Are you ready to buy a home? It’s an exciting time, but it also represents the biggest financial commitment you may ever make. That’s why it’s important to be fully prepared and informed. Having the right amount of funds available before and after can make all the difference, while also ensuring that you bite off more than you can chew financially. Here we look at some important factors at play that will help you decide if you are truly ready to purchase your first home.
You have an appropriate down payment
The more money you borrow, the more you must pay back. Saving up for a conventional 20% mortgage can help you pay off your mortgage sooner and save big money over the years to come. Anything less than 20% will also require that you take out mortgage lender Insurance through a provider such as CMHC or Genworth. Though you may be able to buy a home sooner with a lower down payment, mortgage insurance premiums will be looped into your monthly payments. If it suits your financial picture, it’s always better to save toward a higher down payment.
You can afford the closing costs
Many people do not factor in the closing costs that come with purchasing a property. From legal fees to land transfer tax, property insurance, statement of adjustment costs, and PST on your CMHC insurance, you can become completely blindsided by expenses if you are not prepared. Having the money ready to cover your closing costs is essential. A good rule of thumb is to put aside 1% of the purchase price toward these fees and expenses.
You have enough money for surprise hidden fees
Having maintenance costs as soon as you walk through the door can be a horrible surprise, and when it happens, you need to have some pocket cash to take care of the expenditures. For starters, don’t forgo the home inspection. This can help you renegotiate the purchase price if you find any structural issues during due diligence. Even with a successful home inspection, however, you’re likely going to want to make changes to the home, whether it’s painting the nursery or purchasing new high-efficiency appliances.
If you are planning a renovation or purchasing a fixer-upper, a Purchase Plus Improvement Mortgage might be a great fit.
You have savings for capital improvements and repairs
Many people don’t plan for yearly repairs and potential capital improvements when they buy their first home. Having some money set aside for small projects such as painting, HVAC cleaning, lawn care and driveway paving is wise. Depending on the condition of home, improvements such as a new furnace or replacement roof may be needed in the next decade.
You have researched the market trends
Knowing if it is the right time to buy is important. Learning the historical trends of your market can help you make the right investment and not overpay. If you don’t have industry knowledge, it will work in your favour to hire a real estate agent that has the experience and skills to negotiate for you.
Purchasing a home can be an exciting time, but don’t get caught up in the thrill without knowing what is involved with ownership. Ensure you have the right amount of savings and knowledge to buy and live comfortably in your new home. The Financial Forum can advise you of your options and help you find the right mortgage solution.