February 07 2022
Is buying a home on your list of goals for 2022? This is a major milestone and likely one of the biggest investments you’ll ever make. That’s why it’s important to know all of the steps involved so that you can hit the ground running and reach your homeownership goals in the new year. Here are some things to consider before beginning the process.
Buying a home is a big decision that shouldn’t be taken lightly. Before you get started, you should ask yourself the following questions:
If you feel confident in your answers and are ready to take the leap, then it’s time to prepare yourself for the buying and mortgage process!
In Canada, the minimum down payment requirement is 5%. If a buyer has a down payment between 5-19.99%, this is considered a high-ratio mortgage and they will have to pay for CMHC insurance. If a buyer has saved 20% or more for a down payment, they will not be subject to this additional expense as this is considered a conventional mortgage.
Saving up for a down payment isn’t always easy. In fact, 30% of Canadian home buyers get help from a parent or family member when making a down payment. This support can either be in the form of receiving a gift or having a parent or family member act as a co-signer on your mortgage.
If you’re receiving a gift, this means that a parent or family member is providing you with funds to put toward your down payment. If you are receiving a gift, you will need to provide your mortgage lender a gift letter. This letter outlines who your family member is, the amount they’re giving you and an explanation that the money is being used for your home purchase and is not a loan.
If a family member is co-signing on your mortgage, this means they are applying for the mortgage with you and legally agree to take liability on the mortgage and pay off the debt if you can’t make payments. A co-signer is typically used when a buyer is lacking in areas such as strong credit or sufficient income. It’s a great way to boost your affordability because your co-signer’s income is combined with yours, increasing your chances of mortgage approval.
There are also many government programs that first-time buyers can use for down payment assistance. These include: First-Time Home Buyers Incentive Program, Home Buyers’ Plan and Land Transfer Tax Rebate.
Before you start your home search, get clear on how much you can actually afford. A mortgage pre-approval is a great way to understand your home affordability and can save you a lot of time and stress when searching for a home. It allows you to set a realistic budget from the start and makes the buying experience much more enjoyable.
What many people don’t realize is that a down payment is just one part of the home buying process. While saving for a down payment is key, there are other financial aspects that potential buyers must be aware of. These include:
Your income is one of the major factors that lenders look at when you apply for a mortgage. It helps them understand your level of risk and determines how much they are eligible to borrow. When you begin the process, you will be required to submit proof of employment and income, among other key documents that verify your eligibility.
Before buying a home, you want to ensure that you aren’t drowning in debt. Purchasing and owning a home comes with many expenses and the last thing you want is to dig yourself in a deeper financial hole. Having a strong credit score and a low debt-to-income ratio are two factors that show lenders you’re ready to buy and thus improve your chances of mortgage approval.
There are other costs associated with your home purchase such as closing costs and carrying costs. These are often large and/or recurring expenses that can make a big difference in your overall budget. Before beginning your home search, consider expenses like property taxes, utilities, land transfer tax, legal fees and more. It’s important to note these costs may differ based on the neighbourhood and size of the home – which is why you should factor these in from the start.
A common mistake among many Canadian home buyers is that they don’t explore various options when shopping for a mortgage and often go straight to their bank. Mortgage products, features and terms vary from one lender to the next, which is why it’s essential to do your research so that you can find the best mortgage in Canada. There are many Canadians lenders that offer strong mortgage products that might be more suitable to your needs such as credit unions and monoline lenders. Before you begin the process, consider working with a dedicated mortgage advisor like the ones on our team at Homewise. We’ll help you shop around and give you a full view of what’s available in the market so that you can lock in a mortgage that aligns with your goals.
A positive and successful home buying process starts with being prepared. If you’re ready to begin, connect with our team at Homewise and get pre-approved with us today in just five minutes. Working with over 30 banks and lenders, we are known as one of the best mortgage companies for first time home buyers, giving Canadians access to a variety of mortgage options available in the marketplace. Whether you’re a first-time buyer who’s new to the process, self-employed, or currently have low credit score, our goal is to find you the best mortgage in Canada.
When you choose to work with us, you’ll get unbiased advice, support and answers to all of your questions! Connect with us today.
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