Buying your first home can be a really exciting time, but it can also be stressful or intimidating if you’re new to the process. Buying a home is one of the biggest emotional and financial decisions you’ll ever make and we’re here to help. We’ve compiled our top tips to help you get started with purchasing a place to call your own.
Tips for Getting Started
Know your credit score
Your credit rating is an important tool for qualifying for loans and provides a picture of your financial health. Check your credit report once a year to confirm the accuracy of your personal and financial information, such as your loan payment history. If your credit score is less than optimal it’s ok, there are some practical things you can do to improve your credit profile.
Develop a budget
Start figuring out your financial readiness by evaluating your present household budget. How much are you spending each month? Knowing exactly how much will give you a better idea about whether you can afford to become a homeowner. The first step in buying a new home should always be to take a look at what you can afford and how you are going to pay for it. If you’re like the majority of home buyers, you will have to finance your purchase with a mortgage loan.
Learn key mortgage terminology
Below is a quick overview of some of the most common terms and aspects of a mortgage that you should understand:
- The principal is the amount of the loan that is actually borrowed.
- The interest is the amount the lender charges for the use of funds borrowed. Interest rates vary according to a number of factors including terms and conditions of the mortgage and the borrower’s credit history. Payments are usually comprised of both principal and interest.
- The amortization period is the number of years that it will take to repay the entire mortgage loan in full. A longer amortization period will result in lower payments but will take longer to pay off the loan which means you will pay more in interest. Amortizations typically range from 15-30 years.
- The term is the length of time for which a mortgage agreement exists between you and your lender. A longer term means you will keep the interest rate agreed upon for a longer period of time. Rates and therefore payments vary with the length of the term. Terms usually range from 1-10 years with a five-year term being the most common. Generally a longer term, because of the added security, will be at a higher rate than a shorter term.
Determine how much you can afford
There are tools that can help you determine how much you can afford for a mortgage. For example the Canadian Mortgage and Housing Corporation has a “Household Budget Calculator” on their website that you can use to compare your income with your current or planned expenses and debt payments and see what kind of mortgage you can comfortably fit into your budget.
Before you start house shopping, it’s a good idea to get pre-qualified or pre-approved for a mortgage loan. A mortgage pre-approval is when your lender has reviewed your basic financial information (income, credit score, current debts, etc.) and has determined the maximum amount of money they will lend to you. Determining your maximum mortgage amount and interest rates allows you to set your budget before house hunting.
Talk to a mortgage professional
Many people assume they should go straight to their bank for financial matters. However; this may not be the ideal place to start. It’s advisable to shop around and investigate different options. For example when you work with a mortgage broker, they have access to many lenders and options for you to review. Mortgage Brokers offer ambitious mortgage plans that a banker usually does not have access too. They also offer unbiased advice to help you improve your overall rating.
Most importantly, a mortgage broker can help you navigate the mortgage process and if this is your first time it helps to have someone showing you the way. You can save time, money, and receive expert advice by working with a trusted mortgage specialist.
In closing, the best way to approach first time home buying is to be prepared. Educate yourself and get the facts you need to make the right mortgage decision and increase your home buying confidence.
Have questions? Contact us to discuss how we can get you into your first home today!
JOHN ANTLE MORTGAGES – KELOWNA’S MORTGAGE SPECIALIST
We specialise in offering mortgage solutions that go ‘above and ‘beyond the bank’. This means we are able to provide flexible solutions at great rates, often better than what traditional banks have to offer. Working with a mortgage broker can open up your options, allow for potentially greater solutions for your situation. We work with a variety clients including first-time buyers, those looking to transition from renting to owning, self-employed business people, as well as investors in rental and/or vacation properties.
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