Kawartha Lakes Home Buyer: First-time Home Buyer Tips
How much home can you afford?
Prepare a simple budget to see where most of your money is going on a monthly basis. There are many up-front costs when it comes to buying a home. It is suggested to save 1.5% of the purchase price for the cost of legal fees, appraisal fees, home inspection fees, land transfer tax, title insurance, survey costs, moving costs and other expenses. Also, keep in mind of paying monthly utility bills, property taxes and home insurance. As a general rule, your mortgage payment, property taxes and heating cost should not be more than 32% of your gross household monthly income and then your other monthly commitments such as any loans, lines of credit, credit card payments or other debts should not exceed 40% of your monthly income.
The mortgage amount you can afford will also depend on your down payment. If you are putting less than 20% down you will have a premium fee added to your mortgage by a mortgage insurance company (CMHC, Genworth or Canada Guaranty). This will allow you to put a minimum of 5% down. My website, http://www.merlynnmullen.ca has an online calculator to help you figure out the maximum home price you can afford, how large a mortgage you can borrow, and what your monthly payments will be when considering your down payment percentage. There are different options when it comes to your down payment. First-time Homebuyers are allowed to cash out up to $25,000 from a RRSP investment without the tax holdback. It will be gradually paid back through filing your income tax each year as a payment over 15 years. You are able to use a gifted down payment as long as there is no requirement to paying it back to the person who gifted it to you and some lenders may even let you borrow the down payment (as long as it works into the 40% of your monthly responsibilities). There is also a down payment assistance program through the City of Kawartha Lakes that you may qualify for if you are thinking about purchasing your first home https://www.city.kawarthalakes.on.ca/residents/housinghelp/help-to-find-housing/2016HomeownershipApplicationPackageCriteriaAppBankCert.pdf. The first page of this application will outline what is required to qualify.
Which mortgage is right for you?
You will have a wide selection when deciding which mortgage is right for you that will include amortization period (the length of time to pay off your mortgage), the term (the amount of time and interest rate you negotiated), payment schedule (monthly, bi-weekly, weekly, etc.), open or closed mortgage and whether you want a fixed or variable interest rate (always take into account an increase in interest rates that could impact your ability to make your monthly payment).
Your credit score and how you can improve it.
Your credit score is an indicator of how well you pay your bills and other debts and one of the factors that lenders consider when qualifying you for a mortgage. Always pay your bills on time and in full; pay off your debts as quickly as possible; never go over the limit on your credit cards; and try to limit the number of credit cards or loan applications you make. If you do have any derogatory credit, collections outstanding, consumer proposals or bankruptcies showing, it will affect your ability to obtain a mortgage from a financial institution such as a bank or mortgage lender but there are other options (B lenders or private lenders) each with different requirements needing to be meet to purchase a home. To find out your credit score, you can order an online copy from either Equifax Canada or TransUnion Canada. If you find any errors on your report, notify the credit-reporting agency and the organization responsible for the inaccurate information immediately.
Obtain a mortgage pre-approval
Having a mortgage pre-approval gives you a great advance when looking for a home. It enables you to negotiate the best price and conditions knowing that your financing is in place. It will allow you to know for certain what you can afford based on lender and insurer criteria and what your payments on a specific mortgage will be. An interest rate can be locked in for you from 60 – 120 days so that you are guaranteed to get a mortgage for at least that rate or better. Before looking and calling a real estate agent, like Brad Nelson or Kelli Lovell Real Estate Brokers with Coldwell Banker RMR Real Estate, call me to explain to you the benefits of a short or long term mortgage, the latest programs available to best suit your needs and review all costs involving when purchasing a home. I would be happy to help you get into the home you always wanted. I can be reached anytime at 705-328-4985 or by email email@example.com