Buying Your First Home in Your 20s: What No One Tells You About Getting the Keys

You’ve graduated. You’ve got your first "real" job. Maybe you've finally stopped checking your bank account before ordering takeout. Now someone has suggested you buy a house.

Excuse me?

For many people in their 20s, buying a first home can feel completely out of reach. Between saving for a down payment, understanding mortgages, keeping up with interest rates and figuring out what a lawyer does, the process can seem like one giant financial puzzle.

But buying your first home doesn't have to mean knowing everything before you start. It means knowing what questions to ask, what costs to expect, and when to get professional advice.

So, if you're in your 20s and thinking, "Okay... but how does someone actually buy a house?" Let's break it down.

Before You Open the Real Estate Apps, Look at Your Money

We get it. Looking at houses is the fun part. But before you start saving kitchens to your Pinterest board, figure out what you can realistically afford.

A lender will generally look at factors such as your: income, existing debts, credit history, down payment and overall financial circumstances.

You should also look beyond the mortgage payment. Owning a home can mean paying for: property taxes, home insurance, utilities, condo fees, if applicable, maintenance, repairs, moving costs and closing costs.

The important question isn't simply: "How much will the bank lend me?" It's: "How much can I comfortably afford while still having a life?" Those aren't necessarily the same number.

The first-time buyer reality check is getting approved for a $600,000 mortgage doesn't mean you need to buy a $600,000 home. Your budget should leave room for savings, emergencies, vacations, groceries, and the occasional dinner that doesn't come out of a microwave.

Your Down Payment Is Only the Beginning

A down payment is one of the biggest hurdles for first-time buyers, but it isn't the only money you'll need.

Depending on the circumstances of your purchase, you may also need to budget for: legal fees, land transfer tax, home inspection, appraisals, title insurance, land registration fees, property tax adjustments, moving expenses and immediate repairs or purchases.

Closing costs are approximately 1.5% to 4% of the purchase price. That means your savings goal shouldn't simply be: "Down payment = done." Instead, think: Down payment + closing costs + emergency cushion = much better plan.

In Ontario, buyers may be required to pay provincial Land Transfer Tax when they acquire an interest in land. The amount depends on the purchase price and the applicable tax brackets. If you’re buying a home in the city, there is an additional municipal Land Transfer Tax on top of the provincial tax. This means city buyers need to consider two separate land transfer taxes when budgeting for their purchase.

Eligible first-time homebuyers may also qualify for rebates that can reduce the amount of land transfer tax payable. However, the provincial and municipal rebates have separate eligibility requirements and maximum rebate amounts. This is one of those costs that is much better to understand before you make an offer rather than discovering it when you’re preparing to close.

Your lawyer can help you understand the applicable land transfer taxes and rebates for your purchase and account for them in the closing statement.

First-Time Buyers Have Some Helpful Tools

If you're in your 20s, you may have something incredibly valuable on your side: time.

You may not have a huge down payment sitting in your bank account yet but starting early can give you more options. Two programs worth understanding are the First Home Savings Account (FHSA) and the Home Buyers' Plan (HBP).

An FHSA can provide tax advantages for eligible first-time homebuyers saving toward a qualifying first home. The HBP can allow eligible individuals to withdraw funds from an RRSP to help purchase a qualifying home, subject to the applicable rules and repayment requirements.

The important takeaway? Don't assume you don't qualify for anything just because you're young or don't have a massive amount saved.

Do your research and confirm current eligibility requirements before planning your purchase.

Get Pre-Approved Before You Fall in Love

This is where the fun starts to become real. Before seriously house hunting, speak with a lender or mortgage broker about getting pre-approved.

A pre-approval can help you understand your potential borrowing range and gives you a much clearer idea of what homes fit within your financial picture. It can also help prevent one of the most painful first-time-buyer experiences: falling completely in love with a house you can't afford.

Remember that a pre-approval is not the same thing as final mortgage approval. Your financing still needs to satisfy the lender's requirements for the specific purchase.

Don't Let a House Choose Your Budget for You

Picture this. You find a beautiful house. The kitchen is perfect. The backyard is perfect. The bathroom has the exact tile you've been saving on Instagram. Then you discover it's $75,000 above your original budget.

Suddenly you're thinking: "Well... what's another $75,000?" Stop. This is exactly where emotions can take over.

Buying a home is one of the largest financial commitments you may ever make. A bidding war or emotional attachment shouldn't cause you to abandon the budget you worked so hard to create.

Your future self will probably be much happier with a slightly less glamorous kitchen and money left over for emergencies.

Find the Right Home, Not Just the Right Instagram Kitchen

When you're viewing properties, look beyond the staging.

Ask yourself:

• Does the location work for my lifestyle?

• How long will my commute be?

• Is public transit accessible?

• What are the property taxes?

• If it's a condo, what are the condo fees?

• How old is the roof?

• How old are the furnace and other major systems?

• Are there signs of water damage?

• Will I be responsible for significant maintenance?

• Does the property actually fit my future plans?

A home can look perfect online and still have issues that aren't obvious during a five-minute showing.

Which brings us to one of the most important steps...

Please Don't Skip the Home Inspection

We know. You've already spent money on everything else. But skipping an inspection to make your offer look more attractive can be a risky move.

A professional home inspection may identify issues involving the structure, roof, plumbing, electrical systems, heating and cooling systems, water damage and other components of the property. It doesn't mean every problem will be discovered. But it does mean you're making the decision with more information.

And if your offer includes a home inspection condition, understanding exactly what that condition says matters.

Your Offer Is More Than a Number

When you make an offer on a home, you're not simply telling the seller: "I'll give you $X."

The Agreement of Purchase and Sale can address important matters such as: purchase price, deposit, closing date, what is included with the property, conditions, financing, inspection and other terms negotiated between the parties

Here's the part first-time buyers sometimes don't realize: an Agreement of Purchase and Sale is a legal contract. That means you shouldn't treat signing it like clicking "I agree" on a website without reading the terms. Before signing, understand what you're agreeing to and consider getting legal advice.

So... What Does the Real Estate Lawyer Actually Do?

This is probably the biggest question first-time buyers have. "My agent found the house. My lender approved the mortgage. So, what does my lawyer do?" Quite a lot.

In Ontario, the lawyer handling your residential real estate transaction plays an important role in the legal transfer of ownership.

Your lawyer can review the agreement and explain the legal obligations, closing date, deposit, included items and conditions - consider taking this step before you sign on the dotted line.

Your lawyer conducts due diligence on the property's title and investigates registered interests that may affect the property, such as mortgages, liens, easements, rights-of-way and restrictive covenants.

If you're obtaining a mortgage, your lender will provide mortgage instructions to your lawyer. Your lawyer works through the legal requirements associated with the mortgage and closing.

Title insurance can protect against certain risks involving title and ownership that may not be apparent from a traditional search. Your lawyer can explain the coverage and arrange it where appropriate.

Before closing, your lawyer prepares the Statement of Adjustments, which sets out amounts that need to be accounted for on closing, such as applicable property tax adjustments and other credits or charges.

On closing day, your lawyer coordinates the transfer of funds and documents and registers the transfer of ownership and mortgage. Then comes the best part: you get the keys.

How Much Does a Real Estate Lawyer Cost?

This is a question you should ask before choosing a lawyer. Legal fees vary depending on the lawyer, the property and the complexity of the transaction. And remember: legal fees and disbursements aren't necessarily the same thing.

Disbursements can include expenses incurred during the transaction, such as registration fees, searches, title insurance and other necessary costs.

Ask for an estimate that explains both the legal fee and anticipated disbursements. A cheap quote that doesn't tell you what is included isn't necessarily a better deal.

Choose Your Lawyer Like You Chose Your Home

Okay, maybe don't spend six months comparing lawyers the way you compared houses. But do your homework.

Before retaining a lawyer, you should feel comfortable asking questions. After all, you're trusting this person with one of the biggest transactions of your life.

Closing Day Isn't the Finish Line

Congratulations. You have the keys. You can finally say: "This is my house." But homeownership comes with ongoing responsibilities.

Start thinking about: regular maintenance, unexpected repairs, property taxes, insurance, utilities, mortgage payments, emergency savings and future renovations

That first month of homeownership is probably not the time to decide that every room needs a complete Pinterest makeover. Give yourself a minute.

The Biggest First-Time Buyer Mistakes

If you remember nothing else from this, remember these:

• Shopping before understanding your budget

• Assuming your pre-approval is your final budget

• Forgetting about closing costs

• Using every dollar of your savings for the down payment

• Skipping professional advice to save money

• Waiving important conditions without understanding the consequences

• Buying because you're afraid prices will rise

• Falling in love with the house before checking the numbers

• Assuming the cheapest legal quote is automatically the best value

Maybe you're nowhere near ready to buy. That's okay. You don't have to buy a house at 22, 25 or 27 just because someone else did. But learning how homeownership works now can put you in a much stronger position when you're ready.

Open an FHSA if you're eligible. Understand your credit. Pay attention to your debt. Build savings.

Learn what mortgages actually mean and when the time comes, surround yourself with professionals who can explain the process, not just rush you through it. Because buying your first home isn't about having everything figured out. It's about being prepared enough to make a decision you can live with long after the excitement of getting the keys wears off.

Your first home doesn't need to be your dream home. It needs to be a home you can afford, understand, and feel confident buying and that's a pretty good place to start.

More information? We’re here to help – realestate@wardlegal.ca

This WARDS LAWYERS PC publication is for general information only. It is not legal advice, nor is it intended to be. Specific or more information may be necessary before advice could be provided for your particular circumstances.