Thinking of buying your first home? How much can you afford? How easy is it to get a mortgage? What about if something happens to you or your spouse/partner?
If questions like these have been running through your head, you’re not alone. Here’s what you need to know so that you can take a less stressful approach to buying your first home.
First, you’ll need to determine how your monthly household expenses and debt payments compare to how much money you earn. Based on these numbers, lenders use two ratios to help determine if you can afford a mortgage. By doing some math, you can get an idea yourself:
Expert tip: Rather than stress about the math, use this Canada Mortgage and Housing Corporation (CMHC) interactive form to help you figure out your GDR and TDS.
A mortgage pre-approval lets you know how much home you can afford realistically, so you can go shopping with confidence and work more effectively with real estate agents.
“Real estate agents will see you as a serious buyer rather than someone who is just looking around,” says Jonathan Boucher, Manager, Residential Product Management for TD Insurance. “That gets their attention and it helps them weed through options to those that best fit your budget.”
It’s also a big plus once you’ve found a home you like. With a pre-approved mortgage, you can put in an offer more quickly and more confidently than if you didn’t,” explains Mr. Boucher.
To get a mortgage pre-approval, make an appointment with a mortgage specialist.
To get a mortgage, you’ll need a good credit rating. That may be complicated when you (or your partner if you’re buying as a couple) have a rocky credit history. And if you’re new to Canada, you may not have a Canadian credit history yet.
In either circumstance, you can work with your bank about establishing a good credit history and improve your eligibility for a mortgage. It may take a little time, but it is possible.
“Insurance is part of buying a home,” says Mr. Boucher. “Some types of insurance make sense for everyone; other types make sense for couples.”
Expert tip: Visit your bank or ask your mortgage specialist for advice on saving for a down payment.
Two popular federal programs can help boost your down payment and help cover additional costs.
Finally, when it comes to buying your first home, the more you know the better. “Feeling prepared and ready is a good way to relieve some of the stress involved,” says Jonathan Boucher. Click here for a simple guide through the home-buying journey.
Protect those who depend on you
As a homeowner, the last thing you want is to leave your family with a big financial burden should you die. The right life insurance is a good way to protect those who depend on you. It can help cover:
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