October 27, 2016

4 Things Every First-Time Home Buyer Should Know

The fact that you’re reading this blog likely means you’re seeking info on the home purchasing process. Research is a vital first step before taking the leap and contacting a mortgage or real estate pro, so great for you!

While you mull over the idea of homeownership, though, it’s important to consider the factors that may influence your decision. For example, most people will buy and sell real estate a number of times throughout their lifetimes – but as buying and financing rules and regulations often change, it is good practice to stay aware of how they may affect you and your loved ones – you never know what life will bring!

Here’s what every first-time home buyer needs to know before embarking on their real estate journey.

Step 1: Get in Touch with Your Buyer Emotions

The home buying process is an emotional one – there’s no doubt you’ll experience a racing heart, sleep loss, and plenty of self talk. You’ll also get advice, from anyone and everyone! First of all, take a deep breath, breathe it out, and know you’re not going crazy; this is all totally normal when buying your first home.

Even if you’re done a great job saving your hard-earned pay cheques, or have an immediate family member helping with the down payment, it can be an overwhelming experience.

Step 2: Make Your Must-Have List

While getting professional help – such as a real estate agent and mortgage broker – needs to be your first move, it’s important to be mentally and financially prepared. Here’s what must be in place before you start your home search.

• you need to have a job: While this may seem obvious, it is important as whatever mortgage amount you qualify for will be based on your income, and ability to pay back what you’ve borrowed from your lender.
• you need good credit: Your in-depth credit rating and report will be pulled by your mortgage professional, who will then share it with your lender. They’ll be examining it closely, so be honest and fully disclose your debts and current monthly payments so your broker can effectively find financing for you.Note that it is good to have two active trade lines that are paid on time – and preferably paid in full – each month. This could be any combination of credit card, lines of credit, loans, a different credit card, etc. If you have poor credit as a result of missed payments, or have had debts go to collections, it may take some time before you’ll qualify for a mortgage. You may need to have a co-signer, pay a larger down payment, or settle for a higher mortgage rate than an “A” borrower would qualify for. It’s important to \contact a mortgage professional to provide you with the best advice.

• you must have at least 5% down payment: The Canadian government requires that you have at least a 5% down payment of the home purchase price, plus approximately 3% for closing costs which will cover the Land Transfer Tax and the estimated lawyer closing fee. If you decide to move outside of the GTA, then the closing costs will be around 1.5%. There must be a 90-day history of account statements, and proof of any deposits made over $2,000. “Gifted” money from an immediate family member that does not have to be repaid must also be indicated.
• Get a mortgage pre-approval: A mortgage professional will help determine the extent of your estimated purchase price, which can save a lot of time and unnecessary stress when establishing your buying budget. Gather up items such as current pay stubs, current letters of employment, and Notice of Assessments, as well as the proof of your down payment. Need more info? Check out resources such as the Canada Mortgage and Housing Corporation, Genworth, and Canada Guaranty for details on the mortgage insurance you’ll need, as well as the first time buyers’ tax credit.