I’m sure every 20-something (or 30 or 40-something!) has heard a dozen times how much work is involved and how expensive it is to be a homeowner. First time buyers won’t truly understand the commitment until the bills start rolling in and simple home maintenance chores begin taking up a good chunk of their free time. Rest assured however, that home ownership is a wonderful thing, a major step to becoming a ‘responsible adult’ and perhaps your first foray into the world of investment.
Much like any major purchase, buying a home requires research and certain readiness. Take a look at these points to see if you’re heading in the right direction.
Can you afford it? This is perhaps the most important question of all when considering the purchase of your first home. Don’t just look at the mortgage payments – there’s closing costs, property tax, utilities and the possibility of pricey home maintenance and/or repairs to consider. Your monthly housing costs shouldn't be more than 32 per cent of your gross monthly income.
Have you saved a downpayment? While it’s ideal to put down 20 per cent (to avoid paying mortgage insurance, which can tack an extra $50 to $100 per month of your debt load) the law in Canada requires purchasers to pay, up front, at least five per cent of the purchase price.
Are you ready to settle? This is another monumental question for first-time buyers. Do you foresee yourself in this town or city for a number of years? Buying and selling a home - and moving - are costly steps, so be sure you’ve found the right location to set down your roots.
Get pre-approved. Getting pre-approved helps focus your search on homes you can afford and allow you to put in a serious offer when you do find the right house. Pre-approval from a lender is based on your actual income, debt and credit history. But being pre-approved isn’t a guarantee of affordability, which is why it’s always advisable to include a condition on financing in any offer you make.