Buying your first home is an exciting life milestone. Whether you are planning to buy a cozy cottage-style home on your own, or looking to buy a modern family home with your new spouse, it’s important to start laying the financial groundwork early on. The Mortgage Advisors recommend keeping the following things in mind as you prepare to buy your first home:
With conventional mortgages, the minimum required down payment is 20% of the purchase price. On a $350,000 Ottawa home, this means a $70,000 down payment. This number may seem overwhelming at first, but with some smart saving you can reach your goal.
Mortgage Insurers (like CMHC, Genworth and Canada Guarantee) provide mortgage loan insurance that enables you to buy a home sooner with a minimum down payment as little as 5%. Using the same $350,000 purchase price you would need $17,500 as a down payment. Your down payment can come from your personal savings, RRSPs through the First Time Home Buyers Plan, a gift from an immediate family member, or there are mortgage lenders that allow for the down payment to be borrowed.
How Much Can You Afford?
It’s easy to get caught up with the picture of your new home, paint colour or how you will add you finishes, but before you start visualizing your life in your new home you need to figure out what size of mortgage you can afford and what your financial picture will look like.
Account for factors like:
- Down payment
- Annual household income
- Current debt obligations
- Amortization period (how long it takes to repay your mortgage)
- Closing costs
- Property taxes, homeowner’s insurance, and additional expenses associated with the upkeep and maintenance of a home.
Speak with a mortgage agent from The Mortgage Advisors to review your credit qualifications. Your agent can pull a credit report and assess your options. We can help find which institutions will lend to you, figure out how to improve your credit if needed or restructure current debts. We can prequalify you for a mortgage so you’re prepared when you find the right home, or get you preapproved to hold a rate while you shop for your dream home.
Closing Cost Plan
Closing costs can be a surprise if you don’t account for them in your budget. You must have at least 1.5% of your purchase price available for closing costs to cover legal fees, and land transfer tax. There are other closing expenses that can occur in a purchase transaction that could include home inspection, title insurance, PST on mortgage insurance premium, appraisal, and reimbursing the vendor for taxes paid, oil tank fill ups and paid property taxes.
Analyze Your Mortgage Options
Schedule a consultation with one of our mortgage agents to find the right mortgage product for your unique situation. We have strong relationships with many lenders and will work to find you the best terms and rates. Whether it is a closed, open, or convertible mortgage, with fixed or variable rates, your knowledgeable mortgage agent can find the best mortgage option for your needs. We will look at your needs today as well as your future goals to determine what options are best for you.
If you are preparing to buy your first home, contact one of our friendly mortgage agents today. They will be happy to guide you through the process and make sure you are on solid financial footing once you step into your dream home.