How Do You Know If You're Ready to Buy a Home?
A home is one of the biggest purchases you’ll make in your lifetime, and deciding when you’re finally ready to make the jump into home-buying can be tough. There are so many factors to consider, from financials to finding the home that suits your needs and wants. So, how do you know when you’re really ready to buy your first home? Here are our top 4 tips to help you reach a conclusion:
#1. You have little to no debt
While there’s no hard rule that you have to be out of debt to buy, having low amounts of debt will help you secure a better interest rate. When people think of debt, consumer debt might be the first thing to come to mind, but don’t forget to consider car loans, student loans, or anything else you’ve recently financed. It’s no secret that the more you owe, the more that could hurt your chances of being approved for a mortgage. However, lenders do like to see how well you can manage your debt, and having a good credit history is definitely helpful.
#2. Your savings account can handle the expenses
It goes without saying that in order to buy a home in Sudbury, you need to be able to afford it. We may not have the crazy prices like they do in Southern Ontario, but saving up for the 5% down (plus) for a first time buyer is not easy. Costs while buying a home (think down payments, closing costs, lawyer fees, inspection fees and taxes) can add up, so it’s important to be prepared for that. Banks typically want to see about 2% for those additional costs; they won’t want to see you throwing these extra costs on a credit card. Speaking to a financial planner can help you work out a budget for these expenses and help you decide how much you can afford for a home.
#3. You have a steady job/income
In order to shift from pre-approval to approval, the bank is going to want to see that you not only have a job, but that this job is secure (such as full time, past your three-month probationary period, etc.). This may not be covered during your pre-approval, but to get that final approval, the bank will want to know that you can afford the loan in the long-term.
#4. You can afford the monthly payment
Scrolling through pictures of homes in your dream neighbourhood is exciting, but you need to be able to realistically afford that monthly payment. Every. Single. Month. Sure, you might have enough money in your bank to pay for your down payment and closing costs, but you shouldn’t drain your entire savings account on these expenses. Always ensure you’ll have enough left over to cover the monthly expenses. A great tip is to budget for the complete price of your monthly mortgage as you are shopping and saving for a home. For example, if you are used to paying $1500 in rent, but your projected mortgage is going to be $2200, set aside that additional $700 in a savings account every month and prepare for what your lifestyle will look like paying for your monthly mortgage payment.