STEP 1 – Check your credit score
Getting a mortgage needs a good credit score. Check consistently for any errors and invest time in monitoring your credit score.
- Cut down credit card usage three months before applying for a mortgage.
- Clear down payments without any due.
- If buying a home with a co-buyer, then make sure your co-buyer’s credit score is good.
- A six-month time would probably take to improve your credit score.
STEP 2 – Analyze your budget and set your finances
Analyzing your budget lets you know whether you can afford to buy a new house. If yes, next step is to prepare all your finances.
- Determine how much you can invest in the down payment.
Note that if you invest less than 20% of the total value, you must pay the CMHC tax.
- Determine how much you can save from your monthly expenses.
- Set some money available in your bank account.
- Budget for extra expenses such as legal fees, welcome tax (if applicable in your region) and so on.
STEP 3 – Set-up money for down payment
Figure out how much you need to save. Remember your housing expenses should not outdo your monthly income.
- Sit with a mortgage lender and talk about the mortgage amount that you qualify. This will help you plan.
- Determine the timeframe for buying a home. The shorter your timeframe, the more will be your annual savings goal.
- Set up some automated savings plan like payroll savings plan or accumulating some funds.
- Do not invest that money on risk-type investment vehicles.
STEP 4 – Get pre-approval for a mortgage
Once your credit reports and scores are fine, your very first step is to start shopping for mortgages. You can directly apply with a bank or can apply through a mortgage broker. A mortgage broker does not lend money directly but arrange transaction by searching right lender for your loan type.
The pre-approval process:
- The process includes a potential look at your finances by the mortgage lender and finalize the maximum amount to lend you at a specific interest rate.
- The approved amount relies on the value of your home, and the down-payment amount.
- With a pre-approval, you will be able to estimate your monthly/annually mortgage payments, and fix an interest rate for 60-120 days, relying on the lender type.
Proof you need to submit to the lender/broker:
- Proof of employment
- Identification
- For paying down payment and closing costs
- Information about your current debts (if any)
- Information about any assets like a car, truck or cottage
- Your current salary, position, and length of time at the workplace
- Notices of Assessment from the Government for the past 2 years (if self-employed).
STEP 5 – Choose your loan type
Before proceeding with a Home loan, you must look into specific considerations comparing lenders and their offers.
- Assess your affordability, your financial well-being, and life plans.
- Consider loan term loan product, and the Interest rate.
- Compare lenders and their estimates.
- Determine the loan costs and fees.
Fixed Loan Type:
The interest rate of fixed-rate loans does not change throughout the life of a loan where you will pay same amount every month.
Variable Loan Type:
The interest rate of variable-rate loans will fluctuate over time along with prevailing interest rates. Variable loans have lower starting interest rates than fixed loans.
STEP 6 – Hire a real-estate broker
- The service of a real estate broker is free for buyers.
- An experienced professional help you to find right home meeting your requirements.
- Bring broker at bay for property showing and talk about everything in detail.
- Assist you with comparing sales based on demographics.
- Price Guidance and negotiation.
- Market reach like per square feet prices and average sales price.
- Handling bulk paperwork smoothly.
STEP 7 – Build a “Must-Have” List for your Dream House
- Home size
- Affordability
- Location
- Neighborhood
- Home Interior and Exterior plan
- Schools, medical facilities and Retails stores nearby
STEP 8 – Schedule regular visits
Regular visits help gain knowledge on the market demand and how different builders’ offering different pricing on houses with similar features. Check with the charges that the association takes for amenities like parking, gym or swimming pools. Visiting multiple options help you compare and understand the real estate market.
STEP 9 – Do a keen home inspection
Hire a contractor to inspect all the key house structures right from top-to-bottom. A keen inspection takes less time. Get a home inspection for:
- Roofing
- Foundation
- Plumbing
- Pest reporting
- Heating and electrical systems
- Drainage
STEP 10 – Get home insurance
To protect their investments, most banks ask homeowners to have a minimum amount for home insurance. You need to determine the policy and coverage limits while buying a property.
STEP 11 – Get a good notary
A good notary acts as a bridge between you and your seller.
A notary includes every single information that you deal with the seller. For example, if you are not paying the whole amount in cash, the notary shall ensure that transaction will go smoothly with payment made in time.
A full-furnished paperwork ensuring all the funds are calculated clearly and accordingly adjusted, following with the registration process.
EXTRA: 4 tips to save Money when buying your home
1. Get loan quotes from multiple lenders
Always contact multiple lenders to know the varying interest rates. Do not hurry and get loan quote from multiple mortgage companies (at least 2-4).
2. Find a “ready-to-occupy” house
A ready-to-occupy house takes less work to be done, which ultimately lowers any upgrading or customization costs. However, you can add custom fixtures like wall-art or wall paintings within your affordability.
3. Buy a home over the winter
Winter is the time dedicated for the housing market. In general, there are fewer buyers on the market, and this could help you save up money.
4. Location is key
You should always know the area before you buy real estate. If you are moving to a new place, then take time to learn about your future city/town. You should consider renting an apartment for a couple months before make the big decision of buying.
EXTRA: 5 Mistakes to Avoid when Buying your First Home
1. House-search prior to applying a mortgage
Know the mortgage companies and their loan programs before looking for a home. Learn about various loan programs like VA loans, FHA loans, and USDA loan programs and understand which type suits to your requirement.
2. Over-budget and Fast Moving
Always analyze and calculate your budget for buying a home. Do not exceed above your affordability as over-budget can lead to financial risks in future. Also moving fast for purchasing a home can lead to unplanned financial issues.
3. Cutting down all your savings
Emptying all your valuable savings can make your financial terms in risk. Unexpected repairs can be a growing pain for most of the first-time homeowners. Save enough cash in prior to making your down payment in time.
4. Not improving credit score
Closing your credit balances saves you time for applying a mortgage and getting a home loan effortlessly. Mortgage companies scrutinize your credit reports and then approve a loan with specific interest rate.
5. Ignoring home inspection
Hiring a home inspection person can help you with identifying the quality of the construction.
Conclusion
We have put together all the generalized information to help you understand and organize everything to become a homeowner. Always start planning with how much you can afford for buying a new home, how much you can save from your monthly income, and how to make exclusive home tours. This fool proof checklist shall help you get every single information to assess for buying a house.
