Are you thinking of taking the exciting step in buying your first home? We're here to help! Buying your first home can be stressful. Here are some tips to keep in mind. For more information, help and guidance, give us a call 613.830.3350.
Should you get one?
YES! Getting pre-approved for a mortgage means that a lender has already looked at your credit history and income and is comfortable with giving you a mortgage for a certain amount. This will allow you to know what you can afford, and prevents you from bidding on a property, only to learn a lender won’t give you a mortgage for the amount you need.
Have you selected the area?
What area do you currently live in? Do you like the neighbourhood or are you looking for a change? Based on proximity to schools, universities, work and family, where do you envision yourself living/buying your first home? During your first conversation with the agent, ask questions about neighbourhoods, schools, amenities and other commuting info.
DOWN PAYMENT VS. DEPOSIT
Advantages of Bigger Down Payments
The sum of money that you put down will be deducted from the total you owe to the sellers. Let’s say you give the sellers a down payment of $100,000 for a house priced at $500,000. The amount you still owe the sellers is now $400,000, which you’ll probably finance with a loan (your mortgage). When you put a 20% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
Once an offer is accepted, the Buyer must provide the listing brokerage with a deposit as per the agreement. This amount is to be held in trust up to the day of closing. The deposit is a sign of good faith from the Buyer. It shows the Buyer is serious and intends to purchase your property. At closing the deposit will go towards your down payment.
Bi-weekly and Weekly Payments
A mortgage is a loan that is used to purchase property. It requires regular payments to the lender, consisting of principal payments (paying off the loan amount) and interest. Your mortgage may also bundle in your property taxes or home insurance payments.
Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you are paid.
Closing costs and more
If you are currently searching for a home, we’re sure that someone has mentioned closing costs. But what does that actually mean? How much money should you put aside to cover these expenses?
Lawyer: $1,000 - $1,500
Title Insurance: $250 - $350
Land Transfer Fee Tax: 0.5% - 2.5% of the purchase price. Up to $4,000 rebate for first-time buyers
Home Inspection: $400 - $600
Home Owners Insurance: Minimum $1,000 per year
New Account Set up for Utilities: $40 - $60 per utility
*Note all amounts are approximate guides and should be verified by home buyers as costs can vary from transaction to transaction.