A Brief Guide to Buying Your First Home
Buying a home is a big decision, and as a first time home buyer you will find that the buying process is much different than renting. Not only do you have to get qualified and approved for a loan, but you also need to learn about home inspections, property taxes, property insurance, and everything else that comes with being a home owner.
First Time Home Buyer’s Incentives
The good news is that as of 2009, the Canada Revenue Agency has enacted a first time home buyer’s tax credit (HBTC), baed on a percentage of $5,000, for new home owners that buy a home after January 27, 2009.
Also from the Canada Revenue Agency is a new registered retirement savings plan (RRSP) rule that allows home buyers to opportunity to withdraw up to $25,000 from their RRSP, which must be paid pack over time, but provides a nice kickstart for those that need a down payment.
Getting a Mortgage
The process of getting a home mortgage can be a tedious one, but for good reason. Banks want to make sure that home owners are qualified to repay their loan on time, and that they don’t get in over their head. This is where your credit score and income to debt ratio will play a large part, not only in your qualification, but in the amount you will be qualified for. Banks use pre-qualification as a way to measure someone’s likelihood of success in applying for a loan, but a pre-qualification is not a guarantee of funds.
Once you are pre-qualified and have begun to peek at the local home listings, you will want to meet with a mortgage broker to get pre-approved, which is a step above pre-qualification and involves a look into your debt to income ratio, and your credit history. A pre-approval letter will state how long you are pre-approved for, and for what dollar amount. You will use this to determine the maximum price you can afford to pay for a home.
Of course, some mortgage companies will want a down payment anywhere between 5% and 20%, often offering incentives for higher deposits. Also, should you choose to deposit more than required, you can use the additional amount to buy into a home larger than what you have been pre-approved for.
If you are ready to start your home buying process, then I urge you to take a look at our mortgage calculator & mortgage quotes section, where you can play with the numbers to determine how much home you can afford, and how much you will pay based on varying down payments and interest rates. Also, when using our Canadian mortgage calculator you will be entitled to five free mortgage quotes from local trusted providers, on us. Using our mortgage calculator & mortgage quotes utility is a great way to start the home buying process on the right foot, and it’s free!