With 2023 around the corner, the countdown to the new year is officially on! If your vision board has a picture of a home on it, then it’s time to get started on making this new year’s resolution a reality. While the holiday season can be expensive and unpredictable, the new year is an opportunity to start fresh and work toward your homeownership goal. If you’re unsure of how to get there, here are three simple tips to get you prepared as a prospective buyer:
1. Clean up your credit
If you’re buying a home, your credit history will be a key determining factor if you get approved for a mortgage. So, if you have any old, forgotten debt, it could impact your chances of approval. While debt comes from many different areas of life – tuition fees, credit cards, phone bills – it’s important to get all of this paid off before applying for a mortgage.
Credit scores range between 300-900 but in Canada, a score of 660+ will give you the best chance of securing a mortgage as it shows lenders that you present a low level of risk. While this isn’t the only factor considered during the mortgage approval process, it’s one that you have the power to change or improve on.
To begin improving your credit today, make sure to pay your bills on time, limit your number of credit cards and aim to use less than 35% of your available credit on any given account. These small fixes will make a big difference over the long term and get you started on the right foot heading into the new year.
2. Don’t run to your bank – shop around for a mortgage instead
While most people head straight to their bank for a mortgage, one of the most important things you can do as a prospective buyer is to shop around. In fact, results from an early April 2021 cross-Canada poll by Homewise confirmed that more than half of Canadians do not shop around for their mortgages. This is a problem for Canadians because banks are often advertised as the most straightforward path to a mortgage, but they don’t necessarily offer the best deals.
At Homewise, we partner with over 30 banks and lenders that offer unique mortgage features, rates and terms tailored to your specific financial needs versus a one-size-fits-all from banks that may not serve you well over the long term.
3. Get pre-approved and create a budget
Once you've cleaned up your credit, shopped around and gathered all of your necessary documents, consider getting pre-approved for a mortgage. It will give you a clear picture of your home affordability and how much you are eligible to borrow, which can help you set a realistic budget before you start your home search.
A pre-approval does not guarantee final approval, so it’s important to create a budget and stick to it until you’re in the clear. While it can look differently for everyone, budgeting might mean making some lifestyle changes such as avoiding your daily coffee run, reducing some streaming subscriptions or holding off on buying a new car. Minimizing spending will also give you some contingency, should you need to do a household repair upon moving in or pay for new furniture.
With a new year ahead of us, now is the time to start setting yourself up for success. At Homewise, we want you to feel confident in your decision to purchase a home heading into the new year. We’ll search the marketplace to find you the best deal, while helping you navigate any complexities that come your way. Start today.
