The 6 Things To Do Before Making A Home Purchase
Purchasing a home may be one of the largest financial decisions of your life, and it’s one you’re not going to want to rush. Before getting serious about that new home purchase, there are 6 things that you will want to make sure you’ve done.
Figure Out How Much You Can Afford
One of the largest mistakes first time home buyers make is taking on more house than they can afford. As a general rule, home buyers should look at spending no more than 30% of their take home pay on housing. This 30% encompasses more than just the mortgage payment. Buyers should factor in other home related expenses such as taxes, insurance, maintenance, and any renovations or home improvements that you might want to make. In the case of a condo purchase, you will also need to factor in condo fees, also called strata fees; these are fees paid directly to the condo corporation to cover building related maintenance and repairs.
When looking at affordability, it’s always best to speak with a mortgage expert. A Mortgage Agent or Broker can walk you through some of the options available and what types of fees you might expect with new home ownership and beyond.
Budget For Closing Costs
One of the most common things overlooked when purchasing a home is the closing costs associated with the mortgage and real estate transaction. In British Columbia, closing costs for a real estate and mortgage transaction can range anywhere from 1.5%-4% of the value of the home. And these costs are due upon closing of the mortgage. Typical closing costs associated with a new or first time home purchase are; property taxes, homeowners insurance, title insurance, inspection fees, appraisal fees, PST on mortgage default insurance, GST/HST, legal fees, and more. Unsure of what your closing costs might be? Contact us at TMG today and we can run through what you should expect upon closing of your new home purchase.
Save For A Downpayment
Saving for a down payment on a home is a huge step into home ownership, and it’s not without its difficulties. In Canada, the minimum downpayment required for a home valued at $500,000 or less is 5%, which can be a huge financial mountain to climb. There are, however, some other options and incentive programs available to get you there. For those who fit within the requirements, Canada’s first time home buyer incentive program gives you from 5-10% of the homes value as a down payment towards your first home. Other options such as RSP loans and financial gifts are also available.
Check Your Credit Score
Do you know what your credit score is? While it’s not the only factor in determining the best mortgage for you, credit score, and credit history does play a big role in your interest rate. What should you be looking for in your credit score and history? Most lenders are looking for a good credit rating, 680+, with a minimum of 2 trade lines that contain two years of history. What does this mean? This means that you should have two credit related accounts in good standing, that have been active for at least two years. Examples of these include credit cards or personal loans that have consistent recurring activity with no missed payments.
Get Pre-Approved For A Mortgage
Mortgage pre-approval is a great way to know what size of mortgage payment you can afford, and it’s a easy step to take. But beware of those offering instant or quick pre-approvals. In Canada, all mortgage approval is dependent on confirmation of your actual financial situation. When looking for pre-approval, ensure your agent or broker is asking you detailed questions about your financial history and credit, and be honest when providing those answers. The more information your broker or agent has, the more confident they can be in providing you with a number they can stand behind. Remember, no matter who you are working with, all pre-approvals have the condition of ‘on approved credit’. If your mortgage agent or broker isn’t getting the correct information, it's possible you may be in for a surprise upon signing those purchase documents.
Do Your Home Research
Ultimately you will want to find a home in a city, town, or neighbourhood that is attractive to you and fits your lifestyle. Online MLS search tools are a great way to find houses that fit within your profile, but nothing beats taking a drive around each neighbourhood when you’ve found some areas that you think may be a good fit. When viewing homes there are some things to keep in mind including the age of the home, proximity to amenities such as schools, grocery stores, nightlife, etc. You will also want to take a look at the condition of the other homes in the neighbourhood. Are the homes well kept? Are the neighbours friendly? Is there opportunity for increase in home value? A great way to find out more about the home and surrounding area is to contact a local real estate agent. Local Real Estate agents will be knowledgeable about the city or town they service, and will be able to give you insight into the areas that are becoming popular, or areas to avoid.
If you’re a first time home buyer in the Langley BC or surrounding area, or you are looking at affordability for purchasing another home. Contact your local TMG Broker Karen Canning to discuss what mortgage options might be right for you.
