Summer is often one of the most popular times for buying a home, and in normal times the market can be quite busy this season. This year, the market is nothing short of burning hot and competitive, and first-time home buyers might be wondering what they can do to get ahead. Of course, your mortgage is going to be one of the most important parts of buying a home, so this is something you should be focusing on now. Here are 5 tips related to your mortgage you should consider before taking the plunge into homeownership!
Know your budget
One of the most obvious first steps to buying your first home (or any home) is figuring out how much you can afford. Until you know your budget, you can’t proceed much further because there’s no point looking at homes that will ultimately be outside your price range. Your budget depends on your income and current debts, as well as the neighbourhood you want to live in. A broker or real estate agent can help you determine your budget and get you on the right track.
Having a clear budget helps narrow down your search to homes that might actually suit you. This will save you time and heartache, since you won’t be wasting your time falling in love with a home you can’t have. Once you establish a budget, don’t go over it. You know what you can afford, and it will hurt you to try to buy more than that!
Decide on a down payment
If you’re planning on buying a home this summer, you’ve (hopefully) been saving up your down payment for a while. The question is, how much of a down payment are you going to contribute? How big will your mortgage loan be? For homes under $1 million, many home buyers can have a down payment as low as five per cent. This comes with the addition of Canada Mortgage and Housing Corporation (CMHC) insurance, which protects lenders who deal with high-risk mortgages. Alternatively, you can save up a 20 per cent down payment and avoid this insurance.
The route you take depends on your finances and savings, and how much you’re able to contribute to your down payment. Remember that as housing prices continue to rise, your minimum down payment amount will increase too.
Don’t forget that pre-approval
One of the most important steps you can take when buying a home is getting pre-approved. This gives lenders an idea of your finances at a specific point in time to help them determine whether they could give you a mortgage. A pre-approval doesn’t guarantee you a mortgage, but it helps you understand what kind of mortgage you might be able to secure. Plus, it makes the process go faster once it’s time to get that official approval.
Since the market is so competitive, a pre-approval is even more important than ever. Once you’re pre-approved, do your best to not make any changes in terms of your finances. This includes your employment, income, debts, loans, or anything else that might change your situation and affect your future approval.
Lower your debts
It’s always a good idea to have as little debt as possible when you approach a lender for a mortgage loan. Lenders want to be sure you can support a mortgage, and they will have less faith in you if it seems you’re already struggling with debts. If you have car or credit card debts, work towards lowering those and paying them off. The key isn’t to have zero debt, but to show you can handle debt responsibly. Start with the easiest payments, make them on time, and pay more than the minimum to help increase your credit score.
Use an unbiased broker
The market is hot, and using a broker is one of the best ways to help you get ahead! Brokers help you determine your budget, what kind of product and rate you can expect, and they can guide you through the actual home buying process. Having a broker on your side adds a level of confidence and comfort to everyone, including lenders.
If you’re ready to begin searching for a perfect place to call home, you can reach out to Clinton Wilkins Mortgage Team! Get in touch with them at (902) 482-2770 or contact them here.