First-Time Mortgage Home-Buyers
Guide
Learn the Mortgage Basics, for first-time home buyers. When you are new to the mortgage game, it pays to have a team with networked resources that can explain mortgage concepts and help you learn the mortgage knowledge needed to send your application in for your homeward adventure.
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Guide for First Time Home-Buyers
When it comes to buying a home, first time home-buyers are naturally bound to be nervous and excited at the same time, and rightly so when it is going to be their forever home. Buying a property in Canada is a dream come true event not only for Canadian nationals and PRs but also for others from around the world who are looking to make Canada their future home. Quality of living, close to nature, aesthetic beauty, and most important of all, a peaceful living environment are some qualities that attract migrants to the country, making it one of the most sought-after real estate markets in the world. New home buyers need a helping hand in the process of finding their perfect home, and we hope this guide for first time home-buyers would serve exactly that!
First time home-buyers need to consider a lot of factors before making the right decision in purchasing their dream home. Factors such as government aid, mortgage terms, eligibility, mortgage limit, affordability, down payment requirement, etc. might be unheard of by some first time home-buyers. Every single one of these aspects affects the whole property purchase process. Let us have a look at some of these key aspects in detail further below. First time home-buyers should be able to comprehend the factors below before signing the agreement.
01 Down Payment
Knowing what you could afford and understanding the burden a new property purchase is going to bring your shoulders is crucial for a first-time property buyer. First-time home-buyers should precisely evaluate their current financial status, debt status, short-term and long-term financial goals, etc. in determining their budget. You simply cannot put a number on a property and say that it’s mine! This step is crucial and should be thought out by new property buyers right during the initial phase.
Keep in mind that even for a property that is below $500K, a minimum down payment of 5% is mandatory in the Canadian property market. Also, first time home-buyers should secure loan insurance for their mortgage with Mortgage and Housing Corp.
New home-buyers also have the option of utilizing their Registered Retirement Savings Plan money as a down payment towards the property purchase. This RRSP money withdrawal is non-taxable and allows a first-time buyer to secure their dream home in a hassle-free manner. Some of you might be opposed to this choice, since it might affect your interest income in the short run; but, before you rule it out, just consider the long-term benefits, which is adequate, and moreover, you could purchase your dream home much faster than normal.
02 Government Aid
First time home-buyers have the option of utilizing the incentive provided by the Canadian government, which should help them purchase their first home. This particular aid was introduced by the government in the year 2019, and since then, it has been highly appreciated by all the eligible families – those that come under the annual income cap of $120K.
Mortgage and Housing Corp. of Canada provides an interest-free loan to all these eligible first time home-buyers, aiding them to achieve their goal of owning a property. Usually, this interest-free incentive comes to around 10% of the property value. This amount can be repaid when the first-time buyer sells the property or when the purchase period reaches 25 years, both of which offer adequate financial cushion for the new property buyer.
03 Additional Costs
First time home-buyers should also consider all the other added costs that they would incur apart from the down payment set aside for the purchase. Additional costs involved might come around 5% of the property value, and this number might lower or increase, depending on the current market trend. Some of the added fees, such as inspection fees, are worth spending because securing an expert opinion on the property will go a long way forward, especially for a new home buyer. Other additional costs include land transfer tax, adjustment tax, lawyer fees, insurance premium charges, appraiser fees, location certificate fees, home sales tax, mortgage premium payments, etc. New home buyers should be ready to bear all these charges and more beforehand.
First time home-buyers should evaluate all the financial calculations associated with their financial status. It is not always about what you want, it is very important to understand what you could afford too. The debt to income ratio is a key marker in determining the affordability and eligibility of a first-time property buyer. If you are not a finance person, then you could very well obtain the services of financial advisors in your region. Your colleagues and also other first-time buyers could help you with the same.
First Time Home-buyer Selection
Once the new property buyer has completed the financial evaluation stage, then they need to move on to the crucial home selection phase, before the final agreement signature. The individual and the family should come up with the features they need the most, followed by the ones they are flexible with, and finally to the least important ones. If you have kids, then education and safety become the number one priority and that should be the first box you need a tick on your checklist. The quality of life on offer, environment, habitat, and financial expenditure of the neighborhood play a huge role too.
First time home-buyers from Canada should decide whether they need a new property or an existing property. New properties will be costly when compared to older ones. Other factors, like the neighborhood, also play a role in determining property prices. The type of property should also be selected by the new home owner-to-be. A buyer who is searching for their first home should be fierce and dedicated to finding their dream home. He or she should be actively involved in the search process once all the above-mentioned aspects are sorted out. This is the final step before the official sales agreements, which is a whole new ball game, which we would cover in another article.
We hope that first-time home-buyers in Canada find this article useful and informative.