First-Time Home Buyers more Prepared to Buy

Today's 18-34 year olds feel differently about purchasing a home than their parents or grandparents did at the same age, reveals an October 19, 2009, survey by TD Canada Trust.

Of the 18-34 year-old group, 51% said that they felt financially ready to buy a home. Only 37% of the 55+ group said they felt ready to buy at the same stage of their life.

Help from family sealed the deal:  36% of the 18-34 group purchased a home with the help of family (compared to 16% of the 55+ group).  27 % of the 18-34 group said they received money as a gift or they borrowed from family or friends when they bought their first home (compared to 10% of those 55+).

Location Tops the List for young people: Almost 80% of the 18-34 group surveyed said location was the most important factor in the purchase decision, as compared to 70% of buyers aged 35-54 and 64% of buyers 55+.

Houses vs. Condos and Townhouses: 65% of the 18-34 group bought a house for their first real estate purchase. 88% of 55+ purchased a house for their first purchase.

Life in the City = Older Home: Almost half (48%) of the 18-34 survey group chose a home over 20 years old. 35% of this group purchased their first home with plans to fix it up (versus 24% of 55+).

Life with a Mortgage – Get Used to It:  49% of the 18-34 group said wiping out their mortgage was a top priority. 64% of Canadians 55+ said paying off their mortgage was a top priority in buying their first home.

When Wants Exceed the Budget: 36% of the 18-34 group said their first home was more expensive than they’d planned for 18% of 55+ said their first home went beyond their planned budget.

Copyright Alberta Real Estate Association. Reprinted with permission. AREA makes no guarantee as to the accuracy or completeness of this information. Source: TD Canada Trust Generational Homeownership Survey reveals the younger the owner, the older the home.

 

Thinking about Buying your first Home?

When mortgage rates are low, more renters think about buying their first home. Several factors should be considered when purchasing Real Estate, whether its a single family home or a condominium.

How long do you plan to live in the home?

  If you purchase a home and get a job transfer or decide to move after only a short time, the value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home. The length of time that it will take to cover those costs depends on various economic factors in the area of the home. Appreciation depends a lot on location and other economic factors but you may want to use 3%-5% appreciation per year. You should plan to stay in your home at least 3 years to cover buying and selling costs. If the area you buy your home in experiences an economic up-turn, the length of the time to cover these costs will be shorter, and the opposite is also true. Your Realtor® can guide you to choosing communities with a higher resale value if a job transfer is in your near future.

How long will the home meet your needs?

  What features do you require in a home and the community to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, does the community have the amenities that you need and will the home be large enough if your family grows? Can you add a den and extra bedrooms in the basement? Having an idea of what you need now and in the future will help you find a home that will satisfy you for years.

Your financial health - your credit and home affordability

  Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good. Generally, a couple of blemishes on a credit report will make you a good credit risk and could qualify you for the lowest interest rates. If you have more than a couple of blemishes on your report, lenders may still provide you with a loan, but you might have to pay a higher interest rate and fees.

  Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you can stretch a bit to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it's within your comfort zone.

  To determine how much home you can afford, talk to a lender, ask us for a referral to a mortgage specialist, or go to our website and use the Mortgage calculator. Mortgage calculators will give you a range of what you may qualify for and may assist you in determining whether you should buy or continue renting. Your monthly housing costs can't exceed 32 percent of your income and your total debt load together with your housing costs can't exceed 40 percent of your total monthly income.

Where the money for the transaction will come from

  Typically homebuyers will need some money for a down payment and closing costs. However, with today's broad range of loan options, having a lot of money saved is not always necessary if you can prove that you are a good financial risk to a lender. If your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender. If you have excellent credit, you may qualify for zero-down. However, interest rates are often higher as are CMHC premiums.

The ongoing costs of home ownership

  Maintenance, improvements, taxes and insurance are all costs that are need to be considered in addition to your house payment. If you buy a condominium or a single family home in one of the newer communities, a yearly homeowner's association fee is often required. If these additional costs are a concern, you can make choices to lower or avoid some fees. Be sure to inform your Realtor® about your desire to limit these costs.