Are you a First-Time Home Buyer? You don't know where to start. There is lots of information that helps you buy your first house, condo, or town-home. Did you know that there are 3 steps to buying a home? First comes planning, followed by finding your dream home, and finally, the closing.
Let me help you start your home-buying journey, and let me guide you through the mortgage process.
As being a First Time Homebuyer, it is one of the most exciting and most rewarding moments in life! There are several steps when considering a First-Time Home Buyer Mortgage.
The first-time home buying process is as follows:
★ Step 1: Are you ready for home ownership
Since this is a very exciting point in your life, you need to ask yourself.
- Are you financially stable?
- Are you disciplined to take on a large mortgage loan?
- Are you devoted to taking time to maintain your home?
- Are you aware of all the costs of being a homeowner?
★ Step 2: Cost associated with home ownership
There are two costs associated with home ownership.
- Upfront costs: this includes the down payment you will need to buy a home along with closing costs and any application taxes
- Ongoing costs: This is the cost of living in your home, including mortgage payment, property taxes, insurance, utility bills, strata fees, and maintenance.
★ Step 3: The process of buying your first home
What you should do is connect yourself with a mortgage broker like myself. Can find great alternatives to traditional banks and help you find the best rate in the market. I do the leg work.
★ Step 4: Securing your down payment
The minimum down payment on any mortgage in Canada is 5% but putting down more is beneficial whenever possible as it will lower the amount being borrowed. If you are putting down less than 20 percent to purchase your home, default insurance will be mandatory to protect the investment.
Ideally, individuals looking to purchase their first home will have built up a nest egg of savings that they can apply towards a down payment. However, we know this is not possible for everyone so if you don’t have it all saved, don’t worry! Besides being a vital savings plan for retirement, RRSPs can be a great resource for first-time home buyers and can be cashed in up to $35,000 individually towards a down payment. In fact, most mortgage professionals will tell you nearly half of all first-time buyers use their RRSPs to help with the payment. Those first-time buyers who choose this option will have 15 years to pay it back and can defer these payments for up to two years if necessary. Always remember though, deferring a payment can increase the time to pay off the loan and you will still owe the full amount!
★ Step 5: Mortgage pre-approved
The pre-approval process requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.
As a result, getting pre-approved can help determine:
- ★ The maximum Mortgage Loan Amount you can afford to spend (So you know what is your budget when looking for Houses)
- ★ The monthly mortgage payment
- ★ The mortgage rate for your first term
Not only does getting pre-approved make the search easier for you, but helps your real estate agent find the best home in your price range. The temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.
Getting pre-approved doesn’t commit you to a single lender, but it does guarantee the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping. If interest rates actually decrease, you would still be offered the lower rate. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.
★ Step 6: Financial Approval
Just because you are pre-approved, it doesn’t guarantee that the final mortgage application is approved. To be honest, it is important that you should refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home. Lenders can still pull your credit report before closing.
★ Step 7: Closing Day and Getting the KEYS:
We are here, and we are almost at the finishing line. This is where you sign the papers at the lawyers or notary.
Now to complete the process of closing the sale, your lender gives your lawyer the mortgage money. You would then pay out the down payment (minus the deposit) and the closing costs (typically 1 to 4% of the purchase price). Typically, this payment is done through a bank draft, which will require a bank run ideally 10 days before closing, which is then brought to the lawyer on your closing date. From there, the lawyer or notary then pays the seller, registers the home in your name and gives you the deed and the keys!