You’re a first-time homebuyer in Canada, so what’s next?
To help answer all the questions you might have, and ones you might not even be aware of, we’ve done the research for you and put together a First-time Homebuyers Guide to help you with purchasing your first home in Canada. No matter where you are on your journey, this blog answers questions that will lead you down the path of homeownership.
– Determine how much of a mortgage you qualify for depending on your debt ratio
- How much of a down payment you have
- -Whether you will need CMHC insurance (a mortgage insurance that let’s you get a loan for as much as 95% of the purchase price)
- Inform you of how much your average closing costs will be
Step 1) Understand how a credit score works
A credit score is crucial to buying a home in Canada. When you buy a house, lenders will look at your credit score to determine if you are qualified to handle the financial obligation of a mortgage, and to determine their risk level when they lend you money. In Canada, a credit score is a rating between 300 and 900 and is determined by your credit history. Your credit history is made up of what type of credit or open accounts you have, your total levels of debt and how consistent you are with making your payments.
So, what is considered a good credit score? For both first-time homebuyers and previous owners the ratings are:
There are more nuances to credit scores than just paying your bills on time. Before buying your first home in Canada, make sure you know what your credit score is, and how a credit score works so that you know all the criteria that goes into calculating it.
At EP Homes, we have a team of credit coaches that will work with you to make sure that you are well-prepared before buying your first home in Canada. Contact us today to talk to a credit expert!
Step 2) First-time Homebuyer Programs in Canada
There are many first-time homebuyer programs in Canada. These programs can provide you with financial assistance and tax breaks like the First-Time Home Buyer Incentive or other rebates (Source: CMHC-SCHL) that will assist you the purchase of your first home in Canada.
Step 3) Down Payment
Acquiring a down payment can be a hurdle that first-time homebuyers come across. A down payment is the money that homebuyers pay towards the purchase of a home. In Canada, people are usually required to pay 5-20% of the house price for the down payment. This amount must be saved prior to obtaining a mortgage.
If your down payment is less than 20% of the house’s purchase price, you are required to pay for insurance on the mortgage. Based on how much a down payment you have, your lender will explain what the premiums for the insurance are on top of your monthly payment.
However, with our EP Homes Bridge to Own ™ program, first-time homebuyers in Canada can lease and live in their brand-new homes while saving for a down payment and set onto the path to homeownership. It’s really 0% down.
To find out if you qualify for our Bridge to Own™ program, contact us today!
Step 4) Closing Costs
First-time homebuyers often overlook the closing costs when buying a home. Other than saving for the down payment and preparing to pay for the mortgage, future homeowners should start saving for the closing costs as well.
These costs can range between 3-5% of the purchase price and will cover fees such as: land transfer tax, GST/HST on a new home purchase, legal and administrative fees for closing a real estate transaction, moving and insurance costs, and home inspection costs.
It is important for first-time homebuyers to save and be prepared for these expenses in advance so that they are not in the red when it is time to close on their home.
Step 5) Get yourself ready to pay a mortgage
Once you have saved up enough for the previously mentioned costs, it’s time to get a mortgage pre-approval. You need to figure out if you can afford a mortgage. A pre-approval will let you know the maximum amount you qualify for and estimate your mortgage payments.
While pre-approvals aren’t mandatory, they give you an idea of what types of houses you can afford and assist with setting a budget.
While setting up a budget, you should take your household income, personal monthly expenses, property taxes, condo fees, utility bills, and an emergency fund for life’s unexpected expenses into consideration.
We're here for you
Buying your first home in Canada may seem like a daunting experience, but it doesn’t have to be. Before you start looking for your dream home, make sure you should know your financial situation and start saving.
Want to talk to an expert? Book a consultation session with us to talk about homeownership in Canada and find out if you are qualified to buy your first home with $0 down payment through our EP Homes Bridge to Own™ homeownership program!
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