Contributed by Jibril Yassin.
Buying your first home is the first step towards achieving adulthood, a sign of when you know you’ve made it. With that said, it can be stressful! Being a homeowner is a commitment that comes with a lot of work, one we are familiar with at Realty Unleashed. We’ve helped out plenty of people looking to buy homes for the first time and now it’s time to share our knowledge!
Here's a primer on what you need to know while on the search for your first home.
Know Your Numbers
Buying a home will likely be the most expensive purchase you will make in your life. It’s easy to assume you can save enough, but a lot harder to put into practice.
Creating a budget can help you map out a plan to help you set aside money for your home and give you a framework to save money effectively. It allows you to take a look at all the costs involved: a down payment, closing costs, property taxes and importantly, it will help you determine the price of homes you are afford based on your income and credit rating.
Know Your Mortgage
You’ll also need a mortgage to help you pay down the rest of your house payments, so knowing how mortgages work and what you’ll need to provide is essential.
What kind of mortgage should you go for? Open or closed? Low or high ratio? Fixed or variable? There's no one type that works for everyone, so your best option is to research them all to better determine what works best for your situation. Make sure to shop around and determine what are the most competitive mortgage rates right now.
If you’ve created a budget, you may have an idea of what your mortgage payments need to be like. If not, that’s what mortgage calculators are for! You can include your down payment, repayment schedule and total selling price to better determine the finances you’ll need to help you save money in the long term during your mortgage.
Lastly, look into getting a mortgage pre-approval before you proceed. Obtaining a mortgage pre-approval will go a long way to ensuring good faith from the realtors you deal with.
Know Your Down Payments
Traditionally, a down payment is 20% of your home’s purchase price. The minimum amount can change depending on the price of the home, but generally, you can expect to put anything between 5% and 20% as a down payment. This can make the difference in clinching your own place but the downside of a smaller down payment means higher payments to deal with later on.
Our advice? The bigger you can make the down payment, the better. A 20% or higher down payment can allow you to save big on mortgage insurance and monthly premiums.
Know Your Programs
Buying a home for the first time just got a lot easier! With the help of the newly introduced First-Time Home Buyer Incentive, no longer leave first-time home buyers left in the dust.
Coming in the form of a shared equity mortgage with the government, the incentive provides prospective home buyers up to 10% of a home's purchase price financed and put towards their down payment. If you’re eyeing a $500,000 home, you could get $50,000 from the FTHBI program. The incentive can help home buyers save on their mortgage payments and monthly premiums, making it easier for homebuyers to close the gap on their dream home without adding to any unnecessary financial burdens.
The FTHBI isn’t the only program available for first-time homebuyers. There are a number of government programs that can help you save money when it’s time to make an offer. You can claim up to $5,000 through the Home Buyers' Tax Credit on the purchase of a qualifying home to help recover closing costs. There’s also the Home Buyers' Plan, which allows the option of withdrawing up to $35,000 from your RRSP to serve as a tax-free down payment. If you bought a newly built home or was involved in substantial renovations, you may be eligible for the GST/HST New Housing Rebate on a portion of the sales tax.
Want to learn more about home buying in Edmonton? Give us a shout!