Owning a home means that you have a strong financial foundation to provide a decent life for yourself and your loved ones. As one of the biggest decisions that you will ever make in your life, buying a house for the first time can be nerve-racking because it comes with huge costs and responsibilities. Keep this checklist in mind to ensure that you are fully prepared to buy a new home for the first time and start a new chapter in your life!
Step 1: is owning a home right for you?
Does your current lifestyle really require that you own a home? If you are someone who has lived in your parents’ house and rented all your life, you may not be aware of the real costs of homeownership.
Some costs to consider:
Upfront costs
Down payment, closing costs, and any applicable taxes.
Ongoing costs
Mortgage payments, property taxes, insurance, utility bills, condominium fees (if applicable) and routine repairs and maintenance.
Major repairs
Large and expensive repairs such as roof replacement or foundation repair.
Some questions to ask yourself:
-Are you financially stable?
-Do you have the financial management skills and discipline to manage this large investment?
-Are you informed of all of the costs and responsibilities that come with owning a home?
-Are you prepared to dedicate the time to maintaining your home regularly?
Buying a home for the first time is exciting, but having everything in order is equally tough.
Step 2: are you financially prepared to be a homeowner?
As a first-time home buyer, you need to make sure that you are aware of your financial situation before you start looking for a home. Here are some calculations that can tell you if you are ready:
Calculation A
1. Figure out how much you spend monthly on these four categories.
Household expenses Loans and debts
□ groceries □ credit cards
□ tuition □ car loans
□ clothing □ personal loans
□ gifts □ lines of credit
□ housing maintenance □ student loan
□ child care
Entertainment expenses Saving and donations
□ dining out □ RRSP
□ spectator events □ TFSA
□ magazines and books □ saving accounts
□ hobbies □ charitable gifts
□ travel
2. Subtract that number from your total monthly net income (the amount of money your household earns monthly after taxes and deductions). The difference the amount of money you have left each month after expenditures.
Calculation B
How much can you afford?
Affordability rule 1
As a general rule, your monthly housing costs should be no more than 32% of your average gross (before-tax) monthly income. This percentage is known as your gross debt-to-income or gross debt service (GDS) ratio.
Housing costs include:
-Your monthly mortgage payment (principal and interest)
-Property taxes
-Heating expenses
-50% of condo fees (if applicable)
-50% of homeowners association fees (if applicable)
-100% of the site rent for leasehold tenure (if applicable)
Affordability rule 2
As a general rule, your monthly total debt load should be no more than 40% of your average gross (before-tax) monthly income. This percentage is known as your total debt-to-income or total debt service (TDS) ratio. CMHC restricts homebuyers to a 42% TDS ratio to qualify for an insured mortgage.
Your monthly debt load includes:
-Housing costs (amount calculated in rule 1)
-Car loans or leases
-Credit card payments
-Line of credit payments
-Other mortgage payments
Calculation C
Figure out the upfront costs.
□ Down payment — the part of the home price that is paid when you make an offer to purchase
□ Home inspection and appraisal fees
□ Insurance costs — including property insurance, mortgage loan insurance, etc.
□ Land registration fee — based on a percentage of the purchase price of the property
□ Prepaid property taxes and utility bills — you may have to reimburse the seller for bills paid in advance
□ Legal or notary fees
□ Potential repairs or renovations
□ Moving costs
□ GST/HST/QST on the purchase price (for newly built homes) or on the mortgage loan insurance (if applicable)
Step 3: financing your home
If you think you can afford your home based on your calculations, you are ready to meet with your mortgage lender or broker to discuss your financing options and confirm that you are financially prepared to buy a home. They will discuss mortgage terms and interest rates and will explain what your next steps to make sure that you get approved for a mortgage once you find your new home.
Looking for a first mortgage? Contact Maxx Mortgages for a free consultation! We will offer you valuable insight as we walk you through the process and find you the best mortgage that is tailor-made for you.
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The experienced mortgage advisors at Maxx Mortgages are committed to making the mortgage financing process simple.
It’s better to get pre-approved for a mortgage before starting to look for a home. A pre-approved mortgage lets you know your affordability, your interest rate, and what your monthly mortgage payments will look like. Getting pre-approved can help you narrow your search down to a specific home type, size or neighborhood.
Bring the following list of documents when you meet with your lender or mortgage broker. This will help them decide whether you are qualified for a mortgage.
□ Contact information for your employer and your employment history
□ Proof of address and your address history
□ Government-issued photo IDs with your current address
□ Proof of income for your mortgage application
□ Proof of down payment (amount and source)
□ Proof of savings and investments
□ Details of current debts and other financial obligations
Lenders and brokers will look at your credit history when determining if you qualify for a mortgage. Before you apply, it’s a good idea to get a copy of your credit report to ensure there aren’t any mistakes or surprises.
Step 4: finding the right home
What does your dream home look like?
Our Victoria real estate team have spent the majority of their careers in Greater Victoria and have the intimate knowledge required for providing you with the best advice and assistance in local real estate and property investments. Contact our experts for your first home purchase!
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Your local Real Estate Experts, showing you the beauty of Vancouver Island, and tips and tricks when it comes to buying and selling a home.
-Location: Do you enjoy the hustle and bustle of downtown, or do you prefer a quiet suburb or countryside? Does the neighbourhood have a look and feel that suits your style? Do you want to live close enough to grocery stores, school, work, and public transit without the necessity of a car?
-Size: How many bedrooms or bathrooms do you need? Do you need space for a home office, a garage, or extra storage?
-Special features: Do you need an air conditioner or a swimming pool? Do your family members have allergies, environmental sensitivities or other special requirements? Do you want your home to be environmentally friendly?
-Lifestyle: Which stage of life are you at currently? Are you planning to have children, have teenage children who will move away soon, or close to retirement? Do you want to live near parks, community centres, churches, or family and friends?
Step 5: making an offer and closing the deal
Your offer should include:
-Your legal name, the name of the seller and the address of the property
-The purchase price (the amount you’re offering to pay)
-The amount of your deposit
-Any extra items you want included in the purchase such as window coverings or appliances
-The closing date, which is the date you want to take possession of the home (usually 30 to 60 days after the agreement is signed for existing homes and longer for newly constructed homes)
-A request for a current land survey of the property
-The date the offer expires
-Any other conditions that must be met, such as a satisfactory home inspection or lender approval of your financing
Before closing the sale, you need to get home insurance and present proof to your lender.
Maxxam Insurance represents Canada’s top insurance companies. As your first-class insurance specialists, we will help you find a plan that will meet your budget and coverage needs. A sound residential insurance policy can give you peace of mind against unforeseen loss or damage. Contact us for a free quote!
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When it comes to residential insurance you can count on our experienced brokers to deliver a comprehensive and competitive policy that is tailor-made for you, your family, and your property.
Whether you’re a first-time homeowner or you’re getting ready to downsize, there’s a lot to think about when you’re buying a new home.