There’s something about the clock striking midnight. It brings an exhilarating sense of renewal. And the opportunity in the air. Amongst the countless resolutions swirling in your mind, there’s a shimmering dream for a first-time home buyer, a vision of stepping across the threshold to a new home. Buying a home in Canada, you can almost picture a beautiful abode nestled amidst snow-kissed mountains or by the tranquil shores of a pristine lake. It stands welcoming you with open arms as its newest story member. Amidst the maple-scented breeze and the promise of new beginnings, you envision a home that mirrors your aspirations and a cosy hearth to create cherished memories. This new year, make that fresh start. The perfect home awaits you and will probably be your best New Year resolution. And one that you will fulfil. Here are some tips to help first-time home buyers see their path through.
2024 Home Goals: Resolutions for First-Time Buyers
Here’s a curated list of essential best practices to follow before purchasing your first home, designed to help you have a smooth and successful buying experience.
Track Your Expenses
The first step in home-buying is to determine the costs of buying a home in Canada and prepare financially. Keep track of your expenses to learn where and how you spend the money. This will help you understand and identify where you are overspending. Follow a few simple steps to monitor your expenses:
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- Create a spreadsheet and input each of your purchases manually.
- Install a money-monitoring app on your phone. Mint, Wally and Acorns would work perfectly.
- Access your credit score by checking and rechecking the usage of your credit card.
Track the expenses for at least one month so that you will be able to find out where you need to cut the expenses and how much you need to save in the upcoming months.
Start Saving for a Down Payment
Once you have tracked your expenses and monitored where you are overspending, it’s time to start saving for a down payment. Make a budget for you that seems practical and reasonable. Make sure to allocate a certain amount of money for your savings account each month. You just need to make a few changes in your spending to be able to save money every month and add up your funds over time. Cut nonessential living expenses like eating out, gym memberships, magazine subscriptions, etc. Stay disciplined with your budget and you will certainly be able to see a notable growth in your savings which will further help you make a significant down payment.
Enhance Your Credit Score
Your credit score is a major factor that helps lenders to analyse your eligibility and credibility for buying a home in Canada. If your credit score seems perfect to the lenders, you will have better chances to secure a loan for the home. If your credit score doesn’t qualify the requirements for the loan, you will have to contact a Mortgage Loan Originator to understand and learn how you can improve your credit score.
Obtain Pre-Qualification
You need to get pre-qualified for a mortgage loan. Pre-qualification is a way to determine your eligibility for the loan. It will also help you know interested parties whosoever is willing to sell you a home. This will increase your chances of sealing the deal at a desirable price.
Leverage Government Incentives for First-Time Buyers
Canada’s housing market offers various programs to support first-time home buyers. Stay updated on new government incentives introduced in 2024, such as tax credits, down payment assistance, or lower mortgage rates. These schemes can significantly reduce the financial burden of purchasing a home.
Reach Out to a Real Estate Agent
It would be beneficial for you to hire a real estate agent because they will provide you with proper guidance on the home-buying process. This will make the process easier for you since you will have good knowledge about how it works. Reach out to a Mortgage Loan Originator and take their recommendations on a real estate agent of good reputation and credibility. They can help you get the best ones in the town.
Start your Hunt for the House
Visit real estate websites to find homes best suited to your budget and requirements. Discover available houses in the market on SquareYards.com. Moreover, you can have the opportunity to visit open houses in person, so go and explore. You can take pictures and notes of the homes you visit to make the comparisons further.
Create a Budget for Home Maintenance
You have no idea how much it will cost for the home maintenance and utilities. However, you can request the utility bills of the last year from the seller to know a rough estimate of the cost for home maintenance. Moreover, the home exploration will give you an idea of the home repairs and alterations you will need to make. So you can easily estimate the money to spend on maintenance.
Keep Consideration of Other Expenses
You need to consider some other costs as well such as property taxes, homeowners insurance and not to forget, private mortgage insurance (in case your down payment is below 20%). The factors for the homeowner’s insurance cost include the location of the house, its size, the age of the house and the value of your possessions. The property taxes will depend on the taxable value of your home and they will be collected by the governments of the county, city and state.
Make Sure the Debt Doesn’t Increase
Remember that the mortgage lenders consider your income and employment history and thus, they will examine your job history and debt-to-income ratio. The lenders consider these two major factors to analyse how much of a mortgage loan you can afford. Do not make exorbitant unnecessary expenses since they will ultimately escalate the amount of your debt.
The Home Inspection is a Must
You should take advantage of this step. Visit the homes and examine the issues with the property so that you can have peace of mind while buying. Otherwise, you will not be able to identify the problems and might end up purchasing a home that is not in good condition. Be straightforward and ask questions during the home inspection. Take pictures for proof that might be helpful in the future.
Learn About the Home Appraisal
An appraiser will be arranged by your lender so that you can determine the fair market value of the property you are planning to buy. However, you need to sign a home purchase agreement first and then the appraisal happens before the approval of your loan by the lender. The reason for arranging an appraiser is to save you from paying more for the house than its actual value. However, remember that appraisals usually take 14 days to complete. In case the appraisal is below the expected, you can negotiate and appeal the appraisal assessment. Else, you can ask for a second appraisal.
Get all Set for Closing Costs
Closing costs are usually 2-5% of the loan principal and they differ from state to state. These costs generally include application fee, origination fee, an appraisal, credit report fee and more. Your lender and real estate agent will have a proper discussion with you regarding closing costs. Follow these tips to get prepared for closing costs:
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- Reach out to a lender before starting the home inspections.
- Make the budget for closing costs along with the down payment.
- Assess each cost thoroughly once you receive the Closing Disclosure. Compare the costs with your loan estimate.
Close a Deal on Your New Home in Canada
Closing on is the final step of home buying and the whole feeling is freaking amazing. When you are about to close on your new home, get prepared with some important documentation and gear up to sign so many papers. You can ask your lender and real estate agent as many questions as you can pertaining to the closing day.
Wrapping Up
Since New Year is around the corner and is one of the best times to buy a home in Canada, gear up to make the best New Year resolution and turn your dream of buying property in Canada into reality. Square Yards is here to help first-time buyers get there and begin a new life in one of the world’s most beautiful countries.
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Frequently Asked Questions (FAQs)
When purchasing your first house, assess your financial readiness and save for a down payment. Improve your credit score for better mortgage options and seek guidance from a real estate professional to navigate the buying process efficiently, ensuring informed decisions and a successful purchase.
Canada’s down-payment plans can differ for the kind of property available or the market trends at the time of purchase. First-time buyers typically aim for a minimum down payment of 5% of the home's purchase price. However, putting down a higher down payment, if feasible, can reduce mortgage insurance costs and overall borrowing expenses.
First-time home buyers in Ontario can benefit from the Land Transfer Tax Refund, which provides a provincial land transfer tax rebate. Additionally, eligible buyers may qualify for the First-Time Home Buyer Incentive program. This is categorised as a shared equity initiative. Eligible applicants can seek a loan of 5% or 10% of the home's purchase price, contingent on the property type. Repayment of the incentive occurs after 25 years or upon selling, along with a share of any appreciation in the home's value owed to the government.
In Canada, permanent or non-permanent individuals with specific conditions, such as a valid work permit, can purchase a property. It's essential to note that owning property does not automatically grant permanent residency or alter the conditions of one's visa status.
The new regulations bar non-Canadian citizens or permanent residents from buying residential properties for two years, after which they will expire automatically. These regulations specifically forbid foreign commercial entities and individuals without Canadian citizenship or permanent residency from acquiring residential properties, encompassing various housing types like detached homes, condos, and more. How do I buy a new house for the first time?
How much do first-time home buyers have to put down in Canada?
What are the benefits of first-time home buyers in Ontario?
Can you get PR if you buy property in Canada?
Can I buy a house in Canada without PR?
