We all know New Year’s resolutions can be challenging to stick to. If you’ve decided 2021 is the year to buy your first home, then this is the blog for you. Here is our top New Year’s resolutions to help make the home buying process easier:
1. Save for a Down Payment
If you haven’t already started saving for a down payment, now is the time to start. An important resolution is to look at your budget and find ways to increase the amount you have up front. The higher your down payment, the lower your mortgage and the more equity you have in your home right off the bat. The minimum amount that you need to put aside is based on the price of your home:
- For a home $500,000 or less you need 5% of the purchase price
- For a home from $500,000 to $999,999 you need 5% of the first $500,000 and 10% for
the portion of the purchase price above $500,000 - If you are looking for a home of $1 million or more, you’ll need 20% of the purchase price
Consider these numbers so you can be financially prepared to purchase your first home, and make sure you’ve budgeted accordingly. For more information on the costs associated with purchasing a home, check out this blog “What does it cost to buy a home in Toronto and the GTA?”
2. Improve Your Credit
This is a good New Year’s resolution even if you aren’t planning to buy a house. Having sound credit makes it easier to qualify for a mortgage. It also provides peace of mind once you purchase a home. Some tips to improve your credit include:
- Always pay your bills in full and on time including rent and utilities
- Use your credit cards and pay them off in full each month to establish a strong credit
history - Avoid applying for credit, as credit seeking has a negative impact on your credit score
- Set a budget and stick to it so you can make more purchases using cash/debit
- If you have debt, set an even stricter budget so you can start paying off your balances
- Keep unused credit cards open as long as they don’t charge a fee, as this helps improve your credit utilization ratio (the amount of credit available to you compared to the amount of debt you owe)
This resolution will help establish a credit history while also improving your credit rating. A stronger credit history can help you qualify for mortgage financing and better terms.
3. Apply for Mortgage Pre-Approval
Once you have a down payment of at least $25,000 and your credit score is healthy, apply for mortgage pre-approval. A pre-approved mortgage is important for a few reasons:
- It establishes your eligibility for a mortgage
- You understand how much money a lender will be willing to lend you for a home
- It helps secure an interest rate
- You better understand how much your monthly mortgage payments will cost
With pre-approval you can set a budget to share with your real estate agent. This way you’ll only target and see homes you can reasonably afford. Seeing too many homes beyond your budget can not only be frustrating, but it can also taint how you perceive those within your budget.
4. Speak to a Real Estate Agent
This might seem like a quick call to action to have you contact our team. However, it is an important resolution. The decision to buy a home is always exciting. However, it’s not something you should jump into blindly. Finding a real estate agent you feel comfortable with provides you with the support and knowledge you need to navigate the Toronto real estate market.
We are always here to help first-time home buyers on their journey. In fact, I have a team of experts, including mortgage lenders to help with the pre-approval process. When you are ready to start your 2021 home search, I’m happy to jump on a call, set up a Zoom meeting, or a go for a distanced walk to discuss your goals, needs, and the best strategy.
To read more about what to expect when purchasing a home and what to avoid, take a look at my blogs – Lessons learned from buying real estate Part One and Part Two.
Photo by Tim Mossholder on Unsplash
