4 important steps if buying a home is your New Year's resolution

With 2022 just around the corner, you’re probably listing all of the resolutions you want to make for the new year ahead. If buying a new home happens to be on this list, there are many factors to consider, especially with rates expected to increase over the next two years. To ensure you’re prepared, here are four key steps to navigate the homebuying process with ease.

Get pre-approved for a mortgage

Mortgage pre-approval is a great first step for any homebuyer, as it helps you understand what you can afford right from the start. It gives you a clear budget to work with, as it gives you the best idea of your affordability and simplifies the home search by narrowing the neighbourhoods you’re able to buy in. Also, once you know how much you qualify for, you can begin planning out what your monthly payments will be, along with other household expenses.

A pre-approval is essentially a commitment from your lender to hold a rate and mortgage for you, for up to four months. If you buy a home within that four-month period, this pre-approval can turn into a mortgage approval if you continue to meet the lender’s requirements. With rates expected to rise, getting pre-approved is a good way to lock in a lower rate while you can. Here at Homewise, we’ve been seeing many prospective buyers moving quickly to get pre-approved to lock in low rates before they increase.

Understand all the costs involved

Homebuyers often get so caught up with saving for their down payment that they forget about the other costs associated with their home purchase. Closing costs, such as home inspection, appraisal fees and land transfer tax can add up and may impact overall affordability. Not to mention, once you own the home, you’ll be responsible for paying carrying costs, including property taxes and home insurance. With all of this in mind, it’s important to consider these expenses ahead of time so you can create a realistic budget and step into homeownership without any financial stress.

Keep an eye on your credit

The holidays can bring out the big spender in all of us, but if you’re planning to buy a home soon, it’s important to spend wisely – even after you’ve been pre-approved. Make an effort to limit your credit card usage to ensure your credit score isn’t negatively impacted until you’ve been given the full stamp of mortgage approval. Your credit score is a key factor that lenders use to measure risk on your mortgage application, so having high levels of debt can significantly impact your chances of locking in a mortgage.

Shop around

When it comes to buying anything, it’s always a good idea to shop around to find the best option; that goes for your mortgage, too. It’s very common for most Canadians to run straight to their bank to secure a mortgage without considering any other avenues. Fortunately, there are other options beyond the bank, such as credit unions and monoline lenders that have grown in popularity because they offer competitive products, as well as lower rates and penalties. At the end of the day, you’ll want to find a mortgage that best suits your needs over the long term.

That’s why having a good understanding of what’s available in the marketplace is essential to help you make the right decision. At Homewise, we are always surprised how many clients come to us with offers from their bank that we are not only able to beat, but we also provide a lot of transparency into what the mortgage options mean, both in the short- and long-term, based on key features.

The start to a new year is always an exciting time – mix in a new home purchase and it’s one you’ll remember forever. To make the most of this experience, be diligent from the very beginning by educating yourself on the homebuying process and understanding what’s involved before you take the plunge. Your future self will thank you for it.