1. The Down Payment
Probably the most significant amount of money you will ever have, the down payment on a home is a key factor in how your mortgage will look in terms of amount and interest rates. In Canada, 5% of the total price is the bare minimum on homes under $500,000. For homes over that amount, you’ll need an additional 10% for any amount over that half million mark. That means you’ll need at least that amount for a mortgage, but that isn’t always the best idea. Conventional wisdom asks for 20%, which will give you a much better deal on your mortgage overall.
The best way to get a down payment is to save over years and years. Having the money unencumbered is a simple and effective solution outside of “wedding gift from the parents.” If that isn’t an option, you can obtain a line of credit or similar product to help out, but these will often come with very high interest rates compared to your mortgage.
2. The Credit Score
Having good credit is essential to buying a home since it will have a definite impact on your mortgage. With good credit, you can get a mortgage with more money available, and probably negotiate lower interest rates. With bad credit, however, you’ll get less money and more interest, meaning you’ll pay way more by the end of your mortgage than someone with better credit.
The best solution to dealing with bad credit is to start making regular payments on your debts. Everything, from phone bills to car payments, should be paid on time. Mostly, banks and mortgage brokers are looking to how you handle debt rather than the actual amount of debt, so if you pay things off consistently, they’ll be more willing to give you a better mortgage.
3. Finding a Home
The most exciting and nerve-racking part of buying a new home is going house shopping. It’s a deeply complicated process, however, being much more than simply square footage and number of bedrooms. The best way to deal with the obstacle of actually finding a home is to enlist a qualified and experienced real estate agent. With the right real estate agent, you can find a quality home that will serve you and your family for years, possibly decades, to come.
The path to owning a home is beset with many roadblocks, but many of those obstacles are easy to overcome. With the right planning and the right team behind you, you’ll be able to secure a quality mortgage and a quality home, and start the next phase of your life in confidence.