A Complete Guide to Buying Your First Vancouver Home in Today's Market
Thinking of buying your first Vancouver home but you’ve heard about low inventory levels and record-high home prices? Not to worry—this is a reflection of our city’s desirability and promising investment potential.
Ranked consistently as one of the most livable cities in the world, it’s no wonder so many first-time home buyers are looking to enter Vancouver’s real estate market. And even though the current market is highly competitive, an experienced Vancouver realtor will see this as an exciting challenge rather than an obstacle.
In this guide, we'll provide you with the tools and knowledge necessary to fulfill your goal of becoming a homeowner in this incredible city.
What Not to Do When Buying Your First House
Before we dive into what to do when buying your first Vancouver home, let’s first cover what not to do. When applying for a mortgage, avoid:
- Financing a car or any other major purchases
- Taking out a loan
- Maxing out your credit card
- Getting a new credit card
- Quitting your job
- Switching careers
Doing any of the above can negatively impact your credit score and debt-to-income ratio, which are crucial factors that lenders consider when approving a mortgage. It may sound obvious but, in my years as a Vancouver realtor, I’ve seen people get denied a mortgage on their first home at the last minute.
To be safe, it’s best to hold off on any significant financial decisions until after you have closed on your new home. I know it’s hard but this will help ensure that your finances are stable and won't jeopardize your ability to secure a loan or afford the mortgage payments.
Tips for Buying Your First Home
1. Check Your Credit Score
When buying your first home, your number one priority should always be checking your credit score so there’s no guessing. This is the number that lenders and creditors will use to determine your creditworthiness and interest rate for a mortgage loan. A high credit score can also help you negotiate better terms with lenders.
According to Equifax Canada:
- A credit score, usually ranging between a low of 300 and a high of 900 is a measure of your creditworthiness.
- It's derived from information found in your credit report — from your repayment history to outstanding debts and the duration of your credit accounts.
- Credit scores ranging from 660 to 900 are typically categorized as good, very good, or excellent.
Checking your score won’t hurt your credit. If you discover the number is lower than you'd like, take some time to improve your credit score before applying for a mortgage. Pay off any outstanding debts, make all of your payments on time, and avoid opening new lines of credit.
2. Determine What You Can Afford
While you may already have a specific budget that comes to mind, have you taken into account the possibility of career changes or emergencies in the future? Consider factors such as job stability and possible salary increases or decreases. Do you have a backup plan or other streams of income in the case of an unexpected situation?
When determining your budget, always factor in any existing debts or financial commitments you have as well—whether it be car loans, student loans, credit card debt, or other monthly expenses.
You should also think about the type of lifestyle you want to maintain after purchasing a home. Will you still be able to save for retirement or take vacations? After such a large investment, it's important not to stretch yourself too thin financially by buying a home that is beyond your means. This is where the term “house-poor” comes from.
Another key factor is thinking about the long-term costs of homeownership. There are additional expenses such as property taxes and maintenance fees that come with owning a home in Vancouver. Make sure you budget for these ongoing costs when determining how much you can afford.
Once you’ve determined what you can realistically afford within your budget with all of the above factors in mind, stick with it during the search process. I know it can be tempting to stretch yourself further if competition is fierce for properties within your price range, but this could lead to financial strain down the road.
3. Find the Right Lender
When it comes to finding a lender for your mortgage, you have several options. You can work with a traditional bank or credit union, or you can seek out the services of a mortgage broker. Each option has its pros and cons, so it's essential to do your research and speak to multiple lenders before settling on one.
Do you already have an established relationship with a specific bank or credit union? Then it’s worth exploring a bank loan as an option, as it could lead to more favorable terms on your mortgage loan.
On the other hand, working with a mortgage broker can give you access to different lenders and loan options that may not be available through more traditional institutions. Think of mortgage brokers as intermediaries between borrowers and lenders. They can help match you with the best loan options for your specific financial situation. They also handle a lot of the paperwork involved in securing a mortgage, making the process less stressful for you as a first-time home buyer.
Before deciding on which type of lender to work with, compare interest rates and fees with various lenders. This will give you an idea of what is considered competitive in today's market and help ensure that you are getting the best deal possible.
4. Get Pre-Approval on a Mortgage
Getting pre-approval on a mortgage is an important next step in the home-buying process. Once you get a commitment from a lender, it means they’re willing to provide you with a specific loan amount based on your financial situation and credit score.
To get pre-approved, you’ll need to submit an application and provide documentation such as pay stubs, tax returns, and bank statements. The lender will review everything to assess how much of a risk it would be to lend you money.
Once you have been pre-approved, the lender will issue a letter stating the maximum amount they’re willing to lend you. This letter can then be used as proof of financing when making offers on homes. It also gives sellers confidence that you have already gone through some of the steps necessary to secure funding for their property. This will give you an edge over the competition.
Lastly, keep in mind that being pre-approved doesn’t guarantee final approval for your mortgage loan. Lenders may still require additional documentation or conduct further reviews before issuing final approval.
This is why we advise you to avoid financing large purchases or having significant changes in your financial situation between getting pre-approved and closing on a home. It could affect your ability to secure final approval for the loan at the initial terms agreed upon during pre-approval.
5. Check if You Qualify for the First-Time Home Buyers’ Program in B.C.
The First-Time Home Buyers’ Program in British Columbia is designed to help first-time homebuyers with the purchase of their new property. This program offers partial or full tax exemption on the Property Transfer Tax (PTT), which can significantly reduce the upfront costs of buying a home.
To qualify for this program, you’ll need to meet their requirements. First and foremost, you must be a first-time homebuyer by the government of British Columbia. This means that you have never owned an interest in a principal residence anywhere in the world at any time and have not received any other first-time home buyer’s exemption or refund.
The property you plan to purchase must also meet certain criteria to be eligible for this program. The fair market value of the property cannot exceed $835,000 and it must be used as your primary residence within 12 months of purchasing it.
If you’re purchasing the property with one or more people, each of you must qualify for this program individually. For example, if your partner has previously owned a principal residence before but you haven’t, they will not be eligible for this tax exemption.
6. Partner With the Right Vancouver Realtor
Finding the right Vancouver real estate agent is crucial when looking for your first home in Vancouver. A good agent can make all the difference in a competitive market, helping you navigate through listings and negotiations to find your dream home.
The first step in finding the right realtor is to do your research. Ask friends and family for recommendations, read online reviews, and review their sales history. You want to work with someone who has a solid track record of buying and selling residential homes in Vancouver's current market.
If a family member or friend refers you to a realtor or you find an agent on social media, always meet up with them in person before deciding they’re the right person for the job. Think of finding a real estate agent just like dating; you should get a feel for their personality and communication style, and keep an open mind when exploring your options.
When meeting with realtors, make sure you feel comfortable with and enjoy being around the agent you plan to work with. Buying a home can be stressful, so having open communication and trust between yourself and your agent is key for a successful transaction.
Another factor to consider when selecting a Vancouver realtor is their availability. In today's fast-paced market, timing can make or break your chance of securing the property you want. That’s why it’s crucial to find an agent whose schedule aligns with yours. They should have the flexibility to show you new listings promptly so that you don't miss out on any opportunities.
7. Start House Hunting
Once you have your pre-approval and a Vancouver realtor by your side, it's time to start house hunting. This can be an exciting but also overwhelming part of the home-buying process for some first-time buyers. With so many options available in Vancouver's competitive market, it can be challenging to narrow down your choices.
To make the most out of your house-hunting experience, here are some quick tips to keep in mind:
- Set Your Priorities: Before you start looking at properties, make a list of your must-haves for your first home. Look beyond just the physical attributes of the home and assess factors like the location, amenities, and whether you can see yourself living here long-term. This will help guide your search and prevent you from wasting time looking at properties that don't meet your needs.
- Keep an Open Mind: While it's important to stick to your priorities, try not to limit yourself too much when searching for homes. There may be other neighbourhoods or types of homes that could also meet your needs and preferences. An experienced Vancouver realtor will present great options that you may have not known you’d like.
- Research Neighbourhoods: Vancouver has many different neighbourhoods with unique characteristics and housing markets. Take the time to research these areas thoroughly before starting your search so that you have a better understanding of where you can see yourself living.
- Go to Open Houses: Attending open houses is an excellent way to get a feel for different properties without any pressure or commitment. Here, you can ask questions about the properties directly from the seller's agent.
- Don’t Be Scared to Schedule Multiple Viewings: Don't limit yourself to just one viewing per property. Remember that you can schedule multiple viewings for the homes you're seriously considering. This will give you more time to notice any details you may have missed and help determine if the home is right for you. Re-visiting a property can also help narrow down your choices between different options before making an offer.
8. Make an Offer
Once you’ve found a potential home, the next step is to make an offer. Work with your real estate agent to determine a fair price and any conditions you'd like to include. Your agent will draft a written offer document, which you'll submit to the seller. Be prepared for negotiation, and if both parties agree, you can then go ahead with the necessary deposits and inspections to finalize the purchase.
Be prepared to offer an ‘earnest money deposit’ (also referred to as a ‘true deposit’), which is a gesture of good faith. This deposit is a percentage of the property’s sales price, which shows the seller that you're serious about buying their home. This money is typically held by a third party, like a real estate brokerage or escrow company, until the sale is finalized.
If the sale goes through, the earnest money deposit is usually put toward your down payment or closing costs. If the sale falls through for a valid reason outlined in your contract, you’ll get your earnest money back. Just keep in mind that, if you back out of the deal without a good reason, you might lose your earnest money deposit. Your agent will guide you through this process.
9. The Closing Process
Once your offer is accepted, it's time to move forward with closing on the property. Once you’re under contract, schedule a home inspection as soon as possible. This will show you if the home has any issues that you weren’t aware of and it will also give you a better idea of any ongoing maintenance that could be required.
Once that’s taken care of, it’s time to complete all the paperwork and finalize financing with your lender. It's important to work closely with your Vancouver realtor and lawyer during this stage to ensure everything is completed accurately and legally.
As part of closing, several additional costs need to be considered, such as legal fees, property transfer tax (unless you’re exempt), home inspection fees, title insurance, and more. Your realtor can guide these costs so that you can budget accordingly.
The last step in buying a home is attending the official closing day. This is where all your efforts pay off, as you’ll sign all the necessary documents and pay any remaining costs. It can be a detailed process, but having an experienced Vancouver realtor with you will make a world of difference.
Once everything is finalized, you'll receive the keys to your new home and can start moving in. Congratulations!
Next Steps - Get in Touch With Us at Vuppie Real Estate
At Vuppie Real Estate, we have matched hundreds of homebuyers with their ideal properties to navigate Vancouver's competitive housing market. We understand that buying a home can be overwhelming but also exciting, which is why we work tirelessly for our clients to ensure a smooth and stress-free process.
Are you ready to buy your first home or have any questions about the process? Contact us now or simply fill out this form and we’ll get in touch. Our team is here to discuss your goals and guide you through the homebuying journey.