The home buying process is often so exciting, especially for first time home buyers, but often people forget to be informed & prepare themselves financially, which can often be daunting. We’ve outlined below what things home buyers need to prepare themselves for, that are sometimes overlooked!
You May Qualify for the First Time Home Buyer Incentive
The First Time Home Buyer Incentive is a shared-equity mortgage with the government, and is aimed at middle-class first-time homebuyers to help lower monthly mortgage payments without increasing the amount they need to save for a down payment. The government will provide 5% of the price of the resale home and 5-10% of a newly constructed home, and it will have to be paid off within 25 years or when the home is resold — but there’s a catch, although the loan is interest free, it’s a “shared equity mortgage” which means the government shares in any gains on the property value. If your property value takes a hit, your repayment amount to the government will be less than the amount borrowed.
How do I qualify?
- Borrower must be a first-time homebuyer
- Borrower must have a household income of less than $120,000
- The mortgage is capped at four times the maximum household income of $120,000, or $480,000. This means the average price of a home would be $500,000 to $600,000, depending on the down payment.
Be Prepared for Unexpected Expenses
Purchasing a home may be one of the greatest investments you will make, and there are several expenses that come with it! From repairs and maintenance, down payment, furniture & appliances — a lot goes into purchasing a home! During the whirlwind of a process, it’s easy to forget about expenses necessary to purchase a home! Listed below are several expenses to be aware of before taking the leap to purchase your first home!
- Property Tax
- At the time of purchase, the property tax owing by the seller has normally been accounted for with the clients, but not that it’s going to be due… buyers should be prepared by saving funds for tax payments as they can often be a surprise to buyers.
- Property/Land Transfer Tax
- When a buyer purchases or gains an interest in property that is registered at the Land Title Office, they are responsible for paying PTT and filing a property transfer tax form. Ontario offers rebates to first-time buyers to help offset the cost.
- Legal Fees
- Fees are dependent on the sale price of the home, and often buyers are required to include ordering a title search & registering title.
- Home Inspection
- Not all sellers provide a pre-inspection, and it’s important for a home buyer to have an inspection done to ensure there are no issues with the structure of the home.
- When planning and going through numbers associated with purchasing your home, be sure to take insurance into account!
- Applicable when purchasing a newly constructed home. Inquire about the tax payable to ensure it fits with your budget!
Be Informed & Proactive About Your Financial Health & Getting Pre-Approved for a Mortgage
Before you actually apply for a mortgage, get a copy of your credit score. Ensure that all of the information is correct, since getting approved for a lower mortgage rate is dependent on a strong credit score. It’s better to know ahead of time if you need to work on your financial health! This is a great starting line to work towards increasing credit score & savings.
Once you have all of your documents prepared & organized you’re ready to get pre-approved! Getting pre-approved is one of the most important steps, as it will give you a realistic window of price before you dive into the home buyer search.
Once a home buyer has prepared themselves in each of these categories, they are well on their way of continuing finding their home! If you have any questions or inquiries, please reach out to us or comment below. We’d love to help!