Purchasing a home is a major financial decision. For many people, it is the largest investment they will ever make. If you are a first-time homebuyer, there are several things you can do to help ensure that your experience is positive and successful.

Our previous article discussed some tips that first-time homebuyers should follow. This article will continue with eight more tips to help you through home-buying.

5. Calculate Your GDS/TDS

Your GDS and TDS ratios are two ways lenders assess whether or not you can afford a mortgage. Your GDS ratio is your monthly mortgage payments as a percentage of your gross monthly income, and your TDS ratio is your monthly mortgage payments as a percentage of your monthly income from all sources. 

You’ll need a GDS ratio of 32 percent or less to qualify for a mortgage and a TDS ratio of 40 percent or less. The mortgage stress test is another way lenders assess whether or not you can afford a mortgage. To pass the stress test, you’ll need to prove that you can still make your mortgage payments if interest rates rise.

6. Evaluate Your Mortgage Options

A lenders are the major banks, while B lenders are smaller financial institutions. A lenders are banks and credit unions with the strictest mortgage qualification requirements. They usually lend to clients considered prime borrowers, those with a good credit score, solid credit history, and stable jobs. B lenders are not as regulated as A lenders, but they still have rules and requirements. B lenders often charge higher interest rates.

You will need to decide what type of mortgage you want. Some options include an open or closed mortgage, fixed or variable rate, and monthly or bi-weekly payments. Having a five-year term with a 25-year amortization is common, but many other options exist. Do your research to get the best rate and conditions possible. You will need to decide if you want to work directly with a lender or go through a broker.

7. Get Pre-Approved Before House-Hunting

Being pre-approved for a mortgage gives you an idea of how much you can borrow from a lender. This can help you stay within your budget when shopping for a home. Some lenders offer pre-approved interest rates that are locked in for 60 to 130 days. This means that the interest rate will not change during that period. Note that pre-approval is not a guarantee that you will get a mortgage. A lender can still refuse to give you a mortgage even if you have been pre-approved.

8. Don’t Neglect Home Insurance 

Many lenders require borrowers to have home insurance to get a mortgage. Home insurance protects against various losses, such as theft, fire, and vandalism. It also covers damage to people who visit your property. Home insurance premiums and policy terms vary widely, so it’s important to compare different providers before buying a policy.

Conclusion

There are a few key things that the first-time homebuyer should follow to have a smooth and successful home-buying experience. The most important thing is to be patient and take time when making such a big decision. By following these tips, a first-time homebuyer can increase their chances of having a successful home-buying experience.

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!