Three Tips For First-Time Homebuyers
Are you planning to take the next important step in your life and purchase your first home? These three important tips will prepare you to begin the process for homeownership.
As many say, buying your first home can be a stressful process but once you get handed the keys you’ll realize it was all worth it in the end. To ensure you’re prepared before stepping into the process of buying your first home, it’s important to consider these three tips that will guide you on a smooth pathway to homeownership. These tips won’t only prepare you for the process but will also save you time and even money.
Buying your first home is all about smart budgeting. Planning in advance ensures financial bumps won’t detour your homeownership plans. The first important amount to save for is your down payment. The minimum down payment every borrower must have is 5%. For example, if you’re pre-approved for a home at $400,000 you must have $20,000 to cover your down payment to meet the requirements. Anything below a 20% down payment is subject to mortgage default insurance. This is an insurance premium added to the mortgage payments to protect the lender in case there is failure to repay the loan amount. Lenders usually require the down payment to be from the borrowers own resources or a gifted amount from a family member. There are plenty of ways to budget and save for a down payment; one may be to earn a second income with a side job and/or eat at home more often. The small amounts you save will add up before you know it!
The next important amount to save and budget for is closing costs. The usual closing costs to buying your first home will include; legal fees, appraisal fee, land transfer tax fee, PST on the mortgage default insurance premium, title insurance fee and home inspection fee.The good thing for you as a first-time homebuyer is that you’re eligible for a rebate of up to $4000 for the land transfer tax fee. An estimated range to budget and save for closing costs is 1.5% to 4% of the purchase price.
Although there are other expenses to consider (moving costs, house upgrades, furniture, property taxes), these two costs are at the top of the list to budget for when planning to buy your first home. Budgeting can be difficult at times but it’s definitely worth it for the future investment you’ll be making. There are plenty of online articles, classes and tools to help you budget and stay on-track with your financial goals.
2) Team Building:
It’s important to have a handful of reliable, trustworthy and supportive experts by your side to help guide you in the right direction and ease the process.
Realtor: From the knowledge of neighbourhoods to the lowdown on brand new listings, a realtor will help you zero in on homes, set up viewings and walk you through each one. Once you’re ready to make an offer, they’ll negotiate for you and prepare your offer to purchase.
Mortgage Broker: Mortgage Brokers provide you the best mortgage finance solutions to meet your needs. They have access to a variety of mortgage options and a broad selection of lenders with great products and rates. They prepare all of your loan documents and advocate on your behalf.
Home Inspector: These home experts can save you money and stress by identifying significant problems in a property. These issues may warrant revising your offer or to rescind it altogether.
Real estate lawyer: Real estate lawyers will review the purchase agreement, help negotiate any modifications, prepare the closing documents, do crucial research on the property and liens, fact check legal descriptions of the building and lot and collect, hold in trust and disburse fees associated with buying a property. Your lawyer ensures that everything from the down payment to the taxes to the mortgage funds gets paid out appropriately.
3) Mortgage Pre-Approval:
This important tip is often forgotten as people are excited to start searching for their new potential home right away and leave the main ingredient towards the end. As it is exciting to search for your new home, it’s important to move getting pre-approved to the top of your to-do list before browsing the market. A pre-approved mortgage indicates a lending institution has vetted you for a specific mortgage amount after reviewing your financials, including your income and credit rating. You’ll know your spending ceiling, your interest rate, and how much your monthly payments will cost. The time frame for your pre-approval with the rate hold is 90 to 120 days with the lender. A mortgage pre-approval is the first step in the home buying process. Pre-approvals are essential to narrow your focus on the ideal home that fits your needs and gives you the confidence and security you need while you search.
Who can help you with your pre-approval? Well, you have two options; your bank or a mortgage broker. Both are great options but as your bank only has the one product and rate to offer, the mortgage broker has multiple products and rates available for you that are suitable to your needs. It’s important to do your research to determine which one you’d prefer. Stay tuned for my next blog as I will explain the differences in obtaining a mortgage with a mortgage broker vs a bank.
There are many other factors to consider when you’re planning to buy your first home but these three main tips will give you the confidence to begin the process for homeownership.
Mortgage Agent (Lic #M19002844)
DLC Parato Mortgage Group
Independently Owned & Operated
Tel. (289) 489-2152