Finally ready to make the transition from renter to homeowner? In this exciting time you may be turning to friends and family for some insight into the process. However, there’s a lot of misinformation out there so we’re here to clear up a few common home buying myths!
You know the saying, “Don’t put the cart before the horse,” well that’s important to remember when it comes to buying a home. You don’t want to start looking for a house until you have sat down with a lender to discuss a mortgage approval and find out the amount that you’ll qualify for. Viewing and falling in love with homes that you can’t afford takes the fun out of home shopping – you’ll end up feeling frustrated and defeated! Your Realtor can give you a checklist of what you’ll need to show your lender, as well as help you understand the costs involved with homeownership (from insurance to condo fees to property taxes and more).
In today’s day and age, with access to sites like Realtor.ca and House Sigma, you may think that you have all of the information you need to purchase a home right at your fingertips. While it’s true that there’s a lot of information available to the public, a few sold prices aren’t going to equip you with the knowledge and tools to make the best possible decision or secure a home for the best possible price. A Buyer Agent (a Realtor who is representing a buyer) can get you access to homes that aren’t as readily available on public searches, will educate you on how to assess a home’s true market value, and help protect you when it comes to navigating legal contracts. Plus, a Buyer Agent is compensated through the listing brokerage, as they receive a portion of the selling commission – so, you’re technically getting their services and expertise for free. Seems like a no-brainer to us!
Fortunately for some, this is a myth. There are many options of lenders outside of the big banks who can work with credit scores down to the low 500’s. Multiple factors go into the approval process, but your credit doesn’t have to stop you from becoming a homeowner. If your credit is low, get in touch with a Realtor to help you connect with the right lender who can help you potentially get approved. (And in the meantime, consider doing yourself a favour and connect with a credit repair specialist to try and get those numbers up – a better score will lower your interest rate!)
Though it’s ideal to have a larger down payment to avoid additional costs such as mortgage default insurance (the CMHC premium is applied if your down payment is less than 20%), the minimum down payment on an owner-occupied home in Canada is 5% of the first $500,000 of home purchase price and 10% on any portion above $500,000. 20% is however the minimum down payment required for an investment (rental) property!
There are many costs that go into buying a home, including upfront costs. One of the mandatory ones is an appraisal. If you are getting a mortgage, the home will have to appraise for the purchase price (or more) and an appraisal can range from $300-$700. You may also want to conduct a home inspection, which can cost upwards of $400 depending on the size and condition of the home (you may require add-ons like a pool inspection, or well and septic inspections if purchasing a rural property).
Aside from your down payment, your largest cost will be your ‘closing costs’. Closing costs are generally 2-4% of the purchase price. Your closing costs encompass things like lawyer fees, title insurance, and land transfer tax.
Now that you have some knowledge to get the process started, let’s chat and get you started on finding your dream home!
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- Rachel & Christina