Top 6 things you should know before buying a house in these record breaking housing market times.

"This may seem obvious, but buying a home is one of the biggest purchases you'll ever make in your life. It may also be one of the most stressful times of your life, especially if you're a first-time buyer and new to the world of real estate. But that shouldn't scare you away. Buying a home is exciting, exhilarating, and something to be incredibly proud of. That being said, there are still some things you should make yourself aware of before buying.

1. Mortgage rates are at an all-time low

The main factor driving Canadians to accelerate their plans to buy a house? The historic-low interest rates.

Obviously, 2020 has been an uncertain time for all of us and the unemployment rates have drastically increased. In order to stimulate the economy and make it easy for people to borrow money, low-interest rates became the new normal and they may continue to stay this low for the next three years according to the Bank of Canada. There are a few reasons why people want to take advantage of this:

  • This could mean substantial savings for monthly mortgage payments

  • Those refinancing their mortgage will notice a huge difference

  • May be easier for people to recover their debts

  • Buyers can make larger purchases

  • Banks are able to lend to even more borrowers

However, if you have a fixed-rate mortgage, you won't be affected by the rate change. With an adjustable-rate mortgage, your interest rate and mortgage payments can change.

2. You need to become familiar with local real estate trends

If you're interested in buying a house or an investment property, your best bet is getting familiar with local housing trends and, of course, relying on professional help from a real estate agent who knows the market better than anyone. Not only can they tell you what you'll expect to pay in certain neighbourhoods, but they can keep you up to date on all information and facts you need to know so you're as comfortable as possible with your purchase with it be for personal use or investment purposes. If you're looking for an investment property, it's also a good idea to rely on a real estate agent who knows what the rental market is like in the area, what you can expect to charge for rent, and what type of renters you should attract. Becoming familiar with the local housing market will also help you set your expectations seeing as bidding wars are becoming quite the fuss. Which brings us to our next point.

3. Prepare for a bidding war (even if it doesn't end up happening)

Bidding wars and getting worse for buyers amid the global pandemic, leaving buyers feeling devastated they didn't land their dream home. Why is this becoming such a popular (and hated) trend? Because of the inventory problem. There are more buyers looking for homes than there actually are on the market, leaving buyers' agents having to pull every trick they know from their hats.

Bidding wars can be frustrating for everyone involved. Ultimately, when it comes to winning a bidding war, knowing how much you can actually afford to spend is crucial because you may need to increase your original offer. You may also want to consider having fewer conditions on your offer to stand out from the others.

4. Ensure that your income is steady before rushing into the housing market

As mentioned above, many Canadians across the country have lost their jobs due to COVID-19, or they've had to endure a pay-cut. If you're someone who has been handed down this financial burden, it may not be the best time for you to buy a home for personal or investment purposes. Plus, when you apply for a mortgage loan, banks will favour those who can prove they have a steady source of income so they can make their monthly mortgage payments on time. You'll also need funds for a down payment and closing costs, otherwise, if you need to borrow a down payment on top of a mortgage, it will need to come from a different lender than that of your mortgage loan in Canada.

5. Shop around for the right mortgage for you

Shopping around for a mortgage online is more easily accessible than ever before since pretty much everything is moving to the digital world due to the Coronavirus affecting in-person transactions. But finding the right mortgage for your specific needs can be tough to do on your own which is why many buyers lean on a mortgage broker for help. A mortgage broker's role is a bit different than your agents. Rather than connecting you with the right house, a mortgage broker connects you with the right mortgage term and lender. They're not just connected to one lender, but various lenders who offer different rates that are better suited for you.

6. Determine if your goals are short-term or long-term

There are many good reasons why people want to get into the real estate market, but when to actually buy a house depending on your goals can vary. So, what are your real estate goals? Do you want to buy your dream home for your family? Do you want to buy a house for investment purposes?

Signs it may be a good time to buy a house for short-term investment purposes to maximize revenue can be:

  • You're financially stable/comfortable enough to put a down payment on a second home (plus you have a good credit score)

  • You're able to access a good interest rate and mortgage rate

  • If you don't have enough for a down payment upfront, you have enough equity to tap into in your first home

  • You've done your research to determine when it's a buyer's market or a seller's market - a buyer's market will mean that there are more properties for sale than there are buyers' interested, so bidding wars may not be as common, but lower prices will!

  • The investment property you're interested in is in prime rental spots for positive cashflow

Signs it may be a good time to buy a home for long-term living purposes may be:

  • You have enough saved for a down payment and closing costs

  • You were able to sell your current home

  • Your credit score is good

  • The interest rates are low

  • You're ready to commit for the long-run and are financially stable to do so

  • The housing market is in good condition and your home will actually appreciate

  • Again, you've done your research - the neighborhood is what you're looking for, the price is right, and the housing market is stable

So .. is it a good time for you to buy a house?

Well, ultimately, it depends on a few factors. Whether you're a first-time buyer, downsizing, or an experienced real estate investor, some of the most important things you will want to consider are:

  • The current interest rates being offered by various lenders

  • What your mortgage rate will be

  • Where you're looking to buy

  • The current home prices (and if you are in good financial standing with your bank)

  • The current state of the housing market

  • If it's a buyer or seller's market

Because of the Coronavirus, many sellers have been nervous to sell, but even while the pandemic has put everything on hold, it seems like many people have been eager to get into the market. This has made some Canadian cities see record-breaking sales, particularly from July to October 2020. Some cities haven't seen such high sales in years, but even more impressive has been the interest rate prices which have actually hit historic lows.

So, if you are financially set and ready to move into your new dream home or look for your first home, now may be the right time, but just remember that you may come across bidding wars due to the demand for homes being greater than what is actually available.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage"

source: Canadian Real Estate Wealth Magazine

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