Congratulations on your decision to buy a home!…Now what? Where do you start? Who should you talk to? So many questions!
Never fear, we’re here to help. When it comes to buying your first home, all you need to do is relax, and consider the following tips to help you along your home buying journey.
1. Establish a Goal
One of the best reasons to purchase a home is to build equity and invest in your future. It’s also much more cost-efficient in the long-run. That being said, a home is one of the largest purchases you will ever make, and for this reason, it’s important to set some goals for yourself moving forward.
Start by making a plan and jotting it down. Establish a reasonable date for when you’d like to see yourself in your new home and how much you’ll need to save. From there, you can start setting monthly, weekly and even daily goals to help you achieve your end result.
2. Start Saving & Build a Budget
Now that you have an idea of how much you’ll need to save, you’re going to have to start working towards your down payment. Unless you’re independently wealthy or your awesome Aunt Edna is going to give you a generous loan, this is a pretty big piece of the puzzle!
First of all, what kind of savings do you have now? If it’s less than $10,000, we suggest building yourself a personal budget. Try to save at least 15-20% of your income and it will add up quickly. Once you have at least $15,000, you’re ready to consider the budget of your home.
There are also several government programs to help first-time homebuyers.
3. CMHC Fee
Speaking of down payment, have you heard of CMHC mortgage insurance? This is something you may need to consider as you’re saving for your down payment.
The minimum down payment required for a home in Canada is 5%. This means, if you’re considering a $300,000 home, you’ll need to put down that entire $15,000 we mentioned above. In the scheme of saving, 5% may not seem too bad, however, anything less than a 20% will require you to pay mortgage insurance above and beyond your regular monthly mortgage payments.
According to the RateHub mortgage calculator, this means you’ll be paying an additional $11,400 over the lifetime of a 25-year loan.
4. Squash Your Debt
One of the biggest challenges a first-time home buyer will face is debt related to a car or other loan.
If you still owe on the new SUV you bought a few years back, work on paying that debt down (or off altogether) before beginning on the quest to invest. If car payments aren’t a concern for you, focus on credit cards, lines of credits or student loans you still have outstanding.
5. Check Once
Did you know every time your credit score is checked, the score is ever-so-slightly reduced?
A credit score in Canada that warrants a mortgage is somewhere around the 650 mark. Our recommendation is to get it checked once, know it, and then only go through with a credit check once you've decided on where you will get your financing. Which brings us to our next point…
6. Shop Around
As we stated already, this is likely the largest purchase you’ll ever make. Be sure to shop around for the best financing and interest rates!
Sometimes a mortgage broker can do more for you than a bank. Sometimes a credit union is the way to go. The builder’s preferred lender may also be a great choice. Be sure to check a few different options before selecting the one you will go with for pre-approval.
7. Consider a Roommate
A roommate can be a great option to help share the cost. A good builder can help you find something to suit your needs, solo or with a roommate!
Remember though, the government is on a need to know basis. If you have someone you’re collecting rent from, you will have to claim it as income on your taxes. Be sure to crunch the numbers and make sure it’s worth it!
8. Be patient
Finally and most importantly, don’t rush. Take your time in doing your research. Visit various show homes and check out different areas of the city that appeal to you. Above all else, speak to the builders and don’t be afraid to ask them questions. A good builder will be able to answer any questions you may have and work with you, and your budget, to help you find your dream home.
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