Is it time to take the plunge? Here’s how to know if you’re prepared to buy a home
You’ve pored over online listings, determined your “must have” home features and scoped out the market in your town. But are you really ready to become a homeowner?
You are, says Stuart Levings, Genworth Canada’s chief operations ofﬁcer, if you’re doing these ﬁve essential things.
Saving at least five per cent for a down payment
Mortgage insurance programs, like Genworth’s Homebuyer 95, let ﬁrst-time buyers purchase their ﬁrst home with as little as ﬁve per cent down. Setting up a savings plan and budget can help you save that ﬁve per cent sooner. “In the absence of doing that, as we all know, money ﬁnds a way of leaving your wallet,” Levings says.
Budgeting for extra fees
Having your down payment set aside isn’t enough. “You also need to think about the costs of closing on a home, which can often run up to three per cent of the cost of the home,” Levings says. Those extra costs could include title insurance, legal fees and a home inspection fee.
Doing your homework
Unless you already work in the world of real estate and mortgages, homebuying education must be self-taught. You’ll need to understand the processes and legalities of working with a real estate agent, making an offer, making a down payment, closing a home and getting insured.
Building a good credit score
A low credit score can affect your ability to buy a home “quite severely because there is a minimum score required,” Levings says. According to Canadian government regulation, 600 is the lowest score you can have to qualify for a mortgage. But Levings warns “many insurers will not even go that low depending on other criteria, such as the amount of money you’re putting down, because the more you put down, the less risky you are in the eyes of a lender.” He recommends going into a home search with a credit score of 650 or higher. A solid history of paying debts such as a car lease and credit card accounts with limits upwards of $1,500 can boost your score.
Getting the right advice “You need to deal with a professional REALTOR® and mortgage broker,” Levings advises. “Brokers are a good source of information for your mortgage options.”
A ﬁnancial planner can also help you create a realistic budget and save for that down payment.
DID YOU KNOW? THE GOVERNMENT OFFERS BENEFITS AND INCENTIVES FOR FIRST-TIME HOMEBUYERS
- The First-Time Home Buyers’ Tax Credit offers eligible individuals a $5,000 non-refundable income tax credit on a qualifying home. actionplan.gc.ca
- The Home Buyers’ Plan lets ﬁrst-time homebuyers withdraw up to $25,000 tax free from RRSPs. You’ll have up to 15 years to pay it back. servicecanada.gc.ca