New Year's resolutions for home buyers
The time for New Year's resolutions is here. And we have some for home buyers to accomplish in 2019.
When the new year hits, resolutions are the topic of conversation. Some want to go to the gym, others want to learn a new language, and maybe you’ll choose the greatest resolution of all...To become a homeowner. However, before you enter the real estate market, there are a couple of other resolutions you need to accomplish first.
Here are our 9 New Year’s resolutions for home buyers:
Work on your credit
You can start the new year by working on your credit score to prove the lender you’re trustworthy. It’s a goal that will take time (possibly the whole year), but in the end, the effort will pay off with a good mortgage deal.
Our advice is to follow three simple rules.
Don’t spend more than 30% of your credit.
Pay on time.
Pay in full each month.
Check your credit regularly to make sure you on the right track!
Estimate your budget
In the new year review your finances and set financial goals. Crunch the numbers to get your home buying budget, but the important thing is to be realistic. If you go into the home buying process with a high number that stretches your budget, you will be in a risky situation.
To work out an appropriate home budget, you need to do two things:
Understand your debt-to-income ratio (DTI), the number that lenders will look at in your mortgage application.
Translate your budget over to real life listings in the current market to understand what your budget can get you. See the running costs calculator in each listing for a monthly estimate.
For a detailed plan, read how to work out your home buying budget.
Save for a downpayment
Saving money is a like any New Year’s resolution. Most of the times, it doesn’t even make it to the summer. When you save money for a down payment, it’s important to not only see it as a resolution but as one of your financial goals.
To save efficiently, you need a specific number to aim towards. Calculate your home buying budget, and you’ll get an estimate of how much you should buy. Usually, it is 20% of the listing price. Set a specific goal and ways in which you can save every day.
Read our tips to save for down payment.
Decide which type of property to purchase
As a home buyer who hasn’t started looking at properties yet, there is one question you should ask yourself…
Which type of property should I buy?
It could be a condo, a townhouse or a single-family home. Whatever you choose, it needs to fit your current and future needs. To answer the question, inform yourself about the advantages and disadvantages of each type of property. Make sure to research what the condo lifestyle is all about and how it differs from a family home.
Search for mortgages
The smartest move you can make in your home buying journey is to search for financing early on and get a mortgage pre-approval. With a pre-approved mortgage, you will be one step ahead during your house hunt. Research which mortgage rate is right for you based on your financial situation and needs. A variable and a fixed rate will affect your budget in different ways.
If you need extra support, a mortgage broker is the right person to talk to. Their job is to secure you the best mortgage rate by looking at what different lenders offer while helping you through the application process.
Know your interest rate
Get informed about interest rates in the new year. They will affect your budget. If you go in blindly, you can end up paying more interest each month and less of the principal.
Some of the factors that affect your interest rate are under your control (the type of mortgage rate, your credit score, your down payment, etc.), while others are under the control of others. An example of this is the Bank of Canada’s benchmark interest rate for all lending institutions. They might raise them or lower them depending on the economic outlook.
Research government programs
The Government of Canada offers help for first-time home buyers. There are three main programs to help first-timer: The Home Buyer’s Plan (HBP), First-Time Home Buyers Tax Credit (FTHB) and the GST/HST New Housing Rebate. Research each of the programs and choose the one that you qualify for.
Find your home buying team
As a first-time home buyer, the purchasing process may be unfamiliar. Thankfully, your home buying team is there to guide you.
Each person in your team has a different role. Lenders, real estate lawyers, real estate agents, appraisers and home inspectors help you with a specific step in the transaction. Start searching real estate professionals, read their reviews and get them on your team early on.
All these New Year’s resolutions get you closer to the ultimate goal. When the year is over, you will see that the effort was worth it and that your home is the greatest investment you will ever make! Start your search today to see what the market has in store for the new year.