The buying process can be scary and intimidating, especially for first-time homebuyers – but it doesn’t need to be. At The Mortgage Station, we pride ourselves on being able to not only give experienced advice to new home owners, but to also walk them through the process – so that they can understand what they may face.
To get you started, we’ve identified nine helpful tips that potential first-time homebuyers should keep in mind:
1. Know Your Credit Score & What It Means
Credit score is important; it opens (or closes) the door with banks and lenders. Your credit rating will determine if you are eligible to take out a mortgage and what type of loans you’ll be able to receive. A good credit score will improve your ability to request and receive a loan from the bank or a lender, but if your score is low, you’ll likely need to work on improving it before you can even consider purchasing a home.
Once your score is acceptable, the lenders will review your credit portfolio, which will tell them if you’ve made any late payments and how many accounts you have. If either of these factors has affected your score, these red flags can immediately decline your application process.
Bonus Tip: Most lenders at minimum need to see at least two accounts, with two years of history, and limits over $2,000. Missing one of these can cause issues, especially if you have a history of poor repayment.
2. Get Pre-Approved
Getting pre-approval on your mortgage can guarantee an interest rate for a stated period while you look seriously to purchase a home. Through pre-approval, you’ll be able to identify what homes are in your price range and you may even be able to leverage your pre-approval in the bidding-war process.
3. Search With Your Head, Not Your Heart
In other words, do your research and make a smart financial decision. Purchasing a home will likely be the largest financial commitment of your life – so think it through. Instead of simply picking a house that looks nice and is in your price range, have the home inspected to confirm the house is healthy and physically stable to live in. Also, make sure to research the surrounding neighbourhood and to identify if the home will be in a good position for re-sale down the road.
4. Save For Closing Costs
Most homebuyers forget about closing costs. On average, you’ll need around 1.5 to 2.5% of your purchase price to cover:
- Land transfer tax
- PST on CMHC premium
- Home inspection fees
- Legal fees
- Appraisal fees
- Property tax
- Property insurance
- Fire insurance
- Utility hook-ups
5. Pay Attention To Interest Rates
People often jump at the idea of securing a new home as soon as they find one that meets all the needs of their checklist. However, timing and poor interest rates available may not make that home the best choice for you. Don’t rush into a decision just because you like the house. Be sure to identify if the current interest rate will work for you as you move forward.
6. Calculate Your Moving Expenses
Homeowners often neglect to consider the cost of moving their furniture and personal items from one home to another. Renting a truck, hiring movers, and purchasing packing materials can all add up. To cut down on costs, ask your friends and family if they have any packing materials you can borrow, and if they’d be willing to help you out on moving day – this strategy may only cost you a pizza or two!
7. Budget For The Cost of Ownership
Purchasing a house isn’t the only expensive part of homeownership. Actually being a homeowner is also very costly. It is important to consider all of the additional costs you’re taking on: such as property taxes, insurance, and even potential repair costs. You must also think about the cost of appliances, basic furniture pieces such as a table and chairs, and if your home will need any renovations.
8. Research Your Down Payment Options
A higher down payment can save you thousands of dollars in interest over the term of your mortgage, but not everyone is in a position to pay a high down payment on their first home. Research your options to find the happy medium you can afford. Also, keep in mind that first time homebuyers can use up to $25,000 in RRSP savings for their first home.
9. Discuss Your Options With An Experienced Mortgage Broker
At The Mortgage Station, we’ve helped countless first time homebuyers to identify what options and payment plans are available to them.
What We Offer At The Mortgage Station
- Step by step advice and we work with your team of professionals (from realtor, to lawyer, etc.)
- Credit review to ensure your report does not contain mistakes that will cost you extra money or your approval
- Advice on how to improve your credit and how to ensure you have a proper and healthy credit profile (from the lenders perspective)
- Options and programs available for down payment and covering closing costs
- 1st time buyers benefits (Land Transfer tax and RRSP program)
The perfect mortgage for you is out there, and our Mortgage Station team is determined to help you to find it. Contact us today at 705.812.4490 or info@themortgagestation.ca.