Simple Financial Tips for Buying your First Home  

Being Offer Ready

What is more exciting than the thought of buying that first home, not too much! It is a sign in independence and personal growth and we all love the idea of having that personal space to entertain and relax. It can be nerve racking and thrilling at the same time. 


So what do many of us do? Rush out and start looking at every home on the market in the area we are interested in, right? Although I was probably guilty of the same actions, in this market with the high prices of homes this is probably not the best way to start. There are a few things I would recommend doing before visiting every open house there is and envisioning yourself in the home. With new mortgage rules and increasing interest rates there is a good chance of disappointment if you do not have a good handle on your finances before hand.


Here are some simple tips to help you be ready to “Offer Ready” when you spot that perfect house:


Tip 1: SAVE, SAVE, SAVE. Save as large of a downpayment as you can. The more you are able to put down as a downpayment, the less money you need to borrow. That sounds obvious but it does a couple things. It lessons you monthly payments and can save you significant money form mortgage default insurance premiums. If you can save 20% then you do not have to pay mortgage default insurance premiums (speak with your bank).


Also, if you have started saving in your RRSP, you may be able to use that money through the Home Buyers’ Plan that allows you as a first-time homebuyer to withdraw these funds to put towards your first house. Be aware that this money does need to be paid back to the RRSP. Be sure to speak with your lender about all the rules and regulations around this.



Tip 2: Determine Affordability. How much, with your available downpayment can you afford? Speak with your bank to understand what that amount is. It is much better to do this before going to see houses that are not affordable. This will provide you with a guideline for what homes you should be looking at from an affordability perspective.


Lenders typically calculate your ability to afford a mortgage based on traditional debt-to-income ratios relating to your monthly housing costs, your family’s gross monthly income and all of your other debt obligations, including loans, credit cards, lease payments, etc.



Tip 3: Be Offer Ready. Once the down payment is known, and you have determined the amount of home you can afford, have your bank of choice provide you with a pre approval letter. This is important as it sets out the maximum amount the bank will loan you and holds a rate for a specified amount of time. This also lets the seller know you are able to purchase their home and shows your ability to make an offer.


If you are looking for a second opinion on what you can afford, I would be happy to put you in touch with a mortgage advisor I work closely with.