Before you jump into the world of homeownership, there are some important things to think about and do to help set you up for success!
1. Start saving for a down payment
The thought of saving up a large sum of money for a down payment can sound overwhelming and somewhat unattainable, but as the adage goes: There’s no time like the present! Start today by setting aside a percentage of your monthly income in savings, and you will be surprised how quickly the funds can add up! If and when you receive unexpected additional funds, decide ahead of time that you will set these aside into your savings.
As you are saving, set a goal for how much you need for your down payment. In Canada, the minimum down payment is a percentage of the purchase price of the home, and this will vary depending on which bracket your new home falls into. The guidelines are:
If the purchase price is $500,000 or less, the minimum down payment is 5%.
If it is above $500,000 and below $1.5 million, the minimum is 5% of the first $500,000 plus 10% of the portion above $500,000.
If it is $1.5 million or more, the minimum is 20%.
2. Get Pre-approval to determine what you qualify for
In the pre-approval process, a bank or lender looks closely at your credit reports, employment history, etc., and determines whether or not you are a suitable applicant for a mortgage. They also determine the maximum amount of a mortgage that you qualify for, giving you a better idea of what you can afford in your home purchase.
Your pre-approval and rate hold are usually valid for 90 to 120 days, depending on the lender.
With your pre-approval, you will be given a locked interest rate, which is a commitment from the lender to hold a specified interest rate for the length of time your pre-approval is valid. You are not obligated to use the lender of your pre-approval for your actual mortgage, however if interest rates increase significantly during your pre-approval term, the rate lock provided through that particular lender protects you from a higher interest rate when it comes time to buy.
3. Determine your budget
Figure out what you will comfortably be able to afford by creating a monthly house budget. List all sources of revenue and foreseeable monthly expenditures, including approximate mortgage payment, utilities, and other obligatory expenses (e.g. student loan, car payment, etc.). By doing so, you will better be able to determine what you are comfortable with for your monthly mortgage payment. In the aforementioned pre-approval process, the maximum mortgage you qualify for may not necessarily be the amount with which you are comfortable. Determine your desired cash flow and you will have a better idea of the purchase price of your future home.
4. Find a good REALTOR® who knows your area
We’ve got you covered here! REMAX First has about 200 agents in one office, serving Calgary and surrounding communities. Contact us today to get connected with a REALTOR® who will help you with your real estate goals.
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