First Time Buyers
Falling in love with a house you can’t afford can be heartbreaking. Avoid disappointment by figuring out your budget before you start looking.
- First, decide how much you can afford for your down payment. The Home Buyers Plan lets you withdraw up to $25K per person (or up to $50K per couple) from your RRSPs – tax-free – to be repaid over 15 years. The bigger your down payment, the less principal you will owe, and the less interest you will pay.
- Don’t forget about closing costs, like insurance, legal fees, home inspection costs, land registration and land transfer fees. Add those to your moving expenses and service hookup fees, and they can add up surprisingly fast.
- Your monthly housing expenses (mortgage, taxes, heat, etc.) shouldn’t use up more than 32-39% of your income. (If your combined monthly income is $5000, for example, 39 % of that is $1950.) If you have car payments or credit card debt, the rule of thumb is that debt repayment shouldn’t be more than 40-44% of your income.
- Talk to a Mortgage Broker and get pre-approved for your mortgage. Not all lenders are the same, different lenders have different approval criteria and monthly expense allowances, called Gross debt service (GDS) & Total debt service (TDS). It’s a good way of finding out how much you can borrow – and it speeds up the process once you’ve found the home you want to buy. Mortgage brokers will shop your deal around and find the best fit for you and your unique situation.
You’ve found the perfect place – now it’s time to make an offer. An offer to purchase includes the purchase price you’re offering, chattels to be included in the purchase (like appliances or light fixtures), the amount of the deposit, the closing date and any other conditions.
Your REALTOR® will help you prepare your offer, and will present it to the vendor, who will either accept it or make a counter offer (which asks for a higher price or different terms). You can accept or reject the counter offer. If everyone agrees, the home is yours. If not, you can make another offer, or you may have to keep looking.