are You Gonna Get Your Mortgage?

Once you’ve really figured out the cost, location and type of home you want to buy, then it’s time to get pre-approved for a mortgage. Yes, gone are the days when you can search for a home, then apply for a mortgage. When we found our townhouse, we had to put an offer in within two hours of looking at it, and we would have been outbid by a competing couple if we’d included a contingency on financing.

So, how do you get a mortgage? There are two ways you can do this: go directly to a financial institution or use a mortgage broker. But even before you do that, you need to have an idea of what type of mortgage you want and what kind of rates are out there. This means you need to do your research well in advance. I would first suggest checking out a few mortgage rate calculators to see what average rates are currently being offered. Then, I would see what type of mortgages are being offered by the banks and credit unions.

For instance, DUCA is currently offering the first social purpose mortgage called the Community Hero Mortgage. This mortgage offers a great rate and supports the local community with DUCA donating to Habitat for Humanity within the greater Toronto area.

You’re going to be stuck with your mortgage most likely for a 5-year term, so make sure you do your research, find the best rate possible and choose a financial institution that you trust and is aligned with your values.

Check Out My Video on Pre-House Hunting Tips!


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