If you’ve mentioned, even casually, to someone that you’re thinking about buying your first house, you’ve probably already received a healthy dose of information overload. Everyone wants to help you achieve this highly anticipated milestone, and are happy to provide you with advice on the best way to go about it.

Though all of this guidance is well intended, some of it is outdated, and some was never 100% accurate to begin with. In light of the barrage of information you’re about to decipher, we thought we’d help by addressing some of the most common misconceptions people have when buying a home for the first time.

Wait for the Market to Change

Of all the advice any homebuyer gets, trying to time the market is arguably the least helpful. Housing prices will always have their ups and downs; the long-term trend is up, but not even the most well-informed expert can predict which way the market will turn or when.

There are too many outside factors that can cause everything to change without notice. Waiting for a “better” time often means putting your dream of owning a home off indefinitely.

Instead of delaying in hopes that conditions will change, it’s better to assess your own goals and resources to see if buying a house is feasible for you. Generally speaking, the earlier the better if you can comfortably afford the payments.

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A little background research will go a long way when buying your first home. The posts below are a great place to dive into all you need to know about Ottawa:

• What Every Millennial Needs to Know About Ottawa Real Estate
• Does Real Estate Protect You Against Inflation?
• Strategies to Help First-Time Buyers Enter the Real Estate Market

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Get Out of Debt First

It’s important to know that you can afford your down payment and carrying costs when buying a house. Too much debt can impact your ability to qualify for a mortgage or manage the monthly expenses.  However, saying that you should clear all of your debts before searching for a place of your own is akin to the adage, “Tomorrow never comes.”

Owning a house for the long term builds your equity and increases your financial stability. A few minor debts don’t mean you must put your plans on hold, especially if you are managing them well.  

A House Isn’t a True Asset

There are those who would argue that a house isn’t really an asset unless it’s generating positive cash flow for you. This is an opinion we respectfully disagree with in most cases.

• The longer you own your home, the more it will grow in value, which in turn increases your equity and purchasing power. Though this isn’t money going into your pocket every month, you still benefit financially in several ways.
• You can sell your house later and earn a return on your investment. Alternatively, you can keep it in the family for future generations.
• You could also rent it out after you move on, in which case it becomes a true asset in every sense of the word.

In addition, buying a home now means you can look forward to being mortgage-free one day, which will eventually free up a significant portion of your income. This is something that will never happen if you continue to rent for the long term. 

You Need a 20% Down Payment

As housing prices go up, so do the requirements for your down payment. However, thinking you need 20% before you can even begin to hope to buy a house can be discouraging. Plus, it just isn’t true most of the time.

The amount of your down payment depends on the purchase price of your home. The higher the price, the more stringent the requirements become. Here’s how it works.

Is the house you’re looking at $500,000 or less? Then you will need a 5% down payment, or $25,000. Not that this isn’t a significant sum, but it’s far more accessible than 20% would be.

If the house is more than $500,000, you’ll need to come up with 10% on the difference. For example, let’s say you’re looking at a home priced at $600,000. You need 5% on the first $500,000, and then 10% on the additional $100,000. After you do the math, you realize you’ll need $35,000 to buy your home, plus closing costs.

As a first time buyer, you may not be looking at homes at the million dollar mark or higher. If you are, you’ll need 20% on any amount over and above $1 million. 

Since many homes in Canada, especially in cities like Toronto and Vancouver are higher than $1 million, that could be where the misconception came from. In addition, if you can afford to pay 20% upfront, you save on mortgage insurance. 

It Costs Less to Rent

There was a time when renting was less expensive than buying a house. That said, rental costs have increased substantially as housing prices rise and interest rates change. Most landlords want to at least earn enough to cover their monthly carrying costs, an expense that gets passed down to you.

Another way to look at it is to see how much renting will cost you over time rather than buying. The barrier to buying a home is definitely greater in the beginning, as you’ll need to have a down payment and qualify for a mortgage. But if you’re buying a $500,000 home, you’ll eventually whittle that amount down to zero. You’ll also benefit from the increased equity. The house will grow in value over time, but you won’t be paying more each month.

If you’re renting a $500,000 property, you can expect your payments to increase over time since landlords are allowed to raise the rent each year. As a tenant, increased equity works against you instead of for you. 

Buying a House Is Complicated

When you first set your sights on buying a house, it can certainly seem complicated. However, by taking things one step at a time, the process will be much simpler. There may be a lot to do, but you don’t have to do it all at once. Start by thinking about one small step you can take today that will take you closer to your goal.

• Get a pre-qualification online to get an idea on how much you can borrow. If you want a more accurate estimate, get a pre-approval from your bank or a mortgage broker.
• Estimate your down payment and monthly carrying costs by using our mortgage calculator.
• Make a list of what features you want your new house to have and where you want to live.

As you proceed, you will undoubtedly have many questions along the way. A knowledgeable real estate agent who knows the neighbourhoods you’re searching in will ensure you feel supported throughout each step.

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Knowing where you want your first house to be is half of the battle. The posts below might help you narrow it down:

• Ottawa’s Civic Hospital Neighbourhood; Make it Your Home Too!
• Is Barrhaven a Good Place to Live?
• Ottawa: More Than Meets the Eye

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Not Using a Real Estate Agent Will Save Money

Another common misconception is that you can save money by not working with a real estate agent. As a buyer, this is simply not true. If there are any real estate commissions, it is the seller who pays them once the transaction is finalized.

Working with a real estate agent means you will have access to more listings, up-to-date information, not to mention having a trained expert to advocate for your best interests. The right agent will guide you through the entire process, from finding the right home for you and negotiating on your behalf.

Knowing what advice to follow and what to avoid is essential when searching for your first home. Having an experienced and caring real estate professional like one of our Chell Team agents will help you find the perfect place to begin your new life.

Are you ready to start searching for your first home in Ottawa? Our compassionate and knowledgeable team is standing by. Reach out to mail@chellteam.com or call 613.829.7484 to connect with us today.