Ready to buy your first home? Buying a home is one of the biggest financial decisions you will make in your lifetime. If you think you are ready to take the plunge into home ownership, we have some tips that can help make the process easier.  

  1. Save for your down payment. The terms of your mortgage and interest rate are determined by the size of your down payment, so more is always better! 
  2. Understand the full price of paying for your own home. There is more than just the monthly mortgage fee, include in your estimate extra expenses like property taxes, utilities, and long-term maintenance.
  3. Consider what mortgage rates and products are best for you. Your mortgage broker can help you through the process, but it’s a good idea to understand some of the basics before you get started.
     
  4. Take advantage of government incentives. Do you qualify for the Government of Canada’s Home Buyer’s Plan?
  5. Contact your broker! Your broker will shop for the best product and best rate. Your broker will help you achieve your homeowner and financial goals.

Details of a mortgage 

Down payment 

The terms of the mortgage interest rate will be determined in part by the amount of down payment you can put down. Set a goal and save up for the biggest down payment you can.  

That said, you can get into a home with as little as 5% down.   

You can use a combination of sources for your down payment – savings, RRSP, TFSA, FSHA or a gift from an immediate family member.  

Mortgage rates 

You have two options – a fixed or variable rate mortgage, and you will need to qualify for your lowest rate.  

  • Variable rate mortgage: the interest rate fluctuates with the Bank of Canada’s prime lending rate. 
  • Fixed-rate mortgage: fixed-rate mortgages guarantee a fixed interest rate for the length of your term. 

Mortgage type 

  • Insured mortgage: If you are making a down payment of less than 20% of the price of the home, then you will have mortgage default insurance.  
  • Conventional (uninsured) mortgage: if you are making a down payment of more than 20% of the price of the home, your mortgage does not require default insurance.  

Mortgage term 

  • Closed: a closed mortgage cannot be repaid without pre-payment penalties during its term (without exceptions in the mortgage agreement) 
  • Open: an open mortgage allows repayment of your mortgage at any time, without penalty, but typically has higher rates. 

Amortization 

  • Amortization period: the length of time over which you expect to pay off your mortgage. It typically ranges from 15-25 years.  

Payment Frequency 

  • The frequency of your payment depends on the mortgage product and the lender. You can have monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly and accelerated weekly payment options. Accelerated options will increase your payments but shorten your amortization. 

Some other important pieces of information for your first mortgage 

What is the difference between a pre-qualification and a pre-approval? 

A pre-qualification helps your mortgage provider determine approximately how much you will be able to borrow and how much you will need for down payment and closing costs. During a pre-qualification your mortgage provider won’t review your credit report or verify your financial information. They will estimate how much you might be approved for based on an overview of your finances, income, assets and debts.   

A mortgage pre-approval is as close to a guarantee as you will get. A pre-approval means that a mortgage provider does some of the initial background checks in advance and commits to giving you a particular interest rate if you are fully approved for a mortgage within a specific time frame (depending on the lender).   

Mortgage stress test  

The mortgage stress test is a test that ensures that you can afford your mortgage payments at a qualifying rate. The qualifying rate is based on either the benchmark rate of 5.25% or the rate offered by your lender plus 2% – whichever is higher.  

Your credit and income 

  • A credit score is the rating that lenders use to assess the risk of lending out money. If you have applied for a mortgage or a car loan, the lender will look at your credit score.  
  • You will also need to show a steady source of income.  

The mortgage you ultimately qualify for will be based on the size of your down payment and your ability to afford your monthly mortgage payments.  

Realtor, Home Inspector and Lawyer 

  • A trusted realtor can help you house hunt and understand the process of buying a house. When it comes time to make an offer, a realtor will ensure your offer contains all the necessary information.  
  • A home inspector can provide you with a report to make sure you are purchasing a home in good repair.  
  • A reputable lawyer can help you with the process of titles, inspections and insurance.  

Closing Costs 

There are some additional costs associated with closing your real estate purchase. Home inspection, land title transfer, property taxes, property transfer tax (depending on the province), provincial sales tax (if a new build), legal fees, utility hookups and moving expenses.  

If you are a first-time home buyer – you deserve to work with a brokerage that will take the time to ensure you are completely informed of all your options. 

Unlike banks, who are tied to their own mortgage products, we have access to all different kinds of lenders, which means more selection, more options and more savings!

Our experienced brokers are ready to assist you with your mortgage journey across BC, Alberta, Saskatchewan, Manitoba, Ontario, and Nova Scotia. Contact one of our brokers today!