Are You Financially Ready to Buy a House?
Are you a first time home buyer? If you’re starting to think about buying a home and have peeked inside an open house or two, you'll want to keep reading.
If your employment is secure and you plan on living in the same place for a while, it might be time to consider if you are financially ready to purchase a home. Here are some important financial questions everyone should ask themselves before they buy a home:
Do you have a Down Payment?
The minimum down payment to purchase a home today is 5% of the purchase price. Obviously the more you are able to put down the better, and anything over 20% of the purchase price will also help you avoid paying fees for mortgage insurance.
More money for Other Expenses?
If you have a healthy down payment saved, do you have enough money the other expenses that come with buying a home, such as moving expenses, legal fees, & land transfer taxes. A bonus for first time Home Buyers in Ontario is that you can receive a maximum Land Transfer Tax rebate of $2,000 as well.
Are you Pre-Approved by the bank?
The first step every buyer should take when they are thinking of purchasing a home is to get preapproved for a mortgage. To get preapproved, you’ll need to share all of your financial information with your Bank/Mortgage Broker and also have them check your credit score. All of this information goes towards determining your mortgage amount & interest rate. If you’re the type to shop around, I suggest using a Mortgage Broker. It will help save your credit from being checked to often which could negatively impact your score. If you would rather work with someone who already knows your financial situation, then you should make an appointment with your bank.
What can you actually afford?
While the bank will always give you a mortgage you can afford (based on your income and debt repayments), do you feel comfortable with this number? Consider what your habits and hobbies are like – is splurging on fancy dinners, or an annual vacation, something you aren’t ready to give up? Make sure you have enough wiggle room to live comfortably.
Check out our Mortgage Calculator for insight into your home affordability.
Keeping up with Maintenance.
Once you own a home the expenses will continue to flow. Annual property taxes, home insurance, lot maintenance, and even making repairs or improvements inside your new home will continue to cost you money. If you're used to renting, you might not realize how much actually goes into owning a home. But never forget, your landlord only rents property because it is a profitable venture & typically these ongoing costs – Mortgage, insurance, taxes, & maintenance – will all be covered by your monthly rent.
So Start Paying Yourself!
Contact me today for answers to all your home buying questions.Greg Dewar on