While it doesn\u2019t always make sense for everyone, home ownership is often a financial goal for many Canadians. It can be the ideal setting to raise a family, build wealth in equity, or set yourself up for retirement.<\/p>\n
A recent Globe and Mail feature shed some good news \u201cthat roughly three-quarters of Canadians live in communities where home ownership is affordable.\u201d But no matter where you live or how much the average house price is, there are certain steps you need to work through on your journey to home ownership.<\/p>\n
Before charging ahead, be honest with yourself if owning a home makes sense for your life goals and plans. If it does, then keep reading \u2013 we\u2019ve broken it down in a step by step list for how to get you to your home ownership goal :<\/p>\n
Establish how much you can afford<\/strong><\/p>\n Once you\u2019ve decided that all of the responsibilities that come along with home ownership is the right direction for you, start by taking a hard look at your finances.<\/p>\n Make sure your credit score is in tip-top shape while you\u2019re establishing how much you can afford. \u201cEnsure your credit score is in tip top shape leading up to getting preapproved. No late payments, try to minimize the amount owing, don\u2019t take out any new credit,\u201d said Planswell Mortgages\u2019 Samson Tella.<\/p>\n Do some market research and figure out where you want to live<\/strong><\/p>\n Establishing how much you can afford may provide some direction when it comes to where you want to look. Every town and city is different, but they\u2019ll all have areas that are considered more desirable and you\u2019ll see that reflected in the price.<\/p>\n Our advice? Sometimes the greatest gem is hard to see at first. Be open to fixer-uppers that you can build into your dream home out of and you\u2019ll often see a greater financial return over time.<\/p>\n Get pre-approved for a mortgage<\/strong><\/p>\n Because you\u2019ve been focused on maintaining a tip-top credit score since the time you started to establish what you can afford, the pre-approval process will be a lot smoother.<\/p>\n Another aspect to consider before you are in search of your pre-approval is the stability of your income. Don\u2019t change careers when you\u2019re looking to purchase a home. Lenders aren\u2019t very friendly when looking at applicants that are still in that probationary period.<\/p>\n If you have a fluctuating income, a lender will want to look at a two-year running average so have your notice of assessments ready if you want to qualify for more than your base hours\/salary. This includes OT\/Bonuses\/Car Allowances\/Etc.<\/p>\n Don\u2019t forget to disclose any additional factors that may help you get pre-approved. Have a lot of liquid assets? Have a cosigner? Have a side hustle that you claim on your taxes? Let your mortgage broker know. The clearer the picture your mortgage broker has, the stronger of a case they can make to get you approved for a mortgage that is right for you.<\/p>\n Establish your down payment<\/strong><\/p>\n When it comes to down payments, minimums are required. You\u2019ll need 5% of the purchase price for homes valued under $500,000 and 10% of the balance above $500,000 up to $1,000,000 purchase price. For homes with a purchase price over $1,000,000, you\u2019ll need at the very least 20% down, if not more, depending on the lender.<\/p>\n How are you going to get there? Save, save, save<\/strong><\/p>\n This is where a strict budget comes in handy. Try out our monthly budget calculator and try to be as strict with your spending as you can. Keep in mind that you have a goal you\u2019re working towards, and you\u2019re only going to get there by changing the way you\u2019ve been doing things when it comes to your spending.<\/p>\n Once you have that down payment all ready and saved up, don\u2019t be moving it around to different accounts \u2013 especially not locked in accounts like an RRSP. Sure, if you\u2019re a first-time home buyer the RRSP Home Buyers\u2019 Plan may be a fit for you, but there are many stipulations like the funds have to have been in the RRSP for at least 90 days. Check out this article to learn more about the ins and outs of the RRSP Home Buyers\u2019 Plan.<\/p>\n Find that dream home (or as close to as possible!)<\/strong><\/p>\n Now that you know how much you\u2019re going to be putting down, and you have a target price you\u2019re able to afford you can narrow in on where you can look for that dream home.<\/p>\n It\u2019s often recommended not going to your maximum mortgage amount when you\u2019re looking for your home. There are often things you forget when going from a renter to a home buye r: legal fees, property taxes, condo fees in some cases, water heater rentals, association fees\u2026 I could go on and on here.<\/p>\n Basically, don\u2019t go crazy here \u2013 stay well within your budget to ensure that you\u2019re not feeling stretched thin when it comes to all of the new expenses you\u2019re about to incur with being a homeowner.<\/p>\n You can sometimes expect to pay 1.5% \u2013 3.0% of the value of the home in other fees on the day of closing. This includes tax on the CMHC premium (if applicable), property tax, and many other fees. For example, if you\u2019re purchasing a $700,000 house you can expect to pay around $20,000 in fees on the closing date.<\/p>\n Secure your mortgage<\/strong><\/p>\n After you\u2019ve placed your \u201coffer to purchase\u201d, your next step is to contact your mortgage broker to get your mortgage approval. Your mortgage broker can help you here, but you\u2019ll also need a lawyer for their assistance.<\/p>\n Once you\u2019ve secured your mortgage, you need to fulfill the mortgage and legal requirements to fund your mortgage as scheduled to ensure your plan goes off without a hitch. This looks different depending on what lender your mortgage is coming from, but don\u2019t worry \u2013 your mortgage broker should hold your hand through this process to make sure you don\u2019t miss any steps.<\/p>\n Well, there you have it : a step-by-step guide to your journey from being a renter to a homeowner. While this is an overview and there are of course many more in-depth aspects to each part of your journey, there is one overarching theme here that will determine your success as a homeowner : having a financial plan.<\/p>\n