Buying your first home is an exciting milestone!

That said, it can also be daunting. Before you start house hunting, it’s crucial to assess your financial situation. I’m all about helping you through the steps to make your home-buying journey as smooth as possible. Here’s a list of the key points you need focus on if you’re thinking of buying your first home in Canada this year.

1. Assess your credit score and credit report

Check your credit score and take steps to improve it if necessary. A higher credit score can help you secure a better mortgage rate. Just as importantly, review your credit report in detail. Complications such as old credit issues that never got cleaned up, recent bruised credit, or a lack of aged credit can count against you. Talk to a professional such as an experienced mortgage broker to ensure you’re putting your best credit face forward.

2. Review your savings

Ensure you have enough savings for a down payment, closing costs, and other expenses. In Canada, if you’re buying a property for up to $1.5 million, the minimum down payment is 5% for homes under $500,000 plus 10% for the portion of the price above $500,000. If you’re purchasing a property for $1.5 million or more, you need to have at least 20% down. On top of the down payment, you’ll also need to pay for closing costs. Plus, there are a number of smaller costs that nonetheless add up. I recommend having an additional buffer of at least 1.5% to 4% of the purchase price of your home for these additional items.

3. Run some numbers on your income

Lenders will look at your debt-to-income ratio to ensure you can manage your mortgage payments along with other debts. Your monthly housing costs – sometimes called “shelter costs” – including mortgage, property taxes, heating, and condo fees (if applicable) – should not exceed 39% of your gross monthly income. Your total monthly debt load, including shelter costs, should not exceed 44% of your gross monthly income. That said, if your down payment is 20% or more, and as long as your credit is good, we can potentially negotiate extra wiggle room with some mortgage lenders.

4. Get your documents organized

If you have been somewhat relaxed about doing things like filing your income tax returns or you’ve never signed up for the “CRA My Account” service, do that right now. You’ll need to provide proof of your income when you have a live mortgage application, and having quick access to your CRA Notices of Assessment and CRA Account Summary is a huge stress reducer. Here’s a detailed breakdown of the documents you are likely to need for your mortgage application.

5. Get a mortgage pre-qualification

Getting pre-approved for a mortgage gives you a clear idea of how much you can afford. It also shows sellers that you’re a serious buyer. However, there’s more work to be done here so that you don’t get surprised by the fine print. Getting pre-qualified is even more important than getting pre-approved. This means working with a mortgage professional such as a mortgage broker. Our job is to help you work through your specific needs, wants, financial documents, and any particular quirks in your situation that need to be taken into account to ensure everything works out.

6. Work with a great realtor

By working with a knowledgeable and experienced realtor, you can make the home-buying process smoother, more efficient, and ultimately more successful. Here’s a more detailed breakdown of the benefits I’ve seen with my clients who have had the privilege of working with a great realtor. They truly are worth their weight in gold. And, when you’re buying a home, you’re not even paying for their time!

Conclusion… And a little shoutout to mortgage brokers 🙂

Buying your first home in Canada is a significant step! With careful planning and professional support, it can be a rewarding experience. I recommend assessing your financial situation, getting pre-approved for a mortgage, understanding your options, and getting organized. That way, you’ll be well on your way to finding your dream home! Working with a mortgage broker can provide you with expert advice, access to multiple lenders, and tailored solutions to make the process smoother. So, if you have any questions or need personalized advice, feel free to reach out to me.

Happy house hunting!

Image [c] Titiwoot Weerawong