Congratulations! You’ve made the decision to purchase your new home. Now, what are some of the important first steps you need to take in order to realize your dream? They have to do with determining what you can afford and how you are going to pay for your new home.
1. Obtain Expert Advice
There are many experts available to guide you through the process of financing your home purchase. The Canada Mortgage and Housing Corporation (CMHC) offers a Homebuying Step by Step Guide which provides examples, worksheets and printable guides to assist with the entire homebuying process, including financing. There’s also an interactive version where you can plug in actual figures, personal to your situation. CMHC also provides valuable information on Mortgage Loan Insurance (typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price), should you require it.
Many of the top mortgage lenders include some excellent information on financing on their websites. For example, BMO Bank of Montreal offers valuable information on the complete homebuying process, including several sections on financing. They also offer a First Time Home Buying from A to Z podcast series which includes “providing advice, answering some questions and de-bunking the myths around buying a home, drawing on experts from a number of fields”. You can search any of the other lenders and find similar information on their websites.
2. Determine your Lender or Mortgage Broker
Like most Canadians, you will most likely have to finance your home purchase with a mortgage loan. Many institutions offer mortgages such as banks, trust companies, credit unions, caisses populaires, pension funds, insurance companies and finance companies. Shop around like you would for any other product or service and speak with more than one lender as options, features and services will vary. Ask your builder about mortgage options as some may offer pre-arranged mortgages and other entitlements. Some buyers find that using a mortgage broker is helpful as they don’t work for any specific lender and their role is to find the lender with the terms and rates that will best suit the homebuyer.
3. Get Pre-Approved
A pre-approved mortgage can help you shop for your home with confidence and save you some valuable time in the decision making process. According to BMO Bank of Montreal, a pre-arranged mortgage will help you determine:
– what you can afford
– how much you can borrow
– how much of a mortgage payment you can handle
– what your interest rate will be for the term you’ve chosen
– what happens if interest rates rise while you are looking for a home
4. Find out if any additional assistance is available
Determine whether there are any other programs in your province such as home assistance plans. Check out the federal government’s Home Buyers’ Plan where consumers can borrow up to $25,000 tax-free (under proposed changes) or $50,000 for couples from their RRSP funds for the down payment and closing costs on their first home.
It’s important to do your homework, shop around and determine what you can afford to make financing your home a little less stressful.
Are there some additional first steps that a homeowner should consider when financing their new home purchase?