Been thinking about homeownership but just don’t know where to start?
First step, reach out to a mortgage broker or lender to understand what budget your income can potentially acquire and get your pre-approval reviewed/started! Employed & self employed are viewed completely differently. Factors like credit score, amount of debt and its ratio to what you make against the qualifying rates (stress test). All are keys to determining where your scenario stands. You may be ready to buy now or not just yet. However finding this out needs to be your first step. This sets your baseline of expectations and what you will be able to buy. As well makes sure you are ready to go, when you want to be. Nothing worst then waiting a year to buy and you don’t qualify because you never checked. Or you qualify but with the terms that are less than ideal due to things on your credit.
Mortgage brokers over lenders, who do I use? I prefer the broker route when it comes to lending, as often they go to bat for you harder and are also a bit more flexible to deal with. They don’t get paid until you get your mortgage. So I find they just work a bit harder for your business. As well, they often can acquire more competitive offers. They shop multiple lenders instead of 1. They have access to both A lenders and B lenders, and are free to use! A good broker / lender (when needed) will provide you the steps in order for you to qualify for what you want. So remember that when prequalifying yourself! If your not ready to buy just yet, your broker/lender should be giving you a “to do list” in the meantime to get you ready and help you achieve your approval.
Next are actual funds needed to buy your home. You have to qualify for the mortgage and you need to have your downpayment. Which depending your scenario downpayment can be anywhere from 5% - 25% of the purchase price. Factors like self-employment, credit score/debts, type of property, value over $500,000, value over $1,000,0000… all are deciding factors of your downpayment. Which your mortgage broker/lender will let you know the details of this. You don’t pay the downpayment until you buy a place. However, you will need to show where the downpayment is coming from and that you have it. Once you do find a property and are locked into a pending offer. You’ll pay a deposit with your offer to purchase. Which is refundable if you decide to not waive conditions. Often this is due within 2 business days of your offer being accepted. This is part of the down payment and not on top of, so you will pull the money form that. You will also have your property inspections cost, which is normally $500 - $1,000 + depending what you are buying/inspecting (condo, house, acreage, outbuildings, wood fire place, size, etc…).You will also need funds for your lawyer which will include the land transfer cost. Which this often will range from $2,000 $3,000 give or take.
“First Time Home Buyers Program”. You will want to be aware of the government program allowing you to withdraw up to $60,000 from your RRSP without any tax implications! You then have 15 years to pay that amount back into your RRSP or you’re taxed on it. Repayment starts the second year from the year you withdrew. Which each year your contributing back to your RRSP, it’s counted towards your repayment. You actually save for a home much quicker this route, as the money being saved is not tax yet! Easily (whatever your tax bracket is) 35% faster using an RSP then using after tax dollars (regular savings, cash, TFSA). You also get a tax credit when you contribute to your RSP. I’ve had many clients take advantage of that and deposit their downpayment into their RSP. Creating the tax credit/refund next tax season. Then withdrawing it through the program.
Ready to start your search or have questions, reach out!
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