Spring is the busiest time of the year for the real estate market. Many people, after a long and cold winter, are excited for a change in their lives. But how should they go about preparing for buying their first home? Here are some important tips to consider so that you can get a head start in buying your first home.
Saving For Your Down Payment
In order to purchase a property in Canada you need to provide a portion of the property’s value immediately. This is known as a down payment. If the property you are purchasing is under $500 000, your down payment can be as low as 5% of the property’s value. If the property you are purchasing is between $500 000 and $1 000 000 the minimum down payment is 5% for the first $500 000 and 10% for the remaining portion. For a property with a purchase price of $1 000 000 or more, the minimum down payment is 20%.
Maximize Your Credit Score
In addition to saving for your down payment, it is important to ensure the rest of your finances are in order. That means, reducing your other debt loads as much as possible, ensuring your credit score is in excellent shape, pay your bills on time and don’t take out any new loans. You can speak to a financial advisor and request a credit report to ensure there are no discrepancies.
Use Online Mortgage Calculators
Whether it’s on your phone or on your computer, there are plenty of calculators and tools that can assist you to envision what your home ownership costs will look like. When plotting out the numbers, make sure the end debt load is not more than 40% of your gross monthly household income. Your mortgage principal and interest, taxes and heating (also known as PITH) should not exceed 32% of your gross monthly household income.
One of the best things you can do is go to your bank and get pre-approved for a mortgage. By getting pre-approved you appear more reliable to sellers, and will have a smoother working process with your real estate agent.
Do Your Homework
This homework, unlike schoolwork, cannot be done in one night. You really need to sit down and think what kind of house would you like to live in. Is it a town home, a condo, a detached home? Do you like homes with a certain style or character? Will you want a finished basement? A backyard? Are you okay with a fixer upper? Where would you like to live? How close to you want to be to parks, schools, shops and restaurants? These are all important questions you really need to sit down and plot out. Otherwise, you put yourself at risk of being overwhelmed when you start house hunting.
Most importantly, when looking to get a head start in buying a home, make sure it is on your own terms! Don’t let anyone pressure you into making a purchase you do not feel comfortable with. That is why it is essential to have a good support system. If you are buying as a couple, you can rely on one another. If you are buying alone, make sure you have a family member or friend you really value and trust to help you along with the process who is looking for your best interests. If you think you’re ready and want to start the process in buying a home, please send me a message! I’d love to help you find your first home and make it everything you hope for.