Recently, my boyfriend and I received the news no one likes to hear from their landlord: “I’ve decided to sell.” So, in a few months we’ll be packing up our place and moving to a new home: another rental.

If you rent, you probably know that little pain you feel every month when a significant amount of money flies out of your account into thin air, never to return again.

So, with the thought of signing a new lease in mind, I asked my boyfriend, “How long before we can stop paying off someone else’s mortgage and start investing in our own?”

If you’re a professional 20-something, buying a place of your own is becoming increasingly difficult. With graduates leaving school with more and more debt and housing prices continuing to climb, home ownership can seem further and further out of reach.

With some hard work, my boyfriend and I have managed to pay off the student loans we’d racked up from university and started saving with the idea of someday owning a place. But what’s next?

So many questions: How do we get to our goal? Are we saving in the right way? Are we saving enough? Is there something we’re forgetting? For an over-thinker like me, the questions quickly started to mount up. We needed advice!

4 steps to home ownership

Cue my financial advisor, Sara Zollo1 from Sun Life Financial. She helped put things into perspective and, with her great advice I was able to create the ultimate first-time homebuyer’s preparation plan:

1. Figure out how much it will cost you

Sure, you may want a 3-bedroom, detached home downtown, but can you afford it? Be realistic. “Work backwards to figure out what size of asset you’re able to take on,” instructs Zollo. “In other words, what kind of monthly mortgage payment could you handle and what would you be approved for?” You can work with a mortgage broker to figure this out. The size of the mortgage you can take on, plus what you can save for a down payment, equals the price of the house you can afford. If you want more house, you’ll have to save more for the down payment.

But before you start budgeting and planning based on that number, don’t underestimate the additional costs buying a home entails. Remember realtor and lawyer fees, not to mention taxes, can add up. Many individuals also forget that buying a new place generally means furnishing one, which isn’t cheap. “Ensure you have a clear idea of what these fees are going to be and, as a rule of thumb, round up,” says Zollo. “It’s better to overestimate the costs!” Once you have that information, you’re ready to budget.

2. Make a budget and save, save, save

Sure, you’ve been saving for the last couple of years, but this will likely be the biggest purchase of your life, so it’ll take more than putting away birthday money from Grandma! Work with your financial advisor to make a plan and begin saving right away; every cent counts.

To save, Zollo suggests mixing it up: “An RRSP is always a good spot for the first $25,000 if you qualify for the First Time Home Buyer’s Plan and a TFSA can help, since the funds that accumulate there are tax sheltered.”

Figure out how much money you will need to save monthly to attain your goal on time, and create an automated transfer if possible, either monthly or bi-weekly, depending on your pay period. I strongly believe in the motto “out of sight, out of mind,” so I’ve opted into my workplace group RRSP. That way the money goes into my RRSP before I can even see it.

3. Plan for emergencies 

How many times have you heard someone say, “Don’t put all your eggs into one basket”? You’ve saved up enough for your down payment and now you’re ready to buy, but throwing every penny of your savings into a mortgage might not be the best idea.

“Real estate is a great investment, but the importance of diversification never gets old,” says Zollo. She recommends ensuring you have some savings left over in a TFSA, where it can easily be withdrawn, tax free, in case of an emergency. After all, a broken furnace in your new home won’t be a cheap fix, and now it’s your responsibility, not your landlord’s!

4. Surround yourself with trusted professionals and take the plunge

You’ve estimated costs, budgeted and even managed to save a little extra in your “just-in-case” account. Now you’re ready to find that perfect place. Work with your mortgage broker and financial advisor to make sure you haven’t missed anything and once you’ve found “home,” have a lawyer review everything before you sign on the dotted line. And as soon as you’ve taken on the responsibility for paying your mortgage, safeguard yourself and your family with mortgage protection insurance, which combines term life insurance and critical illness insurance to cushion the financial impact on your family of your death or serious illness.

After you’ve completed the process, you’ll likely be a little dumbfounded to think that you just spent all of that money. But you should also feel insanely proud of yourself: You set a goal and, with a lot of hard work and dedication, you accomplished it!

* Only advisors who hold CFP (Certified Financial Planner), CH.F.C. (Chartered Financial Consultant), F.Pl. (Financial Planner in Quebec) or equivalent designations are certified as financial planners. 1

Sara Zollo†, Richmond Hill Financial Centre, Sun Life Financial advisor. 

† Mutual funds offered by Sun Life Financial Investment Services (Canada) Inc. 

Sun Life Assurance Company of Canada is a member of the Sun Life Financial group of companies.