So you are getting ready to buy a home and well, you're feeling pretty overwhelmed. It is a daunting process and you don't know where to start. The good news is this video is all about how to be financially ready to buy your next home in Surrey, BC like a pro. No surprises and all in control. Sound good? Okay, so here we go.
Step 1 is to know your credit score. Whether you qualify for a mortgage through a bank, credit union, or other financial institution, you should be aiming for a credit score of 680 for at least one borrower or guarantor, especially if you're putting under 20% down. If you're able to make a larger down payment of 20% or more than a score of 680 is not required. If your credit score does not meet the minimum requirements, there are a number of things that you can do to improve it and your future financial success, including things like paying your bills in full and on time if you cannot afford the full amount, at least try for the minimum required. Also, pay your debt, such as loans, credit cards, lines of credit, car payments as quickly as possible. You also want to make sure to stay within the limit on your credit cards and try to keep your balances as low as possible. You could reduce the number of credit cards or loan applications that you have submitted and consider an alternative lender or a B lender if you're struggling with credit issues.
Step 2, figure out your budget. It's important to look at the purchase price budget as well as your cash flow budget. Being house rich and cash poor makes for a no fun home experience. The home price, based on your cash flow budget may be dramatically different from the budget home price that you qualify for. Not only does having a budget help you to understand your purchase price range and help you find an affordable home, but it can also help you see if there’s any gaps or opportunities for future savings. This will be instrumental when you become responsible for mortgage payments.
Step 3, Do you have your down payment? The ideal down payment for purchasing a home is 20% or more. However, we understand in today’s market that is not always possible. Therefore, it is important to note that any potential home buyer with less than 20% down payment must purchase default insurance on the mortgage, and they must have a minimum down payment of at least 5%. The down payment on your home could come from your own savings, such as savings accounts or RRSP’s, and a big thanks to the federal government's home buyers plan. Potential first time owners are able to leverage up to $35,000 of their RRSPs or $70,000 for a couple to help finance the down payment. A gifted down payment from an immediate relative is also acceptable. If your down payment comes from a TFSA or RRSP, the bank will want 90 days of statements to ensure the funds are accounted for and for gifted funds, they rarely require 90 days of proof.
Step 4, Get your Mortgage options. Rates is only one of the many features in selecting the best mortgage product that meets your financial goals. Be sure to get an opinion from both a major bank and a mortgage broker for a great video on the differences between both, check the description below.
Step 5, Get your paperwork in order. When you apply for a mortgage, you will typically need to provide a standard package of documents, which almost always includes the following items: Your government issued personal ID, 1 month of recent pay subs from applicants who will be listed on the loan, a letter of employment from your employer, your most recent 2 years worth of personal CRA Tax filings and financials. If you're incorporated, 3 months of bank account statements and your down payment, which is a minimum of 5% and any more that you may need.
Step 6, You're ready for your pre-approval. To have the best success with your mortgage, it is recommended that you get a pre-approval. This can be done through your mortgage professional to ensure that you get the best mortgage product for you.
From the best rate to the best term agreement, a pre approval helps verify your budget and allows us as a real estate agent to find you the best home in your price range. A few additional things to know too:
#1) A pre approval guarantees the rate offered and locks it in for up to 120 days, which protects you from any rate increases in the future while you are shopping.
And #2) a pre approval lets the seller know that you securing financing should not be an issue which is beneficial in a competitive market like the one we're in today.
Step 7, You're ready to go shopping. You made it! Once you have your down payment and have qualified for a pre-approved mortgage, you are ready to start searching for your perfect home. Easy right?
If you would like to join us for an online educated buyer session, be sure to check out our website for all of the information. At the Germyn Group. We know you only have one chance to buy or sell your next home. So we're here to help you get it right. Thanks for watching.
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The Germyn Group
Darin Germyn PREC* & Adam Howsam
Macdonald Realty LTD
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