First house and financing: quick guide

Before you start buying a property, you need to analyze a few things, including the liquidity you have. However, the ideal conditions for buying a house go beyond the financial aspect. Here are some important things to consider when buying a first home.

Have your credit checked

Do you have good credit? This is the main criterion for being able to obtain good mortgage terms. Indeed, unless you have won the lottery or received a significant legacy, it is a safe bet that financing is at the heart of the purchase of your first home!

To answer this question easily and to avoid problems that could slow down your homeownership, find out about your credit rating. This will greatly help you pre-approve your mortgage.

Get a pre-authorization

For the acquisition of a first property, it is strongly advised to obtain a mortgage pre-authorization. First, it gives you clear guidelines for your search by setting a maximum purchase price. It is better to know from the outset what is your room for maneuver to make you refuse a loan after having a crush and filled the offer to buy!

In addition, a pre-authorization will reassure the real estate broker and speed up the transaction between the two parties, as the qualification process can sometimes take a few days. You will be able to conclude the sale more quickly and sleep rested throughout the evolution of the file.

Establish the down payment

The amount of the mortgage is normally calculated as follows: the purchase price of the house minus the amount of the down payment you invest. So, the higher the down payment, the less interest you will pay when you repay your loan. Also, the payments will certainly be lower (if depreciation remains the same), which will allow you to keep the balance of your budget.

To raise the money needed to buy a house (usually a minimum of 5% of the total value of the purchase, depending on your credit and the value of the house), the sources are numerous. There are certainly personal savings in investments, but make sure these amounts are available! The maturities of some investments may be inconsistent with the timing of your purchase.

Do not forget the amounts available in your RRSPs because they can be converted into HBP (Home Buyers’ Plan). It consists of “lending money to you” and depositing it back into your RRSP for the next 15 years, with no interest.

Do you have the funds to pay a 20% down payment on your first home? This is a great way to save, as the CMHC insurance premium is not required in this case. Otherwise, this bonus is mandatory and can be as high as a few thousand dollars.

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