Are you tired of renting and ready to buy your first home in Surrey or White Rock? From both personal and professional experience I know that this process can be very daunting. That’s why the focus of this post is to help you understand the first actions you need to take to make home ownership a reality.
1. Start Saving Up for a Down Payment
The first step in getting that home is saving up for a down payment. A down payment is what the buyer puts down on the property they are buying. In Canada banks can only provide mortgage financing for up to 80% of the property value. That means if you are aiming to purchase a $400,000 starter home you will $80,000 saved up.
If you do not have a 20% down payment you are required to get a high-ratio mortgages and must be backed by Mortgage Default Insurance. Canada Mortgage and Housing Corporation (CMHC) is typically who you will acquire an insured mortgage through.
Here is a down payment for a house calculator that will help you quickly calculate how much you should aim to save to be able to buy that “dream home”.
When saving up for a down payment consider the savings plan that are most secure and speak with a financial adviser if you need. Some opt for an RRSP plan, some for a tax-free savings account, others invest in whole life savings or term savings. Make a commitment to saving up and stick to it. . You’ll be surprised how quickly you can build your nest egg when you are determined.
For that final push to the starting gate, think of creative ways to save. Do you have unused items you can sell in a garage sale? Can you eat at home more often? Can you give up one Starbucks coffee a week? While these may seem insignificant they will grow your nest egg faster than you think.
2. Get Pre-Approved for a Mortgage
Once you are well on your way to a down payment the next step is to find out what size of mortgage you qualify for. This can save you a lot of time and frustration, and will make financing a lot easier once you find the dream home.
When getting a mortgage pre-approval you will be asked to provide:
- Name of your employer, length of employment, current salary
- Annual salary or wages for the household
- Annual earnings from commissions, bonuses, tips, interest, investments, etc
- List of assets such as bank accounts, RRSPs, personal assets such as a car, etc
- List of liabilities such as credit card balances, loans, personal line of credit, etc
Talk to your bank manager about getting pre-approved and what kind of tools and resources they have for you. Many banks and credit unions will offer new buyers pre-approved mortgages plus your bank’s website will have cool gadgets like borrowing calculators that take your income, expenses, and down payment and calculate what you can borrow.
An alternative is to hire a third party mortgage broker to take care of this process for you. A mortgage broker works on commissions from the lenders and will get your pre-approval and present it to all the lenders to find you the best mortgage rates. Down the road this will help you make sure you find the best rates.
3. Set a Realistic Mortgage Budget
Once you are pre-approved and have taken a close look at what you earn and what your monthly payments would look like you can decide what size of a mortgage you are comfortable with. Just because you are pre-approved and qualify for a larger loan doesn’t mean you have to take it.
Rule of Thumbs to keep in mind:
- Your monthly housing costs – including mortgage, property taxes, and 50% of condo fees – should not be more than 32% of the family gross monthly income.
- Your housing costs plus all other debit (loans, credit cards, lease payments, etc) should not be more than 40% of your gross monthly income.
It is very important to create a budget that you can comfortably live on that allows you to set aside a fixed amount each month. Find a good budgeting tool to account for all of your monthly expenses, plus an 10% buffer for unexpected expenses. Assess all of your expenses and ask yourself, “To get the bigger home or buy into your dream neighborhood are you willing to cut back on vacations, entertainment and other hobbies?”
As mentioned above, your bank’s website will have a handy mortgage payment schedule tool that lets you play around with the numbers. You can also use our quick Mortgage Calculator.
4. Decide the Right Time for YOU to Buy
If you ask an expert, they will generally agree that BC Metro Vancouver and the Fraser Valley have historically seen housing prices rise. They may slow, they may level off, but year after year, there is a steady rise in property value. Why? Old timers will tell you “they ain’t making more land…” and with the increase in population that the Lower Mainland sees every year, that means that the value of the land goes up.
The Real Estate Board of Vancouver has released the 2013 statistics and the market shown a small increase in sales and pricing values. The stats suggest that If you are ready to buy, then it is time to buy. The time is ripe. Mortgage rates have dropped at the four top banks and housing prices are stable.
However there are many personal factors that you must address when determining if it’s the right time to buy and only a professional real estate agent can help you objectively consider all factors. Finding an experienced Realtor® who understands your goals as well as the current market is crucial.
Are you a first time buyer in Surrey, White Rock or North Delta? Team Taylor brings years of experience and knowledge of the Greater Vancouver and Fraser Valley property market. Call us now to get started on the path to home ownership. Call 778-929-4290 or start browsing Surrey Properties today.