By doing your homework before you buy, you’ll feel more content about your new home.
1. Decide how much home you can afford
Generally, you can afford a home that is priced two to three times your gross income. Remember to consider costs that every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as daycare if you plan to have children.
2. Develop your wish list
Be honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.
3. Select where you want to live
Make a list of your top-five community priorities, such as commute time, schools, and recreational facilities. I can help you identify three to four target neighborhoods based on your priorities.
4. Start saving
Have you saved enough money to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price set aside for a down payment, but some lenders allow as little as 5 percent down. A small down payment preserves your savings for emergencies. If you have established employment and good credit, I can help you find lenders who will provide 100% financing.
However, the lower your down payment, the higher the loan amount you’ll need to qualify for and, if you still qualify, the higher your monthly payment. Your down payment size can also influence your interest rate and the type of loan you can get.
Finally, if your down payment is less than 20 percent, you’ll be required to purchase mortgage insurance which is a requirement for approval. This insurance provides payment to the lenders in the event of a default. Depending on the size of your loan, this insurance can add hundreds to your monthly payment. I can help you identify many incentive programs to help with down payment assistance and other programs for first-time buyers.
5. Ask about all the costs before you sign
A down payment is just one home-buying cost. I can tell you what other costs buyers commonly pay in your area—including home inspections, attorneys’ fees, and land transfer taxes. Tally up the extras you’ll also want to buy after you move in, such as window coverings and patio furniture for your new yard.
6. Get your credit in order
A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.
You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, and TransUnion. Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit-card debt. I can advise you on the best way to establish credit that will get you qualified.
7. Get prequalified
Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see T-4s or employment letter verifying your employment and income, copies of paystubs, and two to four months of banking statements.
If you’re self-employed, you’ll need a minimum of two Notice of Assessements from Revenue Canada.
1. Decide how much home you can afford
Generally, you can afford a home that is priced two to three times your gross income. Remember to consider costs that every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as daycare if you plan to have children.
2. Develop your wish list
Be honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.
3. Select where you want to live
Make a list of your top-five community priorities, such as commute time, schools, and recreational facilities. I can help you identify three to four target neighborhoods based on your priorities.
4. Start saving
Have you saved enough money to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price set aside for a down payment, but some lenders allow as little as 5 percent down. A small down payment preserves your savings for emergencies. If you have established employment and good credit, I can help you find lenders who will provide 100% financing.
However, the lower your down payment, the higher the loan amount you’ll need to qualify for and, if you still qualify, the higher your monthly payment. Your down payment size can also influence your interest rate and the type of loan you can get.
Finally, if your down payment is less than 20 percent, you’ll be required to purchase mortgage insurance which is a requirement for approval. This insurance provides payment to the lenders in the event of a default. Depending on the size of your loan, this insurance can add hundreds to your monthly payment. I can help you identify many incentive programs to help with down payment assistance and other programs for first-time buyers.
5. Ask about all the costs before you sign
A down payment is just one home-buying cost. I can tell you what other costs buyers commonly pay in your area—including home inspections, attorneys’ fees, and land transfer taxes. Tally up the extras you’ll also want to buy after you move in, such as window coverings and patio furniture for your new yard.
6. Get your credit in order
A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.
You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, and TransUnion. Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit-card debt. I can advise you on the best way to establish credit that will get you qualified.
7. Get prequalified
Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see T-4s or employment letter verifying your employment and income, copies of paystubs, and two to four months of banking statements.
If you’re self-employed, you’ll need a minimum of two Notice of Assessements from Revenue Canada.
Consider your financing options. The longer the loan, the smaller your monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically.
I have helped many first-time buyers and experienced buyer find and negotiate the purchase of home - contact me to find out exactly how much I can help you!
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