You’ve decided you want to buy a property!
Now, what? Whether you are a first-time homebuyer, buying your second or third property or you are an investor, there are couple of steps you should do to prepare. Here, I will share my top five.
Step 1: Do your budget and decide on what you can afford without becoming so called ‘house poor’, be diligent, take all your expenses into consideration including fun activities, vacations, shopping for clothes etc…You want to make sure you will still be able to live comfortably after purchasing your new home.
Step 2: Figure out your down payment, the more you can put down the better! Just as a side note: for first time home buyers 5% is the minimum on the first $500,000 of your mortgage, if the home you’re purchasing is over $500,000 then the minimum deposit goes to 10%, so it works out to 5% of 500,000 and then 10% on the remaining amount. If your purchase price is $750,000 then it will be 5% of 500,000 which is $25,000, and then $750,000 minus $500,000 is $250,000 and 10% of that is another $25,000, so your minimum deposit on a $750,000 property would be $50,000. That type of down payment will require CMHC premium. If you want to avoid that, your minimum would be 20%. Also, getting larger downpayment qualifies you for better interest rates.
Step 3: Figure out the expenses associated with the purchase of the property (things like: lawyer fees, deposits, land transfer, mortgage insurance, appraiser fee, inspection fee, moving costs, and penalty on the current mortgage if you already own a property). Please note that there are no fees for realtor services for buyers.
Step 4: See a mortgage broker, better yet, see couple of them. Choose somebody you’re comfortable with, find out what they can offer and how their process looks like. What can you expect from their pre-approval? Do they go through full process like checking credit, employment history etc., or do they start that process only after you purchased the property? Is your pre-approval conditional? Usually it is, but find out what the conditions are. Get their pre-approval in writing . On a side note: we talked about appraiser fee in step 3, that fee could be waved by the lender sometimes, so it is worth inquiring about when interviewing mortgage brokers.
Step 5: Decide what property suits your life style and your budget. Don’t overlook anything. Every kind of property has its pros and cons. Review all, and see what matches your requirements best.
These steps should help you get started, if you would like more detailed information, you can request my Home Buyer’s Guide, or you can book a no obligation consultation appointment with me (email@example.com).