Buying your first home is a huge life event and can sometimes cause a bit of stress. Figuring out where to start can also become a bit overwhelming. All the questions you begin to ask yourself - how much can I afford? Who should I talk to? How much money do I need to put down? To help get you started, and reduce some of that unnecessary stress, we sat down with our Mobile Mortgage Specialist Team to give us their advice on what to know and consider when purchasing your first home.
As it’s one of the biggest decisions of your life, planning is essential to ensure you don’t get in over your head. Planning early is key and includes asking yourself some important questions including:
- What type of home do you want to buy? A condo, residential home or perhaps one that has a legal suite in the basement allowing for potential income – or what some like to call a mortgage helper?
- How long do you plan to live in this home? Is it your starter home? Forever home? What does your life look like in the next 5-10 years? Family, pets, etc. – will this home need to be able to grow with you?
- What can you afford? What payment would you be comfortable paying that allows you to still live comfortably? Does this amount include all home-associated costs such as utilities, maintenance, etc.? What other expenses impact your affordability such as debt repayment, etc.?
- How much money do you have saved for a down payment and what will you need?
When starting to think about purchasing a home, these are just a few of the questions you need to be asking. We recommend speaking with an expert, such as a Mobile Mortgage Specialist, to walk you through these questions and to help you come up with a plan. Doing so will allow you to become focused and help you understand exactly what you need to do to get you where you want to be.
Pre-Approvals & Affordability
Once you have an understanding of what you’re looking for, it’s important to determine how much money you can borrow. Getting pre-approved sets parameters for the amount of loan you’d be approved for and helps ensure you’re not looking at homes outside of your price range.
When getting approved for a mortgage a number of factors are considered including your income, length of employment, credit history, monthly obligations, assets, liabilities, etc. Debt is also a big factor when it comes to being approved. Credit cards, lines of credit, and loans can have a huge impact on how much you’re approved for.
Also, it’s important to understand how your pre-approved amount equates to your payment cycle. Is this amount something you can afford each month, bi-weekly or weekly? And how long do you want to be paying this mortgage off? Twenty years? Twenty-Five? A longer length of time may make your payments lower but can cost you more interest in the long run.
Remember, whatever you are pre-approved for doesn’t mean you need to spend the full amount on a home. Purchasing a lower-priced home means you’ll need to borrow less money, potentially smaller payments, and the ability, if it works within your budget, to potentially pay off your home more quickly.
First-time homebuyers are required to put down a minimum of 5% of the purchase price – for example, if you’re looking to purchase a $300,000 home, you’ll need to put down $15,000. Seems like a lot, right? And another reason why planning is essential.
Start saving for a down payment as early as you can. Consider putting into a savings account, Tax-Free Savings Account or RRSP. Take the ‘pay yourself first’ approach and put a certain amount of money into a separate account each payday. Label the account something that means something to you such as ‘down payment’ or ‘house account’ as you’ll have a better chance leaving the money alone. Also consider putting any extra money you receive such as a work bonus, gift money, money you make selling some of your own personal items, income tax refunds, etc. into this account to help grow your savings faster.
Programs and Incentives for First-time Homebuyers
There are several programs and incentives for first-time homebuyers that you should be aware of.
- The Home Buyers’ Plan allows first-time homebuyers to withdraw up to $25,000 in a calendar year from your RRSP to buy or build a qualifying home. You will need to repay these funds back into your RRSP within 15 years. For more information on this program, click here.
- Saskatchewan’s first-time home buyer’s tax credit provides first time homebuyers with a provincial non-refundable income tax credit of up to $1,075 to eligible taxpayers on qualified homes. More information on this program can be found here.
- The Head Start Equity Builder Program allows first-time homebuyers to take a personal loan as a down payment to purchase a new home constructed by the HeadStart on a Home Program. Learn more about the program here.
Also, consider looking at what local builders have to offer homebuyers. During certain times of the year, or in certain community developments, builders offer incentives such as no down payments or down payment grants to encourage homebuyers to purchase through them.
Other Considerations/Things to Know
There is a lot to know when it comes to purchasing and owning a home, and it can be hard to think of it all by yourself. Along with the advice above, here are a few additional things to know and consider.
- Lean on your experts. Don’t try to do this alone and work with people who are experienced and have your best interests in mind. Your realtor and mortgage specialist are there to offer you a wealth of information to help guide you step by step and ensure as little stress as possible during this exciting time.
- Set money aside for all the additional fees associated with purchasing a home such moving expenses, inspection fees, home and life insurance, utility hookups, taxes, lawyer’s fees, etc. We recommend setting aside 1.5-2% of the purchase price to help cover these different costs.
- Filling your new space can come with a cost. The great part about planning in advance means you can also start setting money aside for furniture, household items and your first grocery trip to fill your cupboards with all of the staple items. Another great tip is to create a list of items you’ll need, watch for sales and purchase throughout your planning timelines, putting anything into storage until you move. Be sure to share this list with family and friends for ideas on what to get you for birthdays and Christmases.
- Use www.expressaddress.com to have your mail forwarded to your new address, update your address within existing companies and even set up your utilities for your new home. It’s free and will help you save time.
- Budget. Budget. Budget. With new home ownership comes new expenses, and it’s important to have an understanding of your money and budgeting for your newest life chapter. When setting a budget, be sure to put money aside for some of those unexpected expenses such as maintenance or breakdowns. Check out our Setting a Budget blog to get you started.
Buying a home for the first time can be stressful but with a bit of planning, and working with a team of experts, you’re transition into home ownership can run smoothly. Remember, you’re not in it alone. We’re here to help.
Ready to start your first-home plan today or have additional questions? We’d love to talk to you – contact one of our mortgage specialists today and let’s start planning your future today!