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Purchasing your first property can be a scary and exciting time, although it certainly comes with questions. In this post, I’m going to share with you items that you need to consider when purchasing a home and how to set yourself up for success.
Credit History
When purchasing a home, you’ll need to consider your credit history in order to get a major lender or bank. In most cases, the minimum requirement will be a score of 620 or greater. Keep in mind, even with a credit score of less than 620, there are still options to getting into a home with alternative lending or private funding.
Down Payment
There is a common misconception that you’re required to have 20% as a down payment on a home, in reality, the minimum requirement for your personal residence is 5%, this also applies to duplex properties and occasionally a triplex. While 5% is the minimum amount, a 20% down payment will avoid the mortgage insurance cost.
Closing Costs
While 5% is the minimum down payment, you’ll also need to budget for closing costs on your property. In most cases, the closing costs you’ll need to budget for are 1.5% of the purchase price and go towards land transfer taxes, lawyer fees, disbursements, home inspections, and title insurance. As a first-time home buyer and permanent resident or citizen of Canada, you’ll receive a rebate of up to $4,000.00 on closing for the cost of Land Transfer Taxes.
Employment or Self-Employment
Income is one of the most important aspects when purchasing a home. As a full-time employee, you’ll need to make sure you have pay-stubs to provide your mortgage lender and your yearly salary. Self-employment and part-time workers are considered almost equal when it comes to income. Mortgage lenders and banks will need to see an average of your two years income for a pre-approval.
Debt Payments
When it comes to personal debt, the monthly repayments will be a strong consideration with mortgage lenders. Debt can be found in student loans, car payments, credit cards, and more. The higher the monthly payment, the lower the amount that you will be approved for a mortgage.
