Becoming a first-time homebuyer is an exciting milestone, but it also comes with its share of challenges and responsibilities. To ensure a smooth and successful home buying journey, it’s important to be well-prepared and well-informed. We’d like to help in any way we can, to make this transition as seamless and enjoyable as can. Let’s explore the key steps and helpful tips that every first-time homebuyer should consider before making this significant investment.
- Mortgage Pre-Approval
Before you start house hunting, obtaining a mortgage pre-approval is a MUST-DO! You’ll want a detailed assessment of your financial situation so you can understand your budget and get specific about your home search. A pre-approval not only gives you a clear picture of what you can afford, but also makes you a more attractive buyer in the eyes of sellers. In this market, you want all of your ducks-in-a-row (for lack of a better term) so when you find your house, you are ready to make an offer without any hesitation.
- What does a detailed assessment of my financial situation entail? Paystubs, bank statements, debt overview? Do you look up my credit score? Does that impact my credit score?
To complete the assessment, we review your employment, credit and ensure you have the adequate down payment. If you are an employee, lenders look for no probation, guaranteed hours and if not we do need to go off a 2 year average as well we use 2 year average for bonus and overtime. If you are self-employed, I will require 2 year average of what is claimed on personal tax returns. For credit, typically lenders are looking for a score over 650.
- What can first time home buyers do to better their chances of getting approved for a mortgage?
Ensuring pre-approval is the best thing you can do to strengthen your chances and have a pre-approval letter to accompany the offer when submitting. Also being pre-approved and having everything in order allows for a smoother transaction.
- Are there specific programs available to young people? Do you know much about the newer FHSA bank account?
First time home buyers can access their RRSP withdrawals for down payment up to $35,000. This allows buyers 15 years to pay the government back. There is also a federal program that matches your 5% down but this option is less favorable as the government is then on title with you and gets a share of the sale proceeds when you sell your home.
- Down payment requirements?
If it is from your savings we require 90 days of statements to show the trail of the funds. Any large deposits must be explained and documented. If it is a gift then we require a gift letter signed (specific to the lender) and proof of the deposit into your bank account.
- How can a co-signer (generous parent) help me obtain a mortgage?
We are able to use parents to co-sign by bringing their income and low debt into the application to assist with strengthening either credit or income shortfall.
Another great idea for first time home buyers is to buy a property with an approved revenue suite in the home to allow for additional income to be used to help pay the mortgage as well debt service for qualifying.
7 . Practice Due Diligence
The excitement of finding your dream home, moving, etc. might tempt you to rush the decision-making process, but it’s crucial to exercise due diligence. Research the neighborhood thoroughly, get a proper home inspection, consider factors like proximity to work, schools and amenities, and assess the property’s overall condition. The last thing you’ll want as a new home-owner are financial surprises!
- Resale Value
You want to be focused on finding a property that suits your current needs, but it’s also beneficial to think long-term and to think about the property’s resale value. Trends and preferences change over time, so considering factors like location, neighborhood development and property features that appeal to a broader audience can potentially benefit you when you decide to sell.
- Overextending Finances & Additional Home-ownership Costs
It’s tempting to try and stretch your budget to secure your dream home, especially when you’re caught-up in the excitement and anticipation of your perfect home, but overextending your finances can lead to financial strain down the road. Finding a balance between what you envision in your home and a comfortable monthly payment is essential for long-term financial stability. We also hear the term “house poor”, so being realistic about what you can afford and factoring in unexpected expenses will help you in the long-term. While the allure of homeownership is easy to get caught up in, it’s also important to be mindful about the ‘other’ associated costs beyond your mortgage payment. Property taxes, utilities, insurance, maintenance and possible homeowners association (HOA) fees should all be factored into your budget. This approach ensures you’re financially prepared for the long-term responsibilities of owning a home.
- Help from a Realtor®
The beginning of a journey to home-ownership is an exciting one, but it can also be overwhelming, particularly for first-time buyers. Navigating the complex real estate market and trends, understanding the legalities and making informed decisions requires expertise and experience. This is where your qualified real estate agent steps in as your trusted guide, providing support and ensuring a seamless process from start to finish. Your agent will have a better understanding of pricing dynamics and neighborhood nuances and can offer insights into property values, upcoming developments or potential investment opportunities.
Purchasing your first home is a wonderful and significant achievement so being well-prepared is the key to a successful experience. By following all (or some) of our recommendations, you’ll be better equipped to make informed decisions and embark on your home-ownership journey with confidence. Remember, a thoughtful approach today can lead to a rewarding and secure future as a proud homeowner.
We would be happy to work with you and develop a plan that ensures you become a future home owner. We look forward to working with you in your home-buying process, please contact us today. We are here to help assist you in any way we can Patricia McKean 403.875.2969 or Stacey Scott 403.850.7738.
Check out our website featuring our First Time Home buyers Specialist guide First Time Home Buyer Specialist – Unbeatable Mortgages Website
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Patricia McKean, a Lead Planner with the Unbeatable Mortgage Team at Mortgage Architects in Olds, has over 20 years of experience in lending and has been successful in helping a number of our rural clients obtain mortgages in Alberta.