Buying your first home in Canada as a newcomer

Jorge: I’m actually an immigrant from Honduras. I moved four years ago to Moncton. I don’t have a home yet, but I’m planning to. What’s the first thing I need to consider?

Jenny: The first thing is getting informed, right? A lot of people don’t realize that buying a home comes with a lot of other things you need to worry about, other expenses. So I always say, yes, perfect, if you can own your first home, it’s wonderful. But being a renter and being a homeowner are two different things. When you’re renting, you just worry about rent. When you have a home, you have to worry about repairs and maintenance. That said, it’s your own home, and it’s also a savings. So one of the first things to do when you’re a newcomer is to make sure you get a preapproval. That’s your first step.

Jenny: And to get a preapproval, you need to have credit history in Canada, because the bank is not going to approve you if you have no credit history. So build good credit, don’t miss payments. Open up a Visa, use it, but make sure you’re always paying it on time to start creating a good credit rating.

Jorge: Well, I got here and I couldn’t get a credit card right from the start. I was denied a credit card. And we’ve been renting for four years. The prices have been exploding, right? So is it okay to wait? Is that the right instinct?

Jenny: I always tell people the right time to buy is when you are ready, when you’re prepared, when you’ve been preapproved. The market is always going to change. Some people say, “Well, wait until interest rates are low.” When interest rates are low, house prices tend to go up. When interest rates are high, it’s a little easier for buyers to get into the market, but you’re paying a higher interest rate. So the perfect time is when you’re ready, when you have the preapproval, when you have the down payment.

3:14 Skip to “The 5% down, closing costs, and the broker”

Jorge: You mentioned we need to build credit. What’s the right way besides a credit card? Because I’m scared of credit cards. My parents were not fans of credit cards. It feels scary.

Jenny: That’s a mentality a lot of us come with. My mom wasn’t always a fan of credit cards either, “No, I want to pay cash. I don’t want to owe anybody.” Over here it’s different. To build credit you need those loans, and a credit card is one of the easiest, fastest ways to increase your credit score in a positive way. Your phone bills are also part of your credit history. Your utility bills. All that helps. But a credit card is one of the fastest ways. And it’s not just getting it and not using it, that’s the same as not having one. It’s getting it, using it, and paying it.

Jorge: Okay. Now, I know you also need to save for a down payment. What are the best tools to start saving? You get here, you start working, your partner starts working…

Jenny: Absolutely. Your first home is not going to be your last home, right? You want to get your foot in the door, even if it’s with something small. Down payments are usually about 5% of the purchase price when it’s your first home and you’re going to be the main person living there. 5% is the lowest the bank will ask for.

Jenny: So this is where you work backwards. You think, “Okay, if I have $20,000, maybe this is the price of home I can purchase.” What will actually give you the answer to what you qualify for is reaching out to a mortgage broker. They’ll take all your information, your work history, look at your credit, and tell you what you can afford. That magic number is what you have to work with. Let’s say they approve you for $300,000. Now you know 5% of $300,000 is your down payment for the bank. But it’s not just the down payment, you also have closing costs. You pay the lawyer for closing. We have something in Canada, and in New Brunswick, called the land transfer tax, which is 1% of the purchase price. So if your house is $300,000, the tax on that is going to be $3,000.

5:20 Skip to “The mistakes newcomers make”

Jorge: What are some of the mistakes newcomers make when trying to buy their first home here in Canada?

Jenny: One of the things is they get into an expensive car or into big car payments. That’s one of the things that’s going to work most against you getting a preapproval. If a home is your goal, don’t buy an expensive car. Don’t be spending most of your money on a car payment, because the bank actually does not approve you for as much when they see a big car payment. Get a smaller car. Get something you can pay off quickly, then start saving for your home. Big debts, cars are a huge one. And if your credit cards are always topped up, that’s something the bank doesn’t like, and that goes against getting that preapproval.

Jorge: Yes. We try to follow that shiny object, right? You see that car… it’s easy here. It’s easy to get preapproved for a nice car. And it’s hard to keep your eyes on the prize, because I want to own a home eventually. But I can see how having those big expenses is going to affect your ability to pay.

Jorge: Yeah. And I know you moved from Ontario to New Brunswick. You’ve been in Canada for years, but basically you’re a newcomer to New Brunswick. What’s something you would have liked to know before you made that big move, of buying a home in New Brunswick?

7:11 Skip to “Location is the one thing you can’t renovate”

Jenny: I think something important I always tell people when they’re moving to New Brunswick and they don’t know the area, newcomers coming from other provinces, know the neighbourhood you’re going to buy your house in. Because it’s very easy to tear down walls inside a house and renovate, but you cannot pick that house up and put it in a different neighbourhood or a different city. You cannot change the location. So before you buy a house, make sure you’ve looked at the neighbourhood. Make sure you’d be happy in the city or town it’s in. The home you could do repairs to. The location you cannot change.

Jenny: Make sure the neighbourhood meets your needs. If you have children, is it near schools? Is it near a park? Is it near a hospital? Whatever your needs are, make sure that neighbourhood meets those requirements. Because if it doesn’t, once you’ve moved in, you’re going to realize, “Maybe this isn’t where we should have bought a home.”

Jorge: Yes. And you tasted the small-town feeling. You were in Sackville. Then you moved to Moncton. Sometimes I consider, should I move from greater Moncton to a small town? What’s that trade-off like?

Jenny: It’s a huge difference. Even though the cities in New Brunswick are still relatively small compared to a lot of cities in bigger provinces, I always say small-town living, we had the fortune of moving to Sackville from Toronto, so it was a huge change. When you’re in a small town and you have a family, it’s a great place to raise them. Small towns are pretty much a community. You see all the same children at the same school. You see all the same children at the same park. They truly grow up together. It grows up like a very tight community.

Jenny: When you move to a bigger city, you no longer know your neighbours as well. There are more schools. The population is bigger, so there are more opportunities for other programs, sports, arts, anything you might want to get your children into. When you’re keeping it small, it’s lovely to have that community feel, but you might not find the same programs you would in a bigger city.

Jorge: That’s the main reason I get worried about going outside city limits. A good hack would be outside city limits but near a highway?

Jenny: Yes. When we lived in Sackville, we were still near the highway. You start to get used to that. When you live outside the city, 25 minutes is too much traveling time, I come from where we would be stuck in traffic in one corner for 25 minutes. So it depends on the lifestyle you want. What I say is: move to a small town, but make sure the amenities are around. Grocery stores, a doctor, a hospital. Because if not, you’re going to be doing a lot of traveling, and you’re going to get tired of it.

Jorge: I’ve met people that moved to New Brunswick and haven’t seen the house they bought yet. They just got here, and they bought the house online or something like that. What’s a common regret you hear from those people?

Jenny: Absolutely. When I started real estate, it was during COVID. During COVID, I’d say 90% of my clients would not see their home in person until closing day, when you give them the keys.

Jorge: That’s crazy.

Jenny: Which is crazy. It’s like you were buying via video. And as realtors, we’d try to give as much information as possible. But remember, we’re all individual people. So I think the biggest regret was, again, location. They fell in love with the home, and as much as we could give out information, it’s all in the personal thing. Were they close enough to a park? Maybe not. So when you’re buying without seeing the home, you might fall in love with the home but not be in the right neighbourhood for where you are in life. Maybe you don’t want children around, maybe you don’t want to be near a park or a school. That is a huge thing. That would be the biggest concern for people buying without seeing the home.

Jorge: Yes. And I’ve heard some horror stories. I get tempted when I’m looking at homes. I see some homes that are in the lower end of price, but they’re older homes. There might be some issues with plumbing and everything. How do you usually avoid those mistakes?

13:27 Skip to “Why the home inspection is non-negotiable”

Jenny: Absolutely. First of all, if you’re buying and you’re not going to be here, and even if you are here, always make sure you find a trusted realtor, a professional that’s going to guide you through all these steps. When you walk into an older home, because maybe that’s what your budget is at, realize that yes, there might be electrical updates that have to be done, plumbing updates that have to be done, and all these things add up.

Jenny: One of the most important things to do is a home inspection when you put in an offer and that offer gets accepted. You want to make sure that, okay, yes, the house is $250,000, we’re staying in budget, but then you buy it, you didn’t do an inspection, and you realize now you have to spend $50,000 in needed upgrades like plumbing or electricity. That doesn’t make sense. You can literally go into debt very quickly. So inspection is crucial when you’re buying a home. It happens unfortunately, where a lot of people are like, “Nope, it’s fine.” I always say: inspection, you need to do it. Because our eyes see something, but we’re not plumbers, we’re not electricians, we’re not going to go into the attic of the home. You need all that to be seen so you know what the condition of the home is.

Jorge: Yeah. We fell in love with Moncton. We like it. I see myself here for the next few years. But when I look at a map, I think about where the next Dieppe is going to be, the area that could rise in value more rapidly in the next few years. Do you have a specific area?

Jenny: Absolutely. Usually it’s within the city. That’s where most of our prices go up. Anywhere near transit systems, near schools, near hospitals, near universities, those tend to go up a bit more quickly. Most people coming into the country want to make sure they’re near transit, near schools, near hospitals. That’s where most people start to buy. When you’re in the city, the value will go up quicker than if you were 30, 40 minutes outside of Moncton, where you have to travel into the city for these amenities. So stay near amenities, and that’s where you’ll know your value will go up a little bit quicker.

Jorge: I know lots of people moving to Irishtown. That area is growing commercially as well. There’s a Costco and parks. Do you think that’s also a good area?

Jenny: Yes, absolutely. Those are good areas. Now you’re looking at different types of homes. In Irishtown, beautiful areas, but the home prices there tend to go up in value because a lot of those homes are new builds. Their properties are larger. The average price increases, but they’re still close to amenities, Costcos, grocery stores, the highway. If you want something more stable, I’m not saying be right in downtown Moncton, but stay within Moncton, close to a transit system. All those things help.

Jorge: And the transit system could be better.

Jenny: It can. Yeah.

Jorge: Ideally in a few years the transit system expands.

Jenny: It expands. Because when you’re dealing with people that are just moving to the province, newcomers, not everybody’s going to have money to buy a car right away. All the international students we’re getting, they might not have a car. So everybody’s going to look to where they can get on a bus and get to their place of work or school.

Jorge: Has there been one scenario where you advise not to buy a home? Maybe right now is not the right time for these buyers?

Jenny: Absolutely. The best time to buy a home is when it’s good for you. Sometimes I’ll have clients where they’re like, “My job is starting to have layoffs. They haven’t told me yet, but I don’t know if I’m going to be next.” That’s when you really need to take a step back and say, “Maybe I should pause the search, or maybe I should pause the purchase.” Because a house is a big expense, and it comes with a lot of responsibilities. Unexpected repairs. Situations where your work can change. I always tell people, take a step back. Maybe wait on that. If there’s no stability in the financial area of your life, definitely don’t get into a home just yet.

18:25 Skip to “The FHSA: Canada’s gift to first-time buyers”

Jorge: I don’t know if this is outside the topics you could talk about, we opened an FHSA, so we could start saving. There’s a lot of good tax advantages. I’d like to explain this a bit better.

Jenny: Yeah. So that would be your First Home Savings Account. It’s wonderful because, let’s say, I think it’s a maximum of $8,000 a year. Those $8,000 you are not going to get taxed on. Every year in Canada, we have to declare our taxes, our personal taxes. So if you open up this account, let’s say up to a max of $8,000, you take that money, you can use it towards your down payment, and you’re not going to pay any taxes at the end of the year on it. That money is going to go toward your home. All the wonderful mortgage brokers I work with recommend opening up this account for first-time homeowners.

Jorge: We don’t have these advantages in our countries. There’s nothing like it in Honduras. So I was blown away that I can put money towards a home, especially as a newcomer. You don’t have savings. You haven’t been here for years.

Jenny: Yes. It is one step to getting closer to owning that home.

Jorge: I get anxious about prices going up. I’m not in the game yet. I don’t own a home. So I’m like, if I need to wait two or three years, prices will be higher and it’s going to be harder. What’s the right mindset for us? I see a lot of people in their 20s who feel like there’s no chance they could potentially own a home.

Jenny: We’re still lucky that we are the second most affordable province for housing in Canada. Our house prices are still some of the lowest in the country. It’s still not super easy where everybody owns a home, but it’s definitely easier than if you were buying a house in Toronto where your average home is a million dollars and needs work. In New Brunswick, your average detached home is in the $370,000 range. So you still need to save up for it, it’s not easy, but it’s more attainable.

Jenny: Yes, our prices have gone up. We already went through the biggest growth, which was during COVID, where prices went up like 120%. But in the last three or four years, our prices have started to settle. Our price increases don’t compare to the bigger cities. So yes, you’re concerned that prices are going up, they are, slightly, but they’re not unreal from one year to the other. They’re not going to double. That happened during COVID, and it was a specific time that I hope we don’t see again. Just focus on the goal. Focus on the fact that yes, you are going to own a home. Start preparing for that, and when your time comes, you’re going to be ready to buy that home. Right now, like I said, New Brunswick is still relatively affordable in comparison to the rest of the country, and attainable. You just need to have a plan, a goal, and sooner rather than later, I could see you in your home.

Jorge: Do you think it’s the right angle to see homes as investments for retirement? A lot of equity’s tied to your home. You feel like one day you’ll use it to retire.

Jenny: Absolutely. Especially if it’s going to be a home you’re going to be living in. You can use the home as an investment. If it’s your first home and you’re like, “This is where I’m going to put most of my savings, and I want to keep this home for a very long time so when I retire, I can take advantage of the equity and the increase in prices”, yes. Because if we compare it to rent, where 0% of it is going to your pocket, a home, even though you’re paying interest rates at the bank, you’re still putting money in your pocket. And with the appreciation, it’s still a saving. So when you do retire, there is going to be something there.

Jorge: A year ago I was thinking, “There’s no way house prices can stay this high for that long.” I think prices should crash eventually. But I’ve changed my perspective since then. House prices will continue to go up, not the same as two or five years ago maybe. But Moncton is getting bigger. There’s a lot of industry, employment, innovation. That, for me, indicates I need to jump as soon as I’m ready for it.

Jenny: Exactly. And one of the best things to do is to actually reach out to a mortgage broker. A lot of people are like, “Well, no, I’m not going to reach out to a mortgage broker now because I don’t have the money.” No. Reach out because a mortgage broker can actually help you create a plan. Where you say, “In a year, my goal is to have a home like this, maybe in this price range, or a home with three bedrooms in this area.” And then we look at, okay, this is the average price. A mortgage broker will start backwards with you. “This is the price. This is how much you need to save, and this is…” They’ll look at your case specifically. Maybe if you have a big debt on a car, they’ll start to say, “Try to pay this off as quick as you can so that when the time comes, your preapproval can actually afford the home you’re looking at.” So reach out to a mortgage broker now. They can help you plan for your home in six months to one year.

25:25 Skip to “What you do this week”

Jorge: That makes sense. Now, let’s say I’m a newcomer. I got here between six months and a year ago. What’s the one thing I should be doing this week to prepare?

Jenny: To prepare, make sure that you’re paying your bills on time. Because again, the preapproval of that bank loan is what’s going to help you get this home, and what’s going to help you get that home is also a good credit history. Start creating credit. If you don’t get a credit card right away, make sure you’re paying your bills on time. Make sure you’re paying your phone bills, your utility bills. Your rent on time. All those things add up. But the first thing I would say is start building credit.

Jorge: What’s one thing you felt we didn’t cover?

Jenny: Again, I would say don’t feel pressured to feel like you need to buy a home now, “everybody’s buying a home, I’m not going to be able to afford the market.” No. Have a plan, have a goal, and know that the best time to buy a home is when it’s the right time for you. When you’re preapproved, when you have a stable job, and when you have that down payment saved.

Jorge: Love it. Perfect. Can you introduce yourself and ways to get in touch with you?

Jenny: Absolutely. I’m Jenny Celly. I’m a realtor in the greater Moncton area. I love helping newcomer families, or people that just moved into New Brunswick, because I did it, so I can give a lot of guidance on that. Put my name in on Google and you’ll see I’m on Instagram and Facebook. Send me a message. I’m happy to help you out.

Jorge: Awesome. Thank you so much for your time.

Jenny: Thank you.