by Nathalie Rivard
Buying a house is a huge decision that can send you on a roller coaster of emotions. However, proper preparation and working with a knowledgeable Realtor can go a long way towards reducing the stress that comes with this big purchase.
To help, we examine three of the most common topics: budget, house hunting and purchasing and negotiating. We hope the tips and tricks will help you take on this milestone life event with more confidence.
This week’s topic: your budget.
Tip #1: minimum 5% initial down payment — but more is better
You should save as much as you can before you think about buying your first property because the higher the down payment, the lower your mortgage. Although you can buy a house with as little as 5% down, it’s best to aim for 20% or more if you’re able to save that much.
A sizeable down payment also shows your financial institution that you’re serious, which is particularly important if you’re a first-time home buyer. Later on, as you build up equity, you’ll have more access to cash for a down payment.
There are programs that support first-time home buyers, including one that allows you to withdraw funds from your RRSP for a down payment and to repay the funds over many years. However, no interest will be earned on the withdrawn funds until they are repaid to the account. For eligibility criteria, check with the Canada Mortgage and Housing Corporation.
Tip #2: set a budget and stick to it
Before you even start looking, you need to set a budget and calculate how much you can afford to spend each month after the initial down payment. The general rule is that your monthly mortgage payment should not exceed 25% of your net monthly income. Once you’ve determined the amount you can afford, you’ll know your range when house hunting.
And don’t forget to factor in the other expenses associated with owning a home: electricity, heating and cooling and maintenance. Calculate how much your monthly mortgage payments will be if interest rates go up.
Figuring out how much a new home will cost is just as important as finding your perfect home. You can calculate your estimated mortgage payments with our online Mortgage Calculator at winnipegrealestatenews.com
Online calculators are a great place to start when you are considering purchasing a property. Always consult a professional financial advisor before making any major financial decisions.
Tip #3: get pre-approved
One of the stresses associated with buying a home is finding out whether a financial institution will lend you the money you need for a mortgage. One way to reduce that stress is to get a pre-approved mortgage. That way, you’ll know the maximum amount you can afford.
A pre-approved mortgage will also demonstrate to the seller that you’re serious and qualified and is a great way to bend the odds in your favour during negotiations.
Good luck with your house hunting! We hope these tips will boost your confidence. And, as always, having a Realtor to guide you through this process is the best way to make sure your home buying experience is stress free.
Stay tuned for the next topic in the series: house hunting.