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Pattie Lovett-Reid

Chief Financial Commentator, CTV

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For many of us, buying a home isn't only a large financial transaction, it is a hugely emotional asset, which typically has a hefty price tag associated with it. Recent statistics released by the Canadian Real Estate Association suggests the average home price in Canada is over $500,000 with Toronto and Vancouver continuing to skew the regional data points on pricing and sales. But with greater demand than supply it doesn't seem to be slowing down.

While there are many factors contributing to the hot markets -- immigration, demographics, foreign interest supported by a low dollar -- there is also another influencer, fear.

According to a new poll by TD, 19 percent of new home buyers won't be sitting back idly because they have this tremendous fear of missing out. I understand that. We have been talking about the housing market slowing down - that hasn't happen, we have talked about rates going higher - that hasn't happened, even the government has stepped in and increased the minimum downpayment for some mortgages, requiring a minimum down payment of 10 percent on amounts over $500,000, which applies to most properties in hot markets like Toronto, Vancouver and Montreal. If you wait too long maybe the rules will change again leaving your dream of owning a home a distant memory.

As we enter the hot spring real estate market you want to keep both your finances and emotions in balance. The temptation will be to succumb to the pressure to act quickly, possibly get into unrealistic bidding wars and run the risk of becoming house poor. These fears are real. According to TD, prospective first-time buyers are concerned about rushing the process to avoid missing an opportunity (20 percent), being pushed out of the market (13 percent), as well as buying too fast in order to win a bidding war (18 percent).

Here are a few tips to help you navigate the process:

Don't let your emotions dictate your house buying decisions. You see your dream home and love it. I've been there and I've over paid. The home was beautiful and yet it was too much home for us given our downpayment and lifestyle decisions. There's more to consider beyond purchase price, interest rate and the monthly mortgage payment. It's essential that buyers leave enough time to do their homework - especially considering, 40 percent of prospective first-time buyers are worried they don’t understand the full cost of ownership.

In Toronto and Vancouver’s competitive housing market, it can be challenging to get your dream home within your price range. One of the best ways to avoid over-extending yourself is to understand the difference between your set budget and the mortgage you qualify for. While a mortgage pre-approval can help buyers shop with confidence, they first need to look at their financial reality to determine what they can afford each month along with ongoing expenses (groceries, daycare, transportation and long-term savings goals). If there's a disconnect between the set budget and selling prices, you need to look at alternatives or holding off until you can save for a larger down payment.

I know easier said than done. But saving up a bigger downpayment helps you in the long-run. You save on insurance costs when you have 20 percent down, save on mortgage interest costs and it acts as a cushion should the market soften. There is always a chance the market could pull back and the last thing you want is to have a mortgage larger than the value of your home.

Finally, as you head out house hunting rank your priorities on a scale of 1 - 10. Ten representing a must have and as you move closer to one these are things you can sacrifice or make compromises on. A nice kitchen may be your top priority, but finishes and appliances can be changed, location cannot. Make sure you are prioritizing properly. Understand the area where you want to live – the schools, services, hospitals and public transit. You might even consider chatting with the local police station to see exactly what goes on in the areas you are exploring.

Research, do your homework, save up for that downpayment, proceed with caution not emotion. Doing your due diligence increases your confidence and increases the odds of finding your dream home even in the hottest of hot real estate markets.