If you are planning to buy your first home in Canada, we understand how overwhelming it can be. In most cases, it involves putting your entire life savings on the biggest purchase of your life. Stress is natural but not necessary. Just follow these tips from experts you have been in the business for many years.
Step-by-Step Guide to Buying your First Home
Get Pre-Approval: The first and most important step to buying your first home is to get a mortgage pre-approval. Many realtors won’t start the process until you are cleared. After all, there’s no point in setting your sights on a home that you can’t afford. There could also be unexpected problems with your credit card that could affect your credit rating. Even if you earn enough, financial mismanagement could come in the way of your mortgage loan. It is imperative for home-buyers to get pre-approval for a mortgage. The other two factors to consider are your income and down payment.
Down Payment: You need a minimum down payment of 20 percent to avoid paying CMHC’s mortgage default insurance. The calculation is based on the mortgage amount and the amount of money you have for down payment. The bigger the down payment, the less your loan and interest charges will be. If you fall short for the down payment, you can borrow money from your RRSP that allows first-time buyers to pull out $25,000 tax-free, and 15 years to replace it back. For a couple investing together, you can contribute $50,000 jointly.
An Experienced Real Estate Agent: A real estate agent may not be necessary but makes the process of buying your first home easier. You need someone who is well-versed with the market conditions, is able to negotiate well on your behalf and sees you through the process to save you time, money and stress. An experienced realtor will have a large network of service providers, credit counsellors, insurance agents and inspectors who will be part of the whole process to help you seal the deal.
Stick to the Budget: Your lifestyle is in your hands. From a cost perspective, it’s up to you to make sure you can afford your home. There may be a few things that you have to give up such as eating out frequently or travelling too often because you need to meet your mortgage needs. You also have to consider unexpected situations such as paying a monthly mortgage if you happen to be unemployed for a few months. Bank loans can approve of a certain amount but it’s up to you how you manage your expenses. Make sure your realtor is aware of how much you can afford before you set out house hunting. Be flexible about your expectations and reality. It’s hard to get exactly what you are looking for in the budget you have in mind. What’s most important is the location, size, layout and general condition of the home. You can always upgrade the interiors later.
Closing Costs: Put a reasonable amount aside to cover closing costs and of course, to save for a rainy day. You never know what you may have to fix in your new home once you move in. CMHC suggests 1.5% to 4% of the purchase to cover closing costs.
It helps to keep in mind that your first home need not be your last. On an average, only five people are said to live in their first home for seven to ten years. For most, it is a starter home. Keep the resale value of your home in mind when you are looking to purchase. Location is always the most important factor.
Lending Experts: Mortgage Brokers in Vancouver, BC
At Lending Experts, our mortgage brokers are highly qualified and experienced. They are known for delivering service excellence and committed to placing our clients first. We listen to our client’s needs, and work hard to find unique solutions and financial advisory. Even in complicated cases we hold a high reputation in the industry with proven experience in finding the best solutions efficiently and effectively. Give us a call when you are ready to invest in your first home.