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Getting ready to buy your first home can be really exciting. But it can also make you feel overwhelmed and stressed out. After all, buying a house is always a complex transaction, and it's normal to feel intimidated by the process if you've never done it before.
From saving money for the right down payment to hiring a reliable real estate agent to help and guide you, here are seven tips for first-time home buyers.
Start with saving money for a down payment
A down payment is a sum you must pay upfront when buying a house. It's a small percentage of the total cost of the home you want to buy. The higher your down payment is, the lower your monthly mortgage payments should be.
This is why it's in your best interest to save enough money to make a down payment higher than the minimum required. For example, in Canada, the minimum down payment required for a house with a purchase price of $500,000 or less is 5% of its purchase price.
Try to save money for a down payment of at least 20%, which would not require mortgage default insurance.
Improve your credit score if it needs some improvement
You will need a mortgage to buy your first home. A high credit score would help you get approved for the mortgage amount you want and benefit from an attractive interest rate. If you already have an excellent credit score, congratulations. You should have no trouble getting approved for a mortgage.
However, if your credit score needs to be improved, start working on it as soon as possible. Make sure there are no errors on your credit report, pay off your debt, and pay all your bills in full and on time.
Compare your mortgage options and get pre-approved
Getting pre-approved for a mortgage is essential before searching for your dream home. This will limit your options and ensure you don't fall in love with a house you can't afford to buy.
When applying for a mortgage, you can either apply directly to a lender or work with a broker. Mortgage brokers don't lend money to you. They analyze your situation, connect you with a mortgage lender that fits you best, and negotiate on your behalf. As a first-time home buyer, contacting a reliable mortgage broker is a wise idea.
Be realistic about how much mortgage you can afford
Homeownership comes with many costs that influence which home you can afford to buy. You must pay for insurance, taxes, moving costs, utilities, and potential repairs or improvements.
Look at your current monthly income and be realistic about how much mortgage you can afford. A mortgage lender will not lend you money if they can't be certain that you can make your mortgage payments month after month.
Decide which mortgage amount you can afford or consider increasing your monthly income.
Check if you qualify for a tax credit or an assistance program
Different tax credits and assistance programs help first-time home buyers reduce home buying costs.
Living in Canada could be eligible for different incentives, such as the Home Buyer's Plan, the GST/HST New Housing Rebate, or a Tax-Free First Home Savings Account.
Check if you qualify for one of these and if another assistance program is offered in your area.
Start searching for your dream home
Now that you know how much you can afford your first home, start shopping around. Start by making a list of what you want. What would your dream home look like? How many bedrooms do you need? Which neighbourhood would you like to live in?
Look at listings for homes you can afford. If you find a home that meets your criteria, see if you can schedule a visit. However, you might have to compromise if you don't find anything that meets your needs in a location that interests you.
Hire a great real estate agent
The last tip for first-time home buyers is to hire an experienced real estate agent. Instead of figuring it out independently, let a professional guide you through the closing process.
They will advise you on arranging a home inspection, negotiating with the seller, getting the right home insurance plan, and dealing with all the paperwork. This will finally make your dream of buying your first home come true.
