Did you know that two out of three Canadian families are homeowners? Canada boasts of one of the highest rates of homeownership worldwide, for good reason. Real estate is a wise investment!
However, the challenge of becoming a first-time home buyer can be quite intimidating and confusing, tempting many to make a hasty decision, or continue to rent. To aid you in the demystification of this process and ensure that you make the right purchase, here are some helpful tips which will be beneficial for all first-time home buyers.
Understand your range
It’s important that you crunch the numbers yourself prior to approaching a lending body so that you can confidently afford the payments. Remember to factor in additional expenses (lifestyle costs, retirement savings, and child care etc.).
Don’t make the mistake of “overbuying” as a first-time home buyer. Even though you may be dreaming of a character home, your budget may be more suited to a condo. It’s prudent, to begin with, smaller payments on a starter home, then move up from there.
Prior to initiating a house hunt, the first important step is to obtain pre-approval for a mortgage from a bank or mortgage broker. Doing so will narrow your search to the established price range, and allow you an edge over others who may be interested in the same property. Furthermore, the seller will view you as a serious buyer, and this will streamline purchase negotiations.
Additionally, there could be issues with your credit which you may be unaware of. Credit is among the three factors considered when pre-approving a mortgage (the other two being income and down payment).
Target a 20% down payment
It is highly recommended that first-time home buyers aim to put down 20% of their home value in order to be suitable for a conventional mortgage. Although doing so is rare for first-time home buyers, those who do keep a 20% down payment get to avoid paying Canada Mortgage and Housing Corporation’s (CMHC) mortgage default insurance. However, even if this isn’t possible to achieve, remember that your down payment must be at least 5% of your home value.
Calculate other expenses
it is critical to remember that your down payment isn’t the only amount you will need. You must account for other expenses, particularly moving and closing costs. It is recommended that you create a moving budget and factor in the hidden costs of moving.
Remember that closing costs also comprise of 1.5-3.5% of the total costs of your home, and can include legal fees, home inspection fee, appraisal fee, land/property transfer taxes, and insurances.
Buying your first home and building equity is made all the more important today due to rising housing prices. As a first-time home buyer, you are about to make a life-changing decision, and the Mortgage Guys are here to help you every step of the way. So contact us today and let’s get your foot on the first rung of the property ladder!