Consolidated Credit’s tips for first time home buyers
(TORONTO, ON) — Home buyers, start your engines: we are about to drop the flag on the spring real
estate season. April kicks off a period that typically sees the highest number of homes on the market, and with mortgage rates hitting historic lows, prospected homeowners are revving their engines.
But Consolidated Credit would like them to pump the brakes.
“There’s a real urge out there to dive head-first into the housing market,” says Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada.
“We have this idea that Canadians are not successful until they own property,” adds Schwartz. “I worry that this results in first-time home owners biting off more than they can chew, and that will set them backwards, not forwards.
Schwartz points to recent news out Alberta, where mortgage insurers are bracing themselves for an increase in delinquencies in embattled oil country. He says it provides an interesting case study that illustrates the impact of sudden job loss amid a generally strong market.
“Times are good and you might be inclined to spend a bit extra,” comments Schwartz. “Nobody can tell the future, but there are ways to safeguard yourself so that you don’t get hung out to dry if things take a downturn.”
Purchasing your first home is probably the biggest financial move you will ever make, and it is not one to be taken lightly. Consolidated Credit has put together the following tips for first-time homebuyers who are getting ready to take the plunge:
- Check your credit – Your credit score will have a large impact on the amount of money a lender will be willing to give you, and at what interest rate. Take a look at your credit profile well before you start house hunting, so that you have enough time to correct errors or focus on areas that need to be rebuilt.
- Master your budget – Transitioning into home ownership will mean there will be many more demands on your budget and you need to make sure you can carry the extra weight. Put some elbow grease into your budget and be certain about what you can afford – and be sure to include some wiggle room. Use our mortgage calculator to crunch some numbers.
- Wake up the “sleeper costs” – You might be used to paying rent, but the “sleeper costs” of home ownership may shock you. When considering your budget, factor in maintenance, property taxes, utilities, insurance and possible condo fees into the big picture.
- And then there are more extra costs – Just when you think you have everything tallied, think about the closing costs – you will need to be able to pay for legal and real estate fees, home inspection, utility hook-ups, land-transfer taxes and home furnishings. Simply put, the purchase price of the house is just the beginning..
- Pre-approval – Getting pre-approved for a mortgage will help narrow down your house hunt because you’ll know what you can afford. But, not so fast. Lenders will often pre-approve you for an amount based on their guidelines. Keep your budget at the front of your mind to make sure you can realistically afford what the bank says you can afford.
- Twenty per cent down – Don’t take any short cuts with your down payment. Saving enough money to put at least 20 per cent down will result in huge savings over the term of your mortgage. Anything less than a 20 per cent down payment is considered high risk and will require you to obtain mortgage insurance – resulting in an added monthly cost.
“Your mortgage will probably be the biggest amount of money you’ll ever owe,” adds Schwartz. “Go beyond due diligence – put hundreds of thousands of dollars worth of thought into this decision.”
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact: