The process of buying a new home in Canada can be equal parts exciting and daunting. It is often the largest purchase people make in their lives, and since it is where you plan on living, it must fit your lifestyle. There are plenty of steps to buying a house in Canada, and it might feel hard to know where to start. However, following some simple steps can make the process much easier.

The first half of this two-part blog focuses on the four basic ways you can ensure a smooth home purchase, from getting a mortgage to financing your purchase.

1. Improve Your Credit Score

A good credit score is important if you want to get approved for a mortgage with a good interest rate. You can improve your credit score by finding and fixing any errors on your credit report, paying off existing debt, and making sure you pay your bills on time. Having different types of credit and keeping your oldest accounts in good standing can also help improve your credit score.

2. Assess How Much You Can Afford to Borrow

When considering how much house you can afford, think about your current lifestyle and expenses, as well as your long-term plans and goals. Do you plan to start a family? Are you hoping to send your kids to a private school? Do you want to retire early? All these factors can impact how much house you can afford and whether you’ll need to make any lifestyle changes to meet your homeownership goals.

When considering how much mortgage you can afford, you’ll want to consider your monthly debts, closing costs, and other additional expenses. This will help you determine what monthly payment you can make and, thus, what size loan you can afford.

3. Save for a Down Payment

A down payment is a portion of the total cost of a home that is paid upfront. In Canada, the minimum down payment for a home is based on the price of the home. The minimum down payment is five percent for homes under $500,000 and ten percent for homes over $500,000.

The minimum down payment when buying a home is a great place to start, but know that there are pros and cons to putting down only the minimum. With a five percent down payment, you’ll have to pay mortgage insurance, for example, and start your home ownership journey without much home equity. On the other hand, saving five percent may not take as much time, meaning you can become a homeowner sooner. And a smaller down payment may mean you can reserve some cash for moving costs or unexpected repairs.

When deciding how much of a down payment to make on the house, think about how much house you can afford. The size of your down payment will affect the price of the house you can afford.

4. Take a Practice Mortgage Stress Test

Canadian lenders use a stress test to ensure that borrowers can still afford their mortgage payments even if interest rates go up. This test involves using a higher interest rate than what is being charged on the mortgage contract. If the borrower can still make payments with this higher rate, they will likely be approved for the loan.

Conclusion

There are several things that the first-time homebuyer should keep in mind before making the purchase. They should consider the location, the size of the home, the type of home, and the amenities that are important to them. They should also get pre-approved for a mortgage and have a realistic budget. With these tips in mind, first-time homebuyers will be on their way to finding the perfect home.

Mills Financial Group is here to help with your mortgage needs, refinancing, new home purchases and mortgage renewals. Led by Candice Joy, we will provide you independent expert advice on your financial options, offering  you mortgage products that will best match your specific needs. If you want to finance your home in Ontario with a secure mortgage loan, get in touch with us! Let’s talk and review your available options!