Find Your Home
The Pacesetter Difference

financially ready for new homeBuying a home or condo will probably be the largest financial decision and process that a person or family will ever make. Because of this, it is important to take the time to make sure you and your family are financially prepared for such a major purchase. This will ensure that you are prepared for the home itself and the expenses that go along with ownership.

How Much House Can You Afford?

The first step a potential homeowner should take is to get assistance to find out how much house you can afford. This will help you to determine the price range of homes to look for, as well as the amount that you will need to save. You can use an online calculator to figure out a rough estimate, but banks employ mortgage specialists to assess your maximum monthly payment based on your savings and income. Look at online real estate listings to determine if you’re happy with your given price range, or if you need to save more before continuing with the buying process.

Your Mortgage Specialist

Mortgage specialists will factor in associated costs, such as property taxes and utilities, things that aren’t part of the mortgage itself. Affording a home encompasses more than just a mortgage and down payment. Not only is it important to get the best interest rate possible, but you should also pay attention to costs such as property taxes, property insurance, and CMHC fees. Interest rates play a critical part in the approval process. Factoring this in to fall in line with the expected possession date is a very smart thing to do.

To get a good interest rate, start by doing everything you can to improve your credit score. Pay your bill in full and on time and get a copy of your credit report to check for errors. Keep in mind that improving a credit score takes time. When going through the pre-approval process the banks will consider your credit score.

What Type of Loan Will You Need?

Your mortgage specialist will not only help you to determine the type of loan you should apply for, but they will also help you decide on whether an insured or conventional loan will work best, the length of term, the down payment options, and payment schedules that will save you money. Insured loans make up most mortgages as conventional loans apply when a minimum of 20% down payment is available. Begin researching loans and decide on how much of a down payment you want to save. While there are loans available that will not require you to make a down payment, these loans come with CMHC fees that protect the bank if you default on the loan. On the other hand, saving a down payment can take years. Decide if renting for a longer period of time while you save will give you the same benefit as buying now and paying CMHC.

Next, look at the estimated taxes and insurance costs of the properties you’re interested in. These factors can add hundreds of dollars to your monthly housing payment. You should also keep in mind that the landscaping for your new home is not included in the cost, and you will be responsible for this.

While it is impossible to know exactly what may or may not go wrong, most experts agree that a homeowner should save one percent of their home’s value every year to go towards maintenance costs. Keep in mind that this is just maintenance, upgrades are separate.

Once you have an estimate of your purchasing power, get a pre-approval letter from the lender you choose. A bank will be able to give you an estimate of the interest rate you qualify for and issue a letter to your realtor stating your purchase price range. With this information, it will be possible to start looking for a home.  Don’t worry about getting your number figured out exactly at this point in the first-time home buying process. As you look at homes, your bank and realtor will be able to give you good estimates for taxes and insurance costs that will affect your payment amounts.

Take the time to make sure that you are ready to purchase a home and you’ll be enjoying it for years to come.

Image courtesy of DepositPhotos.com, @Dmitriy Shironosov