First-time homebuyer tips

Buying a house for the first time can be challenging and overwhelming. Therefore, it’s important to understand the process as well as the attached costs. Here are 8 tips you need to remember when contemplating the purchase of a new house. They will help you save not only your time, but also your money.

1. Check how much you can afford 

Buying a house is a huge investment. Therefore, it’s important that you know your financial situation such as your debt and your income. You can use a home affordability calculator to see how much you can afford for a house to determine the type of house you should buy.

2. Increase your credit score

Increase your credit score is a great way to help you to borrow with the lowest available interest rates. Here are some useful methods to increase your credit score to buy a house.

• Review your credit reports
• Pay bills on time
• Improve your credit utilization ratio
• Let old credit accounts open
• Don’t open new accounts
• Don’t take out additional loan

3. Research mortgage options

There are some principal categories of mortgages that first-time homebuyers need to know: 

• OPEN MORTGAGES

If you plan to pay off the entire mortgage without penalty, then an open mortgage is for you. An open mortgage offers maximum flexibility. This type of mortgage can be converted to any other term, at any time, without a prepayment charge

• CLOSED MORTGAGES

Compared to open mortgages, this type of mortgage usually has lower interest rates. A closed mortgage is attached with a predetermined interest rate, over a predetermined period.

• CONVERTIBLE MORTGAGES

A convertible mortgage allows homeowners to change the type of mortgage they hold during its term. For example, if a homebuyer wants to start with an open mortgage and then change into a closed mortgage, a convertible mortgage is the best option. Besides that, convertible mortgages have lower rates than open mortgages.

• HYBRID MORTGAGES

A hybrid mortgage offers a fixed rate for a predetermined period of time and then an adjustable-rate for the rest of the term. The interest rate can adjust monthly, quarterly, annually, or every few years.

4. Research first-time homebuyer programs

The government offers many programs to assist first-time homebuyers in Ontario to solve their financial problems. You can find out if you are eligible in one of the following programs:

• Land Transfer Tax Rebate

You can receive a refund of all or part of the land transfer tax, which is usually between 0.5% and 2.0% of the purchase price of the property. The maximum amount of the refund that you can claim is $4,000.

• RRSP Home Buyers’ Plan

You can use up to $35,000 from their RRSP to help finance your down payment on a home. However, you need to repay the amount withdrawn back to their RRSP within 15 years, starting from the second year after you made the withdrawal.

• GST/HST New Housing Rebate

You can get some of the GST or the federal part of the HST paid for a new or substantially renovated house.

• First-Time Home Buyer Incentive

First-time homebuyers need to meet minimum insured mortgage down payment requirements. If you are eligible, you can receive the incentives that cost 5% or 10% for a first-time buyer’s purchase of a newly constructed home, or 5% for a first-time buyer’s purchase of an existing home.

5. Compare mortgage rates and fees

It’s recommended that you request loan estimates for the same type of mortgage from different lenders to compare the costs, interest rates, and possible origination fees. You might get an offer from lenders to buy discount points; if so, consider your plan and situation to decide if you should go for it or not.

6. Obtain a preapproval letter

When you are ready to start looking for a house, it’s important to get a preapproval letter to have more advantages compared to other homebuyers who don’t have it yet. You can apply for a mortgage pre-approval from different lenders, but remember to apply for them within a limited time frame, such as 30 days.

7. Hire a real estate agent

A good real estate agent can help you through the negotiation and closing process. If you don’t know where to find one, Usman Khan @usmanzlife is an experienced Real Estate Agent in Toronto. He believes in delivering exceptional consumer experiences, by offering a complete suite of real estate services, that meets consumers’ every need. From buying, selling, investing and rentals, retail and commercial, he will guide you skillfully from the beginning to the end of your real estate journey.

8. Choose the neighborhood

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There are many factors to consider when it comes to the most suitable neighborhood for your new home, from the amenities to the commute, etc. You can research about this easily online or by going around a neighborhood to see it for yourself.

I hope these tips will help you find your first home easier, and I wish you the best of luck in your search.

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