Start Saving for a down payment early
These first time home buyer tips will help you achieve your goals and eliminate stress. These days you can put down as little down as 3% under Canada’s new home buyer program. But, if you can afford to put down more, it can save you thousands in insurance premiums. In fact, the savings is so significant that many new home buyers go to extremes to save. Here are some ways to build up your savings:
1) Prioritize your savings: Commit to putting away a fixed percentage of your income. This will also help you get accustomed to saving for an emergency fund
2) Eliminate High Interest Credit Card Debt: This is a critical step to saving for a down payment. If you are wasting money on interest payments, you will never accomplish your goals
3) Limit major purchases: The car you drive, the TV you watch all come at an expense. The more you reserve your spending to necessities, the more you’ll be able to save.
4) Generate more income: Although not always possible, if you can work additional hours, earn extra commission or even get a part time job, you can sock away a lot more
5) Contribute often to your RRSP: You can withdraw as much as $25k from your RRSP. This can be paid back tax free over 15 years
6) Grow your TFSA: While many people can’t contribute to an RRSP and TFSA, if you may have another significant income stream to tap into. Any money earned in your Tax Free Savings Account is tax exempt and can be used as a down payment.
Get your Credit & Finances in Order:
Some other helpful first time home buyer tips pertain to financing. There is nothing more disheartening than finding out your credit isn’t good enough to qualify for a mortgage. For that matter, your source of down payment isn’t going to be accepted. If you know you are going to be going home shopping it’s worthwhile to make sure that you know your credit is in order.
In saying that, most mortgage lenders want to make sure that you have made all of your payments on time. On the whole, most lenders look at your last twelve month period. They also want to ensure that you are not over utilizing your credit cards.
Another thing that mortgage lenders look for is confirmation of your down payment. Your down payment should be saved (unless being gifted from family) and should be easy to track. Lenders often want to see that you have had your down payment saved from your own resources and that they are not borrowed.
Get yourself a pre-approval from a mortgage broker:
A mortgage pre-approval will help affirm that your credit is good. Moreover, it will help iron out any potential issues you may have in qualifying to buy a home. Especially, proof of income and validation of down payment.
More importantly it will help you figure out how much you qualify for. It will also help guarantee that your interest rate is locked in for a period. A good mortgage broker will help find the right mortgage for you and make sure that you get the best rate with the most flexible terms.
Hiring the right real estate agent is an integral part of buying a home. There is no set criteria for hiring the “right” agent but they should understand what you are looking for and respect your financial limits as set out in your pre-approval. The important thing is that you meet with more than one agent and hire the real estate agent that you feel is going to look out for your best interests.
Bigger isn’t always better:
Some people feel compelled to buy the biggest house on the block but remember your home is as much an investment as it is a roof over your head. Buying something that is modest based on your pre-approval will leave you with more money in your pocket. Additionally, you’ll the opportunity to put away savings in the event of an unexpected home repair.
Don’t take the sellers word for it:
Ever heard the expression “lipstick on a pig”? Homeowners often try to mask issues such as previous water damage and structural issues with fresh coats of paint. Some homeowners are even willing to cast aside ethics to hide deficiencies with their homes to sell them for optimal prices. The best way to protect yourself against unscrupulous or oblivious sellers is to hire a home inspector to provide you with a home inspection report.
Make sure your financing is finalized:
Before you finalize the sale of the home, make sure that every aspect of your financing has been approved. There are instances where a lender or mortgage insurer may refuse to finance a particular home. There are a variety of rare circumstances that do exist, all of which will likely be unheard of for the average consumer such as the house containing urea formaldehyde or having outdated wiring. Either way it is always best that you confirm with your mortgage lender/mortgage broker that they have not taken issue with the home you are purchasing.
It’s a good idea to have the lawyer you intend to act on your behalf look at every aspect of the purchase. In fact, you should consider this before you sign the final set of documents. A lawyer can outline anything that may have been overlooked. And, they can address any concerns that you may have before you sign off on the remaining conditions of the financing.
Remember, a lot of money stands to be made by everyone. By and large, everyone should be acting in good faith but there are instances where this doesn’t always happen. Either way, your lawyer is your last line of defense.
That being said, happy house hunting! If you are looking for an experienced mortgage broker that has over 30 years of experience and want the power of a whole community on your side, give us a call, toll-free at 1-877-383-1577, or apply online.