First Time Home Buyer? Where Do You Start?
Becoming a first-time home buyer can be thought of as a daunting task, especially in today’s economy. Some people may be more inclined to rent and never even attempt to buy a home. Becoming a Canadian homeowner is for everyone. The real question is, is homeownership right for you? Learn how to be better prepared to buy a home, what the best resources are for a down payment, and common mistakes to avoid when buying.
First thing’s first, start shopping around for rates and get pre-qualified. Most realtors won’t agree to take you out to look at properties until they know your budget, a list of your must haves, and most importantly, if you even qualify! It’s a lot of time to be spending “window shopping” for something you’re not even sure you qualify for. Imagine falling in love with a home, rushing to submit an offer, getting it accepted, dropping off your deposit money, to later find out that you are nowhere near qualified, and knowing that you wasted someone’s time who was seriously looking to sell. Not only will that come back to haunt you, it may even cost you.
Anyone can go online and use a mortgage calculator or call their bank to find out what they qualify for, but a mortgage specialist will help negotiate you the best rate possible, find the best mortgage that suits your needs, as well as guide you through the application process step by step. Did you know, your credit won’t suffer if you shop around with multiple lenders within a small period of time? You can actually consult as many lenders in a small cluster of time, because the scoring system will recognize that you are comparing rates for a single product. Use this to your advantage!
When you plan on buying a home, start here: Find out your current credit score and make sure you have a minimum of 680 when you are applying for a mortgage. If it’s not quite there, then start improving your credit by doing the following:
1) Be diligent at paying your bills on time
2) Pay off any collections you have
3) Get caught up on past-due bills
4) Keep your balances low on your credit cards
5) Pay off debt!
6) Sacrifice and save!
As a first-time home buyer in Canada, the government’s RRSP Home Buyers Plan allows you to borrow up to $35,000 tax free to go towards your down payment! If you don’t have an RRSP account as someone who is planning on buying their first home, be sure to open one today! There are stipulations that, you must use that money for a down payment in the same year it was withdrawn. You must also pay back the amount in full, within a 15-year period.
Other resources include:
1) Gifted grants from family
2) New Tax-Free First Home Savings Account (FHSA) that takes effect in 2023!
3) Borrowing a down payment
4) Federal government shared equity program
5) Simcoe County grants available
Common mistakes to avoid when planning to buy your first property…
- Not knowing how much you can actually afford
- Saving too little for a down payment
- Not checking your credit score
- Forgetting about the mortgage stress test, or trigger rate
- Consulting only one lender
- Not looking into FTHB incentive programs
- Skimping on insurance (title, home) – optional but highly encouraged! Covers homeowners against title issues, extensive property damage, liens, fraud and gives you peace of mind.
- Making a large purchase, taking out a loan or opening a new line of credit… this is a NO go! Do not make any large purchases or take out loans until AFTER your property has closed or this will pose a big problem for your financing and you won’t be able to close. Uh oh!
- Forgetting about closing costs – factor in about 2-4% of your purchase price for closing costs. Example, if applicable: inspections (home, well, septic), property appraisal fees, lawyer fees, status certificate for condos, moving costs, land transfer tax, title insurance, mortgage insurance.
- Other costs to consider: deposit amount, property taxes, property insurance.
Homeownership is within reach for so many Canadians, they just don’t know where to begin! Start a conversation with your trusted realtor, a mortgage specialist, or do your own research. There are so many resources at your fingertips, that you may be able to qualify for a mortgage and get into homeownership today! There are a million reasons to buy a home, save on rent, pride of ownership, build your own wealth… So, stop renting and start paving the way to your long-term financial goals and freedom today!
Written by Shawna Lloyd (firstname.lastname@example.org)