10 Steps to Buying Your First Home
Tags: Buying First Home, Vaughan Real Estate, Toronto Real Estate, Realtor, Vaughan Realtor
Buying a first home is a very exciting time but can also be a time of uncertainty and stress. Buying a first home is a huge milestone both from a life and financial perspective. It will most likely be the biggest purchase that you will make in your life but also one of the best decisions in the long run.
Having a good understanding of what to do to get ready will make the buying process a much more enjoyable and less stressful process. Here are 10 steps to buying your first home.
Step 1 – Saving for a Down Payment
You need to have savings to be in a position to put a down payment on that perfect dream home. A down payment is the amount of money you put toward the purchase of a home. Your lender deducts the down payment from the purchase price of the home and the balance is the mortgage amount.
The minimum amount that you need for your down payment depends on the purchase price of the home. However, if your down payment is less than 20% of the purchase price of your home, you will need to purchase mortgage loan insurance.
Mortgage loan insurance protects the mortgage lender in case you can’t make your mortgage payments. If your down payment is less than 20% you will be required to purchase mortgage loan insurance. The premium for this insurance is added to your mortgage.
There are a number of home buying programs available to you to help you come up with the down payment.
- - The First Time Home Buyer Incentive, the Government of Canada offers up to $25,000 in shared home equity
- - Provincial and Municipal Land Transfer Tax rebates – with up to $4000 rebates towards the land transfer tax in Ontario and $4,475 in Toronto
Step 2 – Stable Income and Strong Credit Score
When you get pre-approved mortgage lenders are very concerned with your credit score and that you have a stable income. To be approved for a mortgage the lenders are ideally looking for at least a credit score of 600 plus having a high credit score will also help you get the best mortgage interest rate.
Taking proactive steps to improve your credit score starts way before you start looking for that dream home. Here are some steps to proactively take to improve your credit:
- Avoid late payments if at all possible
- Keep your credit utilization rate low (don’t max out the credit available to you on such things as your credit cards or line of credits)
- Maintain a good credit history
- Limit credit score inquiries
Having a great credit score and demonstrating a stable income will make getting a mortgage much easier.
Step 3 – Getting Pre-Approved to Confirm What you Can Afford
Step 3 will take into consideration how much downpayment you have, your credit score, and your income to determine how much mortgage you can qualify for. This is a critical step before you start looking for a home.
Step 4 – Determine Where you Want to Live
Once you determine how much you can afford and what you are comfortable spending on a home you will need to decide where you want to live. Things that you should take into consideration on where to live are commute time, public transit, safety, schools, neighbourhood amenities.
Step 5 – Don’t Forget About the Closing Costs
Don’t forget that there will be additional closing costs that you need to have savings for when you close on that dream home. Generally, you should budget 3-5% of the purchase price for closing costs. Closing costs will consist of: land transfer tax, lawyer and legal fees, property appraisal fee, and title insurance.
Step 6 – Mortgage Pre-Approval & Get Best Rate
Get a mortgage pre-approval before you start looking for a home. A pre-approval locks the mortgage interest rate for up to 120 days and gives you a comfort level with how much mortgage you qualify for. However, being pre-approved for a mortgage doesn’t mean that you can’t shop around for interest rates.
Step 7 – Find & Work with a Great Realtor
Working with a realtor that you feel comfortable with and has a good grasp of the current market is critical. Particularly for first-time buyers, working with an experienced realtor can make the buying process less stressful and a much more enjoyable process.
Step 8 – Look for Properties that Are in Your Price Range
Although it may feel tempting to push your budget it is important to look at homes that you can afford and that you can picture yourself living in. It may be helpful to spend a little time thinking and building your “must-have” and “nice-to-have” lists in advance. This will help you narrow your search but remember to be flexible.
Step 9 – Make An Offer
The current hot housing market with a low housing supply will most likely result in you placing a number of offers on a number of homes before you get that dream home. In this market, it is even more important that you spend some time completing steps 1 – 7 before you start looking at homes, and when you find the one you will need to move quickly. Your real estate agent will be of great assistance in helping you navigate through this market to get you that perfect home.
Step 10 – Closing Date!!
You have been anxiously waiting for this exciting day. Take some time to celebrate and embrace this special day. Moving into your first home is a huge and exciting time. Buying your first home will be one of the best financial decisions you will make and in 5, 10 years from now you will be very grateful that you rolled up your sleeves and decided to buy.
Now that the day has arrived here are some additional steps to take:
- Change the locks
- Inform service provides – change of address
- Let family and friends know
Your realtor will be a great resource to get you through the stressful process of buying your first home. Are you thinking of buying your first home? Reach out.