Finding and purchasing your first home can be both thrilling and frightening all at once—thrilling because you’re taking a major step toward independence, and frightening because of the added responsibility that step means.
Buying a home is easily one of the biggest financial decisions you’ll make in your life, so it shouldn’t be entered into without asking yourself some critical questions:
Homeownership requires more commitment and maintenance than other alternatives (such as renting). As a homeowner, you’ll be responsible for fixing anything that breaks, as well as maintaining the interior and exterior of your home. It also means you’ll be less mobile, since you will be legally and financially bound to your home (until you decide to sell it).
One major mistake first-time home buyers often do when house-hunting is to ignore the price tag. Take a look at your finances (i.e., income, debt, expenses) and determine what portion of your budget you could dedicate to a mortgage payment. As a general rule of thumb, you’ll want to keep your home payment less than 35% of your monthly income.
There are plenty of “hidden” costs when it comes to purchasing a home, including closing costs and possibly condominium association fees. In addition to figuring out your future monthly payment, you’ll want to decide how much you’ll want to save for your down payment, minimum 5%, and additional costs incurred during and after your home’s purchase such as property taxes. You’ll need to include utilities and any other new expenses when doing budget forecasting.
After you determine how much of a mortgage you can reasonably afford, you’ll need to apply for a mortgage to see how much a lender is willing to lend you (or, the maximum loan amount). This amount will differ based on variables such as your credit history, debt-to-income (DTI) ratio and employment and income. Pre-qualifying before determining a final mortgage allows for more flexibility in your mortgage rates and amount.
Do you foresee your job moving locations in the near future? Will you be expanding a family or taking care of a parent? You’ll need to make sure that whatever home you choose to invest in will not only cover your immediate needs, but your future needs in years to come.
Are you ready to take the leap into home ownership? Capital Mortgages can help you find the best mortgage by searching the most competitive lenders in Canada. Contact us today!