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Home Buying Tips Every Home Buyer to Be Should Know
Home Buying Tips
While buying a home is a big decision, there are also lots of small decisions to make along the way to homeownership. To help you navigate the process, we’ve gathered suggestions for avoiding some of the most common mistakes.
Know your budget
Set a budget. When setting your budget, calculate a monthly payment that you can comfortably afford. Then discuss this amount with your professional mortgage broker. Making sure you can meet your projected future home payment is probably the most important part of successful homeownership.
Include PITI (principal, interest, taxes and insurance) in your budget. Mortgage calculators will show you how much you’ll pay towards your principal and interest every month. Remember that you’ll also have to pay property taxes and homeowners insurance. While you may not pay your taxes monthly, it’s a good idea to set these funds aside each month and factor these costs into your monthly budget.
Know how much cash you’ll need at closing. When you buy your home, you will need to pay a deposit with your offer. The total down payment typically varies from 5% to 20% or more. Putting less than 20% down will typically require you to pay for default mortgage insurance (see more on that below). Closing costs could be about 1.5-3% of the total mortgage amount, and will include charges such as land transfer tax, lawyers fee, dsbursements, any pre-paid property tax, etc.
Budget for private mortgage insurance. For conventional financing, this is typically necessary if you don’t put down at least a 20% down payment when you buy your home. If that’s the case for you, you will likely need to pay mortgage insurance (this is through CMHC, Canada Guaranty or Genworth Financial). Make sure you know how much this cost will be and factor it into your monthly home payment budget.
Research your utilities. If you’re moving into a larger home than you’re used to, a home that is newer or older than you’re used to, ask your real estate professional if he or she can find out what the home’s energy bills have typically been. This can help prevent being surprised by a higher utility bill than you’re expecting. If you’re moving into a new community, find out about water costs, as well.
Don’t forget miscellaneous expenses. Be sure to budget for moving expenses, as well as additional maintenance costs. Newer homes tend to need less maintenance than older ones, but all homes require upkeep. If you’re considering a condominium remember to include condo fees and maintenance in your budget. In addition, keep in mind that you should have an “emergency fund” on hand to prepare for any unexpected changes in your income (like reduction in your wages, less over time or even job loss) or unexpected expenses (emergency). It is always wise to have a minimum of 6 months of living expenses in your account.
Manage your debt carefully after your home purchase. Sometimes your home will need new appliances, landscaping, maybe even a new roof. Planning for these expenses carefully can help you avoid one of the most common causes of missed mortgage payments: carrying too much debt. It’s important not to overextend your credit card and other debts so you stay current on your payments.
A smart start
Research your mortgage options. Find out the difference between the various types of mortgages so you’ll know which one is best for you. We have an encyclopedia worth of information in our site, feel free to browse and read about the many important topics.
Know your credit score. As soon as you decide to start looking for a home, check your credit with the two major credit reporting agencies: Equifax and TransUnion. If you find any mistakes that need to be corrected, addressing these issues early will put you in a better position when it’s time to buy a house.
Find a responsible mortgage broker. When you choose a mortgage broker, pick someone you feel good about working with. They should listen to you and put your needs first, and they should be able to explain your home mortgage options in plain terms. It’s a good idea to interview potential mortgage brokers to find the one that is best for you.
Get pre-qualified for a mortgage before you start shopping. Knowing what you can comfortably afford will let you keep your search focused on the homes that are right for you.
You can also use one of our many calculators to help calculate a monthly mortgage payment you can comfortably afford.
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