It’s quite normal to feel overwhelmed when you’re considering buying your first home. After all, it’s probably the biggest investment you’ll ever make throughout your life. This is why we’ve put together the helpful tips, so that first-time buyers know what to do and what not do when purchasing their very first home.
#1: Getting Pre-Approved
This is the first step in buying a home. You need to get pre-approved for a mortgage before you hire a real estate agent. Let’s be realistic, it would really suck to find a home you like and then find out you actually can’t afford it. So make sure not to do this step backwards, you don’t want to let yourself down.
Going through the pre-approval process will also make you aware of any existing credit problems, even thing you might not know about. It’s not uncommon for people to discover these things, however it’s important to catch it first and rectify it where possible. You don’t want it to affect your chances of getting approved for your mortgage.
Your credit, income and down payment are the three qualifying factors in your mortgage approval. Then there are other things like mortgage default insurance. In this case, having a 20 percent down payment will help to avoid having to pay this. If your down payment is less than 20 percent, your default insurance with be calculated based on your mortgage size and actual down payment amount. The more you put down, the less you have to borrow, the less you pay in interest.
RRSPs are a great ahead-of-time planning option. It can give first-time buyers like yourself extra funds when it’s time to make your purchase, allowing you to borrow up to $25,000 if you’re buying alone. This is also tax-free and the repayment term is 15 years. However, if you’re buying a home with someone else you can both borrow up to $50,000 combined.
#2: Hire a Mortgage Broker
Just because you’re buying a home, doesn’t mean you have to hire a mortgage broker. But, since it’s your first time going through the home-buying process, it is highly recommended. A mortgage broker can be your go-to resource for market information and buying and process questions. They will do all of the legwork for you and connect you with appraisers, credit counsellors, lenders, inspectors and insurance agents. Their network is huge.
#3: Know Your Budget
Before you decide to buy you need to be mindful of your budget and lifestyle. Even if you can afford your own home, you may still have to sacrifice sometimes in order to pay your mortgage.
Remember life is unpredictable, so if you lose your job or expand your family and take time off work, then you need to be sure you can still manage. You don’t want to be house poor when you enter into home ownership.
#1: Don’t Get Attached, It’s Only a Starter Home
One of the biggest mistakes people make when buying their first home is that they assume they are buying the home with the intent to live in it for decades. This is quite often not the case. The average home buyer only stays in their home for 7 to 10 years. So, this is why it’s called a starter home, don’t forget that.
#2: Don’t Let Your Emotions Take Over
Most often times first-time buyers let their emotions control their decisions that they forget to think about other things such as:
- The re-sale value of the home they’re buying
- Location of the property
- Buying a home only with the intent of staying for 5 years
# 3: Get Approved First, Don’t Make a Big Purchase First
Although getting a approved first might seem like the obvious first step, you’d actually be surprised how many first-time buyers will run out when trying to buy and purchase a car or use a portion of their savings, and this can cause your mortgage application to be denied. Remember your credit, income, saving and/or down payment are all factors in your approval. Therefore, it’s better to wait until your home closes before making any purchases of this nature.
When you close your home sale, you’ll have to pay closing costs. You should put aside money to cover these costs. We’d recommend at least a minimum of 1.5 percent if the purchase price, up to 4 percent.
Don’t let yourself become a statistic when it comes to mortgage mistakes, let us help you along the way to avoid the bumps in the home-buying road.