First Time Home Buyer’s Guide: Remember These 10 Steps!

Back in November 2021, I became a first time home owner and co-purchased a bigger home with my Mom and the process of buying my first home was super stressful and complicated. Since it had been so long since my parents had bought a home (we lived in ours for 15+ years), they forgot most of the details and I wound up having to figure out most of the details by myself 😮‍💨

Earlier, I wrote a 3-part series on the Hard Lessons About Buying My First Home so make sure you check those out if you want to learn what not to do. Based on my own experience and learnings, read on for 10 steps with tips and advice for buying your first home!

Step 1: Figure out what you want, why you want it, and what you can actually afford 🏠

  • How much space do you need? How many bedrooms?
  • Do you want a condo, townhouse, or detached home?
  • Do you want a garage? deck? backyard? corner lot?
  • Where do you want to live? close to work/school or somewhere central?
  • Do you want to buy a brand new home or are you fine with renovating an older home?
  • What are some deal breakers?

Ask yourself WHY for each of the questions above and come up with reasonable answers. Repeat the process until you ground yourself in reality.

Step 2: Invest and save up for a down payment 💰

If possible, try to save up a 20% down payment because you can avoid paying mortgage insurance. It can also help with securing a lower interest rate, which is very important.

If you’re not at 20% yet, look at some options depending on your time horizon:

  • Use your RRSP or 401K money (which come with first time home buyer incentives)
  • Invest your money and take advantage of compound interest
  • Find a co-owner (e.g. family member or partner) that you can trust
  • Ask your trusted family members to pitch in or lend you money interest-fee
  • Start a side hustle to earn extra money (and then invest it)

If you really cannot do 20% anytime soon because of the crazy housing market, then you need to consider if buying the home now is worth paying the mortgage insurance. Take the extra amount of insurance that you would need to pay each month for the term of the mortgage and then calculate the opportunity cost if you were to invest it elsewhere. Also consider other factors like having to pay rent, the housing market potential, and your lifestyle and career goals.

Step 3: Get pre-approved 🏦

Once you have the funds, start looking for a good mortgage rate. It’s good to lock this down in advance of the house hunting process because interest rates could potentially go up. It can also help speed up the process once you put down an offer later on.

Typically, you want to work with a mortgage broker because they can check several financial institutions at once and tell you which ones are best. This also helps with checking your credit score once vs. every time you inquire with a different bank or credit union.

In my case, I did my due diligence and called up nearly a dozen different mortgage brokers and individual banks on my own. While the mortgage brokers were quoting me 2.09%, I ultimately negotiated 1.89% directly with a treasury bank and went with them.

Step 4: Find a good realtor to work with 🤝

Ask around to find a few realtors that you can reach out to (don’t limit yourself to one just yet). Tell each of them what you like vs. don’t like and are in the market for. Then, let them take you to see a few homes and observe how they pitch the homes to you. Are they knowledgeable about the home and area? Can they answer your questions confidently?

Essentially, you want someone who isn’t all about closing the sale. The good realtors will point out faults with the homes and tell you what to look out for (this comes via experience from participating in many home inspections). They should also share their perspective of a fair price and negotiation strategies with you.

Ultimately, your realtor’s goal should be to help you get the home you want at the price you want (or as close to it as possible). From experience, the commission is usually covered by the seller.

Step 5: Check out the home at least twice 👀

I recommend checking out the home once in the daytime and once in the evening. This way, you can get a more holistic feel of the environment and observe whether it gets loud or disruptive at night. In the wintertime, you should check the roofs after it snows to see if there are any patches because this could mean that there’s a problem with the roofing insulation. In the rainy season, you should check the grade (slope) of the property and the direction of water flow. Ideally, you want the water to flow away from the base of your home (positive grading). Otherwise, the foundation of your home may be more prone to flooding and other problems.

Step 6: Go through the offer process ✍️

Once you find a home that you like, it’s time to start the offer and negotiations process. Work with your realtor to determine a price point that you think the seller will ultimately land at. Then, you want to make an offer at a price point that is around $10-15K lower (with the expectation that you’ll be negotiating).

Although I was purchasing my home during a very competitive time in the market (Fall 2021), I luckily managed to negotiate:

  • $10K off the listing price
  • Patio/backyard furniture
  • Home inspection
  • Washer/dryer/refrigerator (though these are usually a given)
  • Duct/furnace cleaning

Make sure that you put ALL of your asks in writing. This includes everything from confirmation that there were no deaths on the property (this was a big deal for my parents) to guaranteeing that there were no grow ops on the property (this was a deal-breaker for my Mom). An example of a grow ops home would be one where marijuana is produced in the basement. The moisture from this can damage the home and create mold, which has toxic chemicals and makes it unsafe to live in the home. Many sellers try to hide evidence of former grow ops by developing the basements—so beware (and follow step 7 below)!

Step 7: Get a home inspection 🔎

With the competitive housing market, I know many people who have had to omit this from their conditions… but I personally don’t think I could purchase a lived-in home without one because I wouldn’t have the peace of mind. Even though we had a home inspection with positive results because the seller took good care of the home, we still found some problems after moving in (though this is to be expected with a 10-year-old home).

My thought process is that a home is one of the biggest purchases you will ever make in your lifetime, and you and your family are going to be living in it for years. It is ideal to be informed about your purchase and get a second/professional opinion on the property before you close the deal only to regret it afterwards because of something you didn’t know about beforehand.

However, I also understand that asking for a home inspection may not be realistic when there are bidding wars with other buyers who are offering to purchase without any conditions. In this case, I would suggest finding someone who is a handyman and asking them to accompany you on one of the house tours to casually inspect the home and see if there are any major problems to take note of.

Once you get a home inspection, you should receive a comprehensive report about the home’s condition and any red flags that need to be address. You can use this to negotiate with the seller, either lowering the purchase price or getting them to fix it before you take possession. For example, our home inspection flagged that duct and furnace cleaning hadn’t been completed recently so we worked this out with the seller (but encountered some hiccups along the way).

Step 8: Find a good lawyer to close 📝

To close any home purchase, you will need a lawyer. However, I would start looking for this person earlier on in the process and then looping them in as soon you’re ready to close on a home. Ask them to take a look at the fine print and give any recommendations on areas you could negotiate or be mindful of (I wish I had done this in hindsight because there were a lot of things that we didn’t know to think about).

Although it can be costly to walk through these details with a lawyer, I think the long-term value can be worth it… especially with such a complex process.

Step 9: Complete the final walk through ✅

Before you take possession, you should do a final walk through of the home to make sure it is in the agreed upon condition that you offered to buy it at. If any red flags pop up, make sure you notify your lawyer right away so that they can stop the funds from being transferred to the seller’s on possession day.

Try to do your possession within 24 hours of your possession day to prevent or avoid any unwanted surprises.

Stay tuned for my 50-Step Checklist.

Step 10: Take possession 🔑

On this day, you will wait for your lawyer to receive confirmation that the funds have been transferred over to the seller’s lawyer. Once everything is good to go (it can take a few hours), the lawyer will inform your realtor and you that the keys can be handed over.

Make sure you record the special moment of unlocking your home for the first time… and then remember to change the keys and locks for the entire house afterwards.

Congrats! You finally purchased your new home… You went through a lot, so give yourself a pat on the back.

Good luck, house hunters 🙌

Hopefully, you found this helpful as you start or close out your house hunting process. Remember that these tips are based on my own experience of buying a home back in Fall 2021 when the market was still very competitive (but I have heard that it has gotten even worse since then). This was one of the most stressful experiences of my life, but ultimately a great learning experience for the future!

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