Handbook for first-time home buyers
Those buying their first home surely experience an excitement of a different level. But our handbook will keep them prepared for any ups and downs that they may face through the entire process. Have a pre-approval Most first-time home buyers are advised to use an online calculator to get an estimate of the kind of mortgage one may qualify for. While the calculator is useful it only provides you an estimate. We would recommend you get a pre-approval which is a tedious process involving the lender. The first-time home buyers would need to provide their credit score, a proof of income, down payment details et al. But before you get the final approval you need to show your intent and the ability to confidently pay the mortgage sum. On the other hand the lender must also have confidence in the property you are buying i.e. to them, your house must be worth the price you are paying for it. Don't stretch your pockets First-time home buyers have to make a down payment and it may seem substantial. While making arrangements for the down payment, first-time home buyers must ensure to keep a buffer amount towards other aspects of home buying such as house inspection. They should also have funds for immediate use towards maintenance and repair of the house such as breaks and leaks which come with a house most of the time. So how do you gather if you are stretching your pockets or not. It is a simple test: analyze if you are putting everything you have towards the down payment. If yes, you certainly are stretching. It is advisable to wait for some more time and have some buffer financing before making that deep dive. Future proof yourself Most first-time home buyers make the mistake of considering only their current paying ability for the down payment and the mortgage sum. They must, rather, also take into account their future. If you are single you would need to have some finances for your mortgages, if you are married and don't have children, you would already know having children means you would need a lot of finances. You must also think of unforeseen financial circumstances such as job losses, accidents etc. Make a deal that will last you in the longer run and not just your current lifestyle. Do not pressure yourself for 20% down payment As a first-time home buyer there is no need to pressurize yourself for a 20% down payment. The 20% down payment advantage is that you could avoid default insurance, provided by the Canada Mortgage and Housing Corporation (CMHC). Anyway you cannot avoid the default insurance only if your house costs less than $1 million since you won't be then eligible for it. Once you have explored your options are know the in and out of mortgages you would also need to know about open and closed mortgages. If you have an open mortgage you can make extra payments without paying a penalty. Closed mortgages on the other hand offer a better rate but there is no flexibility about avoiding the prepayment penalties. If you are a first-time home buyer who is in doubt or need help, do not hesitate to reach out to us at LendX Financial in Brampton, Greater Toronto Area.