First Time Home Buyers
The process of buying your first home can be a little overwhelming. Here are the top tips for first time home buyers to help take the fear out of purchasing your first home. I invite you to contact me anytime to learn more.
Tips for first time home buyers
Make sure you qualify to buy a home
Before you get too involved in the home purchasing process, it’s important to be sure that you qualify to buy a home.
Contact a mortgage broker in Ottawa to review a pre approval application. This will give you in-depth details of what you qualify for and what your maximum purchase price will be.
Learn more: How much mortgage can I afford?
Learn more: Mortgage brokers in Ottawa
Research all your first time home buyer mortgage options
The mortgage market is very competitive and there are many lenders and mortgage options to choose from for first time home buyers.
It’s important to do lots of research to assure you get the right mortgage for your needs.
It’s also important to know the types of mortgages available from collateral to conventional mortgages, fixed rates to variable rates and insured to uninsured mortgages. A mortgage broker can help walk through the pros and cons of the different types of mortgages with you.
Learn more: Collateral mortgage
Learn more: High ratio, conventional, insured, insurable and uninsurable
Organize your current debts
Your current debt obligations can affect the amount that you are approved for or be the difference between an approval and a decline for first time home buyers.
Focus on paying off any revolving debt such as credit cards and lines of credit first. Regardless of your minimum payment on these debts, a lender will use 3% of the outstanding balance in the application calculations.
If you’re having trouble managing your debts, consolidating your debts into one loan may help make the debt easier to manage.
Save for a down payment
The larger your down payment, the bigger house price you can get.
Also, there are options where you can buy a home with no down payment saved.
If you are able to put down 20% of the purchase price you do not need to pay the mortgage insurer (ie CMHC) fees. Also, a lender can qualify you over a 30 year amortization which can help you qualify for more.
Learn more: Flex down mortgages
Learn more: How much down payment do I need to buy a house?
Review all the numbers and your budget
For first time home buyers, there can be a lot of unexpected expenses that come with owning a home. Also when buying a home there are closing costs that you may not have thought of.
It’s important to have money set aside for emergencies and unexpected challenges with the house.
Also money for a home inspection and an appraisal if required.
You can also see if you’re eligible for a first time home buyer incentive.
Learn more: Closing costs
Learn more: First time home buyer incentive
Get your homework done ahead of time
In a fast-paced market, the house you have your eyes on most likely has others interested in it too. By having your pre approval in place and all your paperwork together you are armed and ready to make a confident offer.
Learn more: Mortgage pre approval Ottawa
Learn more: Down payment on a house
Buying a home is one of the biggest purchases you will ever make. Making sure the property is in good condition is important. Having a home inspection is one of your best lines of defence in protecting yourself against unforeseen challenges that may arise with the property. Finding an experienced home inspector is key.
Learn more: Is a professional home inspector required?
Use the professionals at your disposal
There are many professionals available to help first time home buyers throughout the home buying process. Using an Ottawa mortgage broker to assist with the mortgage is a great way to ensure you have someone looking after your interests and not the banks. Getting a buyer real estate agent will help assure you have a professional in your corner to navigate you through the negotiations and paperwork. As previously mentioned a home inspector is an important person to have on your team. And lastly, your real estate lawyer will be a trusted person to assure all goes smoothly with your closing.
Learn more: How to find the best mortgage broker in Ottawa
If you do not have the time or skills to renovate a home or maintain a landscaped yard. You will want to strategize on the home that you are looking to purchase. In this case you may be better with a home that has minimal maintenance required, a newer home or even a condo.
If you have the time and skills to fix up or maintain the home and property, finding a home that is a little rougher around the edges or requires extra maintenance may be fine for you.
If looking into a home that needs improvements, you can always take it advantage of the purchase plus improvements option.
Learn more: Tips for buying a home to renovate
Learn more: Purchase plus improvements mortgage
If you are not finding a home that fits your specific needs, you can always consider building a home. When building a home, every decision and aspect of the home can be set to your specific preference.
When building a home, you need to apply for a construction mortgage.
Learn more: Construction mortgages
Five important points for first time home buyers
Create a budget and stick to it as best as possible
Although a bank may approve you for more then your desires, a budget will help you find out what is truly the right purchase price. Also the best mortgage payment for your needs.
Plus, home hunting for the first time can be quite exciting. However with a budget in place it will help you not get carried away with a larger house or upgrades that are not within your means at this time.
A budget can also reduce stress by having you better prepared for the upcoming costs.
Get an in-depth pre approval from a mortgage broker in Ottawa
Online pre approvals and bank pre qualifications are becoming more popular. However with these, sometimes a client may be under the impression that they are approved for a purchase, only to find out after an offer has been made, that there are conditions they cannot meet. An in-depth pre approval should include income confirmation.
There are different documents required for different types of income such as for:
- if you are on probation
- hourly employment
- contract employment
- self employed
- pension income
- support payments
- child tax benefits
With this, being pre qualified based on just the income amount may not be enough for an in-depth pre approval.
Learn more: Self employed mortgages
Choosing the right real estate agent for your needs
Your realtor should be someone you can relate to, trust and openly talk to about your needs. They should take the time to educate you throughout the home buying process and on the real estate market in your search area.
Real estate agents can assist with arranging times to view homes and to prepare the purchase agreement. Also they can assist you with reviewing the condo status certificate, arranging a home inspection and updating you on an important information that is going on in the area you are looking in.
Making sure there are conditions in your offer (if applicable)
Making an offer conditional upon a home inspection and mortgage financing is not only standard practice, it is a great way to protect yourself incase unforeseen challenges arise in obtaining financing or with the home itself.
Many lenders will only do a basic scan of your application at time of pre approval review. The financing condition will give the lender time to do a complete review. Also time to complete an appraisal if needed as well as the mortgage insurer review, if applicable.
Mortgage insurers (i.e. CMHC) will only review an application once an offer has been made and can override a lender’s decision.
Know your closing costs
It is standing practice for a lender to confirm that you have 1.5% of your purchase price saved for closing costs. However your actual closing costs can vary from this number. With that, it’s important for first time home buyers to be prepared for these costs in order to avoid surprises on your closing date.
Closing costs can include, for example:
- legal fees
- land transfer tax
- moving costs
- utility hook up
- pre paid property tax
- fire insurance
- tax on mortgage insurer fees