For most Canadians, it is a dream to own a house. Owning a home not only allows you to amass wealth but also gives you complete control over your living situation when compared to renting. However, the cost involved, hard work and responsibilities are not the same for everyone. You need to ensure that you prepare yourself financially before making such a life- changing decision.

Finances For A First-Time Home Purchase

Below mentioned are steps that help you to decide if you are financially stable for a first-time home purchase:

1. Have a steady flow of income

Unless you have an insurmountable amount of money, you will need to apply for a mortgage to purchase a house. Regardless of being self-employed or a full-time employee, it solely depends on your income to see how much of a mortgage you can qualify for. Ideally, lenders want to see if you’ve full-time continuous paid job. This is crucial to lenders because they do not want to take up the risk with someone who’s not employed. Steady employment gives lenders peace of mind. If you are a freelancer or a small-business owner, a lender will want to see a consistent income stream.

2. Take steps to improve your credit score

The higher your score, the more a lender will trust you, including offering you the best mortgage rates and terms. It is a number that lenders take into consideration when approving a mortgage; because it gives them a fair idea to determine how likely you are to repay the loan. If your credit score is below 600, you might find it hard to get your mortgage application approved. Consider paying off any high-interest debt before applying for a mortgage. Therefore, it will help you to improve your credit score, and the higher the credit score, the better chances of you getting approved for a mortgage.

3. Save up for a down payment

To qualify for a mortgage when purchasing a house, you need to have a down payment. The property’s down payment depends on the market value of the property. For example, if the value of the property is $500,000 or less, the down payment required is 5% of the value. Saving more money will ensure that your monthly payments will be lower.

4. Familiarize yourself with the government incentives

There are several government incentives offered to first-time homebuyers to help them achieve their dream. For instance, the Tax-Free First Home Savings Account (FHSA) where those looking to purchase a house can contribute $8,000 annually up to $40,000 to their FHSA. The capital gains earned are tax-free.

Furthermore, the Home Buyers Plan (HBP) allows a person to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to purchase their first house. If a couple is trying to buy a home, they can together access up to $70,000. The best part is; you can repay what you withdrew over a period of15 years.

Another program is the First-Time Home Buyer Incentive (FTHBI). This is where the Canadian government will provide up to 10% of the property’s purchase price. This increases your down payment, and at the same time lowers your monthly repayments. In this situation, the government will take a percentage of your home’s equity. For example, if the scheme provides you with a 5% down payment, the government will get the same percentage when you decide to sell your house.

5. Get pre-approved and create a realistic budget

The best way to prepare yourself as a first-time home buyer is to get your mortgage pre-approved. This also helps you create a realistic budget for what type of property you can purchase based on your financial situation.

If you are a first-time home buyer in Ontario and need help securing a mortgage, you can rest assured; as the team at Sure Loan For You will negotiate on your behalf ensuring a hassle-free process. Talk to the team today to get your queries addressed.

Posted in Mortgage Service