Buying your first home is an important life event. All the excitement and sense of accomplishment aside, buying your first home can be a daunting experience so it’s important to be prepared for this step and address any key concerns beforehand.
There are many things to get informed about – your eligibility for funding, your mortgage loan, and the pre-purchase inspection.
To help navigate your way through your purchase project, our Courtier Immobilier Lanaudière REMAX real estate brokers will explain everything you should know before buying your first house.
Research your funding eligibility
Purchasing mean investing. When buying your first home, it’s rare that you’ll be able to pay for the whole thing in one go.
Most property buyers take out mortgages in order to pay for their homes. A loan like this implies a repayment of the amount borrowed. Concerning the mortgage amount, there are several factors to be taken into consideration. Note also that a mortgage loan isn’t the only way to fund a house!
Calculate how much you can borrow
Before getting a loan from the bank, you should calculate how much you can borrow. To do this, it’s best to make an appointment with your bank to discuss your borrowing capacity. Your annual salary and your down payment will be the main determining factors.
There are many online calculators out there that you could also use to estimate your borrowing capacity.
This is the first thing we recommend that you do before buying your first home. When you know how much you can borrow, you can figure out your budget, prepare your house search, and plan the best time to buy a house.
Decide on your down payment
Once you’ve been given a mortgage quote, you can figure out your down payment. This is the amount that you initially put down to pay for part of the house.
Depending on the amount of money you have and your background, the down payment will inevitably be different. In Quebec, it is mandatory to have a down payment of at least 5% of the house purchase price. This means, for example, that for a $400,000 property, you will have to put down a minimum of $20,000 at the time of purchase.
The down payment reduces your mortgage amount, and so also reduces the interest you will have to pay. It is therefore beneficial for you to put as much money down as possible. If your down payment is 20% or more of the house price, you may even be able to get a mortgage insurance waiver and get a conventional loan.
Note: The down payment can be paid with cash, investments, donations or from your Registered Retirement Savings Plan.
Get a mortgage pre-approval
Once you have a down payment in mind and you know what your borrowing capacity is, it is important to go ahead and get your borrowing capacity confirmed. To sort this, you must get your mortgage pre-approved with your bank.
Watch out though as a mortgage pre-approval doesn’t necessarily guarantee you the mortgage. A mortgage is a secure funding approval and occurs only once you have obtained all the necessary funds for your purchase project.
Important: your mortgage loan is validated once your purchase offer has been accepted by the seller and the sale has concluded! After your pre-approval is validated, you can begin searching for your dream property within your budget! 😊
Getting mortgage loan insurance
If you can’t put down a down payment of 20% or more (as is the case for lots of first time buyers), you will have to take out mortgage loan insurance.
As its name suggests, this is insurance covering your mortgage if you are unable to pay it back at any point.
Don’t forget the closing costs!
Keep in mind that other fees will also be added to the house price. Notary fees, real estate cessation fees, and taxes can quickly add up to 5% of the total house price.
It is therefore important to put aside sufficient funds to be able to pay for these costs in addition to the sale price of the house.
Did you know? There are home ownership programs in your region. Think about finding out more and see if you can benefit from them. They can offer tax exemptions and financial aid, especially for first time buyers!
Act carefully during the pre-purchase inspection
What you should also know before buying a house is the importance of the pre-purchase inspection. Indeed, to avoid any bad surprises and hidden flaws, you must take the time to check everything during your visit.
Ask all the questions you think are relevant, even those you are reluctant to ask. It’s better to ask too many questions than not enough. It would be unfortunate to take out a mortgage and go into debt for a property with problems that were not detected during your visit. Furthermore, if you are still attracted to the property, any issues could lower its market value to your advantage.
For a successful pre-purchase inspection, many people decide to be accompanied by a real-estate broker. Experienced in these types of situations and being experts in the property world, real estate brokers will ask all the vital questions during the inspection. The real estate broker’s role can therefore be decisive.
Trust Courtier Immobilier Lanaudière when buying your first home
Buying your first home is a big life event. Becoming a property owner is the result of many years of hard work and is the first leap onto the property ladder. To make sure it all goes smoothly, there are many things to know.
Since it’s difficult to know everything about the real estate market and its administrative and legislative specificities, being accompanied by a trusted professional throughout your property purchase is an excellent solution. Using a real estate broker can simplify your task and help make your house purchase a success.
Contact Courtier Immobilier Lanaudière if you wish to purchase a property within the Lanaudière region! Guillaume Tremblay and his team of REMAX real estate brokers will be delighted to help you buy your first home.