One of the biggest investments you’ll ever make is to buy a house. It requires a lot of preparation before you make such a purchase. Before you begin moving towards homeownership, ensure you’re ready. Here are some steps to take before you buy a house.
Credit Score Improvement
A higher credit score can obtain you great deals. A lower one can cost you a higher down payment or sizeable fees. Ensure you don’t have penalties on old, settled or paid debts by pulling your credit reports. Don’t apply for new credit a year prior to your mortgage application. Wait until you’ve closed on your new home.
What Can You Afford?
Determine if you can afford the cost of the house you’re eying. There are loans that can’t allow your home expenses to exceed a certain percentage of your monthly income. Calculating this amount and adding some other costs such as insurance, taxes, and utilities can give a rough idea of the home you can afford.
Save For Your Down Payment For A House
Save between 3 to 20 percent of the price of the house for a down payment before doing anything else. This step is very crucial in helping you pay your mortgage in the long run. Your loan terms and credit history can help determine how much you’ll need to save. The more money you come up with, the better.
If you’re a first-time home buyer, saving more leads to fewer mortgage costs. If possible, save at least 20 percent for your down payment. This can help you avoid a high-ratio mortgage and the payment on its insurance. However, it may call for big sacrifices to make this kind of saving.
Calculate Initial Purchase Costs
It’s not enough to save for a down payment. Many people overlook some other costs that are associated with the move. They include property transfer fees, legal fees, among others that are usually not part of the purchase price of the house. It’s wise to save for them as well.
Get a Pre-Approved Home Loan
Before you start shopping, see a financial adviser and find out how much you can get as a pre-approval for your mortgage. This amount is dependent on several factors including your credit score, savings for down payment, and your income. You can’t put a solid offer on the house you’re planning to buy without a pre-approval.
Understand Your Options
If you’re a first-time buyer, there are tools you can utilize to secure a house. You can get up to $750 from the Canadian government’s First-Time Home Buyer Tax Credit. You can also borrow from the Registered Retirement Savings Plans to finance the purchase (the maximum is $25,000). This can go into your down payment.
Look around to find the institution that offers the most suitable mortgage rates. Mortgages aren’t equal, so find out the one that you like. For instance, one can allow pre-paying a certain amount on it while another may not. Find a mortgage that’s flexible.
Find Professional Mortgage Broker Near You
The steps that you need to follow in the process of buying a house can be daunting. You need professional guidance and advice to get everything right. Find a reputable and experienced mortgage broker for a flawless process.