Tip #1: Pre-qualify for a mortgage first and then start house hunting.
According to the survey results, many homebuyers pre-qualify for a mortgage well after they begin the house hunting process. The risk here is that you might find your ideal home only to discover you can’t qualify for the mortgage. To avoid disappointment, pre-qualify first and then start house hunting with clearly defined expectations.
Tip #2: Understand the opportunities and risks of home equity lines of credit.
You should also know that iIf you have a down payment of more than 20%, your bank will likely offer you a home equity line of credit (HELOC) linked to your mortgage. Be sure to understand both the opportunities and risks to your long-term financial well-being that come with HELOC products.
Tip #3: Find out if you’re financially ready to own a home.
One third of first-time buyers admit they don’t have a good understanding of the full cost of homeownership. Owning a home goes well beyond the mortgage payments. Property taxes, condo fees, utilities, and maintenance costs all need to be factored in. CMHC’s Homebuying Step by Step gives you access to calculators, checklists and an online workbook to help you find out if you’re financially ready to own a home.
In anything, your chances of success hinge on how well you prepare. In the six months to a year before buying a home, keep a detailed budget to understand exactly where your money goes. You should compare that breakdown to what it might look like with the added expenses of a home to see if you can afford a mortgage. It might sound surprising but the survey revealed that only a third of buyers go through this simple yet revealing exercise.
Tip #4: Make sure you’ve got a home that meets your needs without compromising your financial situation.
More than 90% of surveyed first time buyers plan to spend the maximum amount they can afford on their new home. Buying a home is a complex decision with many considerations including the neighbourhood, the lot, and the size and type of home. At the end of the day, you want to make sure you’ve got a home that meets your needs without compromising your financial situation.
Tip #5: Set aside 5% of your income as an emergency fund to be ready – just in case.
Good planning can help you prepare for unexpected costs but no one has a crystal ball. Almost four in ten of those surveyed say they’re either uncertain or unlikely to have a financial buffer should they face surprise costs. To give yourself some peace of mind, it’s good practice to set aside 5% of your income as an emergency fund to be ready – just in case.