How to prepare to buy a home in a hot market
As lockdown restrictions ease up and provinces enter new phases of reopening, we’re seeing the Canadian housing market experience the momentum of a delayed “hot spring market” into the summer. With more people listing their homes and resuming home searches, we saw one of the hottest June markets nationwide in a really long time.
According to the Canadian Real Estate Association, national home sales shot up a total of 63 per cent month-over-month in June, with an increase of 15.2 per cent in overall activity year-over-year. As restrictions for open houses are being lifted, we can expect this trend to continue into the later summer months.
So, how can buyers best prepare for this hot housing market?
1 – Determine your down payment
A down payment is the amount of money a homebuyer pays up front when purchasing a home. Knowing what your down payment is from the get-go will make for a more productive home search. It will also give you a rough idea of how much you need to borrow for a mortgage, while helping you budget for other expenses such as closing costs and land transfer taxes, if you’re not a first-time homebuyer.
2 – Get Pre-Approved for a mortgage to find out what you can afford
Once you have a clear idea about what your down payment is, getting pre-approved for a mortgage is your next step. Pre-approval will help you establish your home affordability and what you can borrow right from the start. Having this information will allow you to set a realistic budget, which in turn will simplify your home search and make for a much more enjoyable home shopping experience. At Homewise, we’ve seen a strong increase in pre-approvals over the last three months as buyers were getting prepared to enter the market.
3 – Find a good realtor
Once you’re ready to start home shopping, find a knowledgeable realtor that knows how to navigate a hot market. You’ll want to find an unbiased individual that will steer you in the right direction and help you understand if you have access to buying opportunities in a broader market.
4 – Shop only for what you can afford
Whether you’re looking at a new or resale home, a key rule of thumb when shopping in a hot market is to shop only for what you can actually afford. One of the biggest mistakes buyers make is losing sight of their budget and spending beyond their means. When buying resale and you find yourself in bidding situation, make a five-day conditional financing offer. This gives you necessary time to work with a lender that can shop around and get the financing you need to close the deal.
At the end of the day, purchasing a home is a really exciting milestone. Being prepared and knowledgeable will only help you maintain this excitement as you enter a competitive marketplace. Knowing what you can afford will ensure you make a well-informed buying decision that you can feel good about. Happy shopping!
Jesse Abrams is Co-Founder at Homewise, a mortgage advisory and brokerage firm based in Toronto. thinkhomewise.com