Whether you’re living at home or on your own, the topic of renting versus buying has never been more popular. Both offer pros and cons, and the best decision for you is dependent on many factors, including your finances. If you’ve decided to buy a home, becoming familiar with the process can save you time and money in the long run. We’ve compiled a list of questions to help you get started.

1. How much home can I afford?

You’ll first need to consider your current financial situation. Is your income and employment reliable and consistent? Do you have a sense of where you spend your money each month? Try tracking every expense for 30 days. Things like dining out, shopping, and unplanned purchases can quickly add up and can be easy tweaks to make if you’re looking to make space for the cost of home ownership. After all, a mortgage payment is only part of the picture. You’ll need to factor in costs such as utilities, home insurance, property taxes, not to mention things like snow removal, lawn care, and furniture to make your house a home.

2. Should I get a pre-approval?

Yes. Pre-approval for a mortgage is an evaluation that determines if you qualify and the maximum amount you are eligible to borrow. It helps set expectations about a purchase price, taking into consideration possible future interest rate changes. It is important to stress the difference between pre-approval amounts and affordability. You may be approved for an amount that is higher than you’d expect, which can be tempting when searching for your first home. However, much like a credit card, it’s always best to leave wiggle room in the case of an unexpected surprise. Lastly, it is important to keep in mind a mortgage pre-approval is not a mortgage guarantee. A pre-approval is a preliminary review, it is not a binding agreement. If there are any changes to your circumstances after your finances were initially reviewed, it is possible for a lender to deny your mortgage application. Learn more about getting a pre-approval >

3. How much cash will I need?

There are two main items you’ll need to save for. The first is the down payment. In Canada, home buyers are required to have a minimum down payment of 5% of the purchase price of a house less than $500,000 and 10% on a house that is listed for more than $500,000. Saving enough money for a down payment can feel like a steep hill to climb and, depending on your situation, there are a number of options available. If leveraging existing savings or investments are not an option, some financial institutions like CUA offer a product like the No Down Payment Mortgage with a borrowed down payment to help you get into your new home faster.

4. What rate can I expect?

The rate you can expect will depend on a number of factors, including the Five Cs of Credit. Your credit report plays a key role in your ability to get approved for any type of lending, including a mortgage, and will affect the interest rate you’re offered. Your credit report shows a lender how you have handled credit in the past, which is considered an indication of how you will meet your financial obligations in the future. Essentially, the higher the score, the better the rate you can expect. In Canada, a score of 680 or above is considered to be healthy. Did you know, you can access your credit report and score once a year at no cost? Learn more about how to order your credit report.

5. What else should I consider in my home buying plans?

Buying your first home is an exciting decision and provides opportunities to build equity for the future. At the same time, it is important to plan ahead where possible and consider additional expenses or life events that are likely to occur in the future. One area always recommended for homeowners is a maintenance fund, set up as a separate savings account for expenses ranging from a leaky faucet to a hot water tank replacement or a new roof. Setting up a small savings account at the same time as your mortgage can help to lessen the impact when an unwanted surprise arrives on your doorstep.

Buying a home is one of the most exciting and complicated decisions you’ll ever make. We can help make it feel less daunting. If you’re wondering about next steps and are ready to discuss home ownership, contact us via email at info@cua.com or call us at 902.492.6500. Our team of experts are ready to help.