4 factors to consider when buying your first home

In the last year, there has been more emphasis and value placed on our homes. With many of us working from home for the foreseeable future and lockdown measures keeping us inside, there’s a renewed appreciation for homeownership and having a larger space. Combined with lower interest rates, this has led to an upswing of activity in the Canadian housing market, especially among first-time buyers.

At Homewise, we’ve seen an influx of applications from first-time buyers looking to get into the market. If you are doing this for the first time, there’s a few things you should consider before getting started to ensure you’re prepared and that there are no surprises. After all, this is one of the biggest investments you’ll ever make, and it should also be an exciting experience.

1. Get pre-approved and know what you can afford

For first-time buyers in particular, getting pre-approved for a mortgage is highly recommended. While it isn’t mandatory, a pre-approval pulls in your personal and financial information to help you establish what you can afford right from the start and what you’re eligible to borrow. Based on this, you can determine what you need for a down payment and how much to budget for other household expenses. Having this information will also make for a more productive home search so you’re focused on which neighbourhoods and properties you can actually afford.

In a hot real estate market like the one we’re in now, there’s a lot of competition. In these situations, a pre-approval gives you greater credibility in the eyes of sellers and increases your chances of getting the home that you want.

2. Make sure your credit is in good standing

Taking the time to review your credit score will help you decide whether you’re able to make a purchase in the near future. Your credit score is a “rating” given to you based on your repayment history to credit cards, lines of credit, student loans and auto loans, and this is a key factor that lenders use to determine your eligibility for a mortgage.

Typically, lenders are looking for a credit score of 650 or higher for a Prime A mortgage (although there are unique situations where it can be as low as 600). However, if you find yourself in a situation where your credit score is on the lower end, there are other options such as B and private lenders.

There are also ways to increase your credit score, such as paying bills off on time and ensuring you have multiple credit facilities to show that you are able to keep control of your expenses.

3. Shop around and choose the right lender

When it comes to a mortgage, products and terms vary from one lender to the next, which is why you’ll want to do your research and get a full picture of what’s available in the market. As a first-time buyer, it’s important to know that there are lenders beyond the big banks, such as monoline lenders and credit unions, that often offer better features and rates. Most importantly, they also have potentially lower penalties if you ever have to break your mortgage. You may not realize it, but most first-time buyers break their mortgage before the end of their term. Shopping around gives you the opportunity to compare various options and find the full-feature mortgage that’s right for you. Taking the time to understand the details of your mortgage can save you tens of thousands of dollars in the long run. You have choices, so look for the best options available for you.

4. Find a great realtor

Realtors are very important in the homebuying process, and finding that right one for you is a game changer. When you are ready to buy, interview multiple realtors to see who has the same values as you and who you feel understands your situation. Check with your family or friends for their referrals. A strong realtor can be the difference between a long home search and a short one. The longer the search takes, the more expensive your home could be.

If you’re a first-time buyer looking to make a purchase, connect with an unbiased mortgage advisor who can guide you through the process and answer all of your questions. Our team at Homewise works with first-time buyers on a daily basis, simplifying the process so that they can find the best mortgage and enter the market with confidence.

Follow these steps to start your homebuying experience, and have fun doing it.