The purchasing of your first home can be a stressful undertaking. Fortunately, here at Kanetix, we have a crack team of mortgage professionals that have compiled the following checklist to help guide you through the process of buying your first home.
The following is for reference only.
Saving for a down payment
You'll need to come up with a minimum of 5 per cent down payment to buy a home. The following tips may help you pull together the 5 per cent quicker:
- The Home Buyers' Plan (HBP) is a program that allows you to withdraw funds from your RRSPs to be used towards the purchase of a home. You can withdraw up to $25,000.
- Make a list of your debts. Are there any you can pay off to help you qualify for a higher mortgage (such as credit cards and other bills)?
- If you want to save more, you need to know where your money goes. Use a budget calculator; it will help you identify areas where you may be able to make changes to save more.
Home Buyer Resources
- Canada Revenue Agency's Home Buyers' Plan
- Financial Consumer Agency of Canada's Budget Calculator
- Budgeting 101
Saving for your home purchase costs
Too often people focus only on saving for their down payment and overlook the other costs associated with purchasing a home. You'll want to make sure you budget for costs like:
- Closing adjustments: Expenses that have been prepaid by the seller and have to be reimbursed by the buyer (municipal property taxes and utilities for example.)
- Land Transfer Tax: A fee to the buyer when the property changes ownership; it can range from 0.5% to 2.0% of the purchase price of the property (the amount varies across Canada)
- Legal/notary fees and disbursements (out-of-pocket expenses)
- Home inspection fees (if applicable)
- Appraisal fees (if applicable)
- Land surveyor's fees if needed
- Mortgage loan insurance (CMHC or Genworth): Applies if your down payment is less than 20 per cent. The premiums typically range from 1.75% to 2.95% of the principal amount of your mortgage and is added to the mortgage amount
- Home insurance: Usually required by lenders of borrowers. It should be in effect before the closing date and the advancement of mortgage funds. Get home insurance quotes from competing insurers through Kanetix.
Understanding your credit score
Few people have the money on hand to buy a home outright and a mortgage helps to bridge the gap between your down payment and the purchase price. Before applying for a mortgage, you'll need to familiarize yourself with the details of your credit score and credit history-your lender will ask about it and it may affect the mortgage rate you get.
- A credit score above 680 can get you good mortgage rates, while a credit score lower than 620 makes it tough to qualify for most loans, and will likely mean that you'll incur higher borrowing costs.
Credit Score Calculator
Kanetix.ca offers a free online Credit Score Calculator to help you estimate your credit score
Defining your home search criteria
What's your dream home look like? Knowing what you want in a house will ensure you're looking at homes that meet your needs. To get the juices flowing, ask yourself:
- Are you looking for a new home from a builder? Or for a resale property?
- Do you want a semi-detached, detached, townhouse, duplex, highrise or low-rise building?
- What type of ownership are you interested in: freehold or condominium?
- How many bedrooms and bathrooms do you need?
- How much storage space do you want?
- Do you want an eat-in kitchen and/or formal dining room?
- Is a garage or private driveway a necessity?
- What features are important: central air conditioning, swimming pool, fireplace, etc.?
- What neighbourhood characteristics do you value? Research several neighbourhoods, keeping in mind your family's needs, your commute, and area amenities (schools, community centres, places of worship, family, etc.)
- What's your budget? Not only do you need to know how much you can spend on a new home, but you'll need to have a solid grasp on how much you'll need to close the deal (see our Home Purchasing Costs) as well as how much you'll need monthly to maintain and upkeep your new home.
Getting pre-approved for a mortgage before you go house hunting is beneficial on many fronts:
- You lock in an interest rate
- You know how much house you can afford
- You know what your mortgage payments will be
- If rates go down, will you get the new lower rate?
- How long is the pre-approved rate valid?
- Can the pre-approval be extended?
Most house hunters use a real estate agent once they've moved beyond the planning phase. Your real estate agent is someone you should trust; they are after all helping you with one of the biggest purchases you'll ever make in your lifetime.
Tips for finding a real estate agent
Ask questions, and lots of them. Questions like:
- Are they licensed? All real estate agents must be licensed and some are also REALTORS®. The term REALTOR ® is a trademark that identifies a licensed real estate agent as a member of The Canadian Real Estate Association (CREA). All REALTORS ® make a pledge to adhere to a strict code of ethics and standards.
- How many years have they been a real estate agent?
- How can they help you find the right home? You should feel comfortable with their knowledge on the neighbourhoods you're interested in, as well as the type and price range of home you are looking at.
- If needed, can they refer you to a home inspector, appraiser, land surveyor, real estate lawyer and anyone else who may need to be involved in the purchase of your new home?
- Do they have references they can provide?
Learn more about mortgages and mortgage rates