Top Tips for First-Time Home Buyers
This is an important first step in the home-buying process. Make sure you know how much loan you will get and how much you can afford.
There may also be problems with your credit rating that you don’t know about.
The three factors that will be considered before you get approved for a mortgage are your credit, your income and your down payment.
Typically lenders will require mortgage loan insurance if a borrower has a down payment of less than 20% of the purchase price.
One way to increase your down payment is to borrow money from your RRSP. First-time buyers can pull out $25,000 tax-free ($50,000 for couples) and have 15 years to pay it back.
While having a real estate agent is not necessary when buying a home, it is recommended — especially if it’s your first time going through the process. Having someone who is knowledgeable about the market and can lead you through the process makes it all much more stress-free.
Also, a good agent can recommend inspectors, mortgage brokers, insurance agents etc.
One of the biggest things you have to consider in this decision is your lifestyle and your priorities. You may be able to afford your own home but you might be giving up other things because you’re going to be paying a mortgage now.
Develop a realistic budget including all the revenue and expenses like mortgage payments, property taxes, insurance premiums, strata fees, and etc.
Ask yourself: if you lost your job and weren’t working for three months, would you be able to afford your home? Or are you stretching yourself too thin? Just because a bank approves you for a certain amount, doesn’t mean you have to spend it all.
There are a number of first time home buyer benefits you should know of:
Provincial government offers qualified first-time buyers a down payment loan of up to $37,500, or up to 5% of the purchase price that is interest-free and payment-free for the first five years.
The CHMC first time home buyers tax credit offers up to $750 in federal tax relief.
The Home Buyers’ Plan (HBP) also allows you to take up to $25,000 from your RRSP savings to purchase or build a home.
You may also avoid having to pay CMHC mortgage loan insurance by having a down payment of 20% or more.
We’ve all seen the real estate shows with the gorgeous multi-million dollar properties. Your first home will most likely look nothing like that. You walk in and may see a horrible wallpaper, dated kitchen and old carpets.
Wallpaper can be removed, carpets changed, walls painted and cupboards replaced. The things you should be more concerned about is the size and layout, along with the condition of the roof, plumbing and hot water tank.
1.Don’t think you’ll be in that home forever. They call it a “starter home” for a reason.
2.Don’t be too emotional. (Experts say this can be quite common with first-time buyers). Always keep in mind the re-sale value of the home you want to purchase, and remember that in real estate it’s all about location, location, location.
3. Don’t make big purchases before getting approved for a mortgage.
Don’t go and finance a car or spend a large amount of your savings, it will affect your mortgage. Remember that an approval is dependent on your current income, credit and savings remaining the same.
4. Don’t forget about closing costs.
Closing costs can add up. The CMHC recommends putting aside anywhere from 1.5 to four per cent of the purchase price to cover them.
And lastly, don’t forget to also save for a rainy day. You never know when that hot water tank could break down.