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Preparing for Home Ownership
September 17, 2024
It is hard to describe the value you gain when you own your own property. It is value that makes you grateful for the added responsibility that homeownership brings. I personally love that I am building equity in buying a real asset. Homeownership can also help stabilize your housing costs as rent can increase quickly in Alberta. Many have found that owing a home to be a good hedge against inflation as home prices typically rise with inflation.
The type of home you choose will determine the level of responsibility and maintenance costs that you take on. Some property types include apartment condominiums, townhouse condominiums, duplexes, detached homes, acreages and they all have varying amounts of responsibility for the homeowner. When transitioning from renting, owning a condominium can be a great first step onto the property ladder, since you can start with a smaller down payment and start building equity faster. They can be a great way to ease into home ownership since they are less intensive in terms of exterior maintenance.
As someone who started out with a townhouse condominium and owned it for 14 years before buying a detached home, I can tell you that condominium fees are not a waste of money. I was on the condominium board for most of the time that I lived there. Condominium fees pay for many things that you would otherwise be responsible for if you own a duplex or detached home, such as insurance, exterior & common grounds maintenance (roof, doors, windows, siding, sidewalks, driveways, sewers, eaves troughs, fencing). They also typically pay for snow removal and property management.
Condominium Fees
It should be noted that is a requirement to pay the condominium fees when you own a condominium. If you do not pay the condominium fees, the condominium corporation (which is made up of all the owners collectively) can start foreclosure on your property to force the sale of your property to pay the condominium fees.
Homeowner's Insurance
Most people that I meet want a detached home where there is a requirement to buy home insurance that covers fire and theft so long as they have a mortgage. Whichever lender you get a mortgage from will require you to have homeowner's insurance.
Property Taxes
Property taxes are typically higher for detached homes and are required to be paid by the city and your mortgage lender. If you do not pay your property taxes, the city could put your home up for sale to pay the taxes owing. Additionally, if you owe property taxes you will have trouble shopping around for the best mortgage when your mortgage is up for renewal.
Down Payment
Due to anti-money laundering laws, you likely will need to prove that your down payment is from your own savings or a gift from immediate family. In some cases, it can be borrowed, but the cost to repay the borrowed funds has to be included when calculating your debt ratios and can affect how much mortgage you can get approved for.
Mortgage Default Insurance
This type of insurance is different than the homeowners' insurance mentioned above. If your down payment is less than 20% of the home's purchase price, you will be required to pay for mortgage default insurance that protects the lender in case you do not pay your mortgage. This insurance premium can be added to the mortgage.
Emergency Savings Fund
It is not a requirement to have an emergency fund to get on the property ladder but I highly recommend having the goal of establishing an emergency fund as soon as possible. 4-6 months worth of expenses ($25,000 for a family) is a typical recommendation. If you experience job joss, you will not regret having this fund. It is always best to never miss a mortgage payment. Staying on good terms with all creditors no matter what the circumstances will help ensure that you can always get the best mortgage rates and not fall behind on your obligations.
Closing Costs
Most lenders want to see that you have 1.5% of the home's purchase price set aside for closing costs. Closing costs include home inspection and legal fees for the closing of the sale. Reach out if you want lenders who offer incentives on this specifically for first time home buyers.
Home Maintenance Costs
Just some of the costs associated with maintaining a home are: furnace filters, duct cleaning, repairing plumbing, hot water tank or furnace replacement, roof shingle replacement, fencing, landscaping.
Are you ready?
There is no rule that says you that if you buy a home you have to stay in it forever, but since there are closing costs associated with buying a home, staying in your home for 5 years can will help offset those costs. And, it is an option to rent out your home if you need to move, but you should self-examine whether you really want the responsibility and risks associated with becoming a landlord. This option can also affect your homeowner's insurance premiums & mortgage rate.
To get the best mortgage rates, buying a home once you have been in the same industry for two years or more is best, however, there are many flexible mortgage products out there for those not in that situation or the self-employed so reach out for more details.
If you have done the reflection and home ownership is right for you. There are a few options to help you gather a down payment for a home, such as the:
• First Home Savings Account (FHSA); and
• Home Buyer’s Plan (HBP).
A lender will want to see that you are investing your assets as well into the property, so you’ll need to save a minimum of 5% of the home’s purchase price as a down payment plus 1.5% of the purchase price for closing costs.
I am more than happy to help you navigate the home ownership journey. If you want me to be 'Your Mortgage Assistant' know that there is no cost for my services. I am here to help you figure out the cost of home ownership and assist you with getting approved for a mortgage. I have access to over 40 lenders in Alberta who compete for business which means great products and rate for you. We even have access to options not available at banks.
If you would like a more comprehensive guide, phone/text/email me for FREE copy of my Home Buying Guide for first time home buyers so that you can take the guess work out of getting approved for a mortgage and prepare yourself for homeownership.
I am happy to answer any questions you may have to make the process less stressful so that you can get on with enjoying your home and building equity. Please feel free to reach out to me at (780) 707-5451 or crystalcromack@invis.ca. Alternatively, you can start a mortgage application available on my website.
Ten Steps to Home
September 17, 2024
Dreaming of celebrating the holidays in your very own home? Maybe it’s not as far away as you think. In fact, you might be just ten steps away!
1. Start off on the right foot by having a conversation with me to determine if you’re ready to buy. If you are not quite ready, I can provide tips on how to get ready!
2. I’ll let you know how much home you could likely get approved for.
3. Work with an experienced realtor to find your home. I know some great realtors if you need somewhere to start.
4. Find your perfect home and make an Offer to Purchase that is subject to financing.
5. Gather up the documents to support your mortgage request. (I'll let you know which documents are needed)
6. I'll work to get you a mortgage commitment from a great lender at a great rate so that you can waive your financing condition.
7. Don’t make any significant changes to your income or debts before getting possession of your home.
8. Meet with your lawyer approximately a week before the house becomes yours to finalize everything.
9. Arrange for home insurance.
10. Walk in your very own front door!
If you would like a more comprehensive guide, phone/text/email me for FREE copy of my Home Buying Guide for first time home buyers so that you can take the guess work out of getting approved for a mortgage and prepare yourself for homeownership.
Five Tips for First-Time Homebuyers
September 17, 2024
Although mortgage debt is ‘smart’ debt, buying your first home is a huge financial decision and there is a lot to think about. It’s one of the most important financial decisions that most Canadians will make in their lifetime. Here are five tips to help you get off on the right foot in your home buying journey.
Determine what you can afford
Before you start shopping for a home – and long before you consider putting an offer on one – build a realistic budget. Remember that home ownership involves costs beyond the
monthly mortgage payment such at utility bills, insurance, taxes, and home upkeep. Consider opportunities that will help you manage your housing costs. Perhaps you could rent out part of your home, or have a roommate to help offset expenses. Or if you are in a condo, possibly rent out an extra parking space if you have one.
Start off small
The dream house may be priced too high, so a starter home might be the right option. A smaller home or maybe a house just outside of the expensive area will help get a foot in the door. You can take advantage of today’s low interest rates to pay off the home quicker and use the equity from the first home to buy that dream home later.
Get expert advice
Work with a mortgage broker to sort through all of the mortgage options and get the right combination of mortgage features, privileges and rate that is best matched to your needs.
The right mortgage goes beyond just the rate--it’s important to also consider term, prepayment options, refinancing penalties, restrictions, and fees. I’d be happy to help you build a strong away team so that all aspects of your home buying experience are efficient and professional. Your team will include a realtor, lawyer, and a home inspector.
Plan for closing costs
There are additional costs that come with buying a home – lawyer fees, home inspection, title insurance – so you’ll need to have some extra funds set aside to cover these costs. Generally, you can expect to pay around 1.5% of the home’s selling price in closing costs.
Accelerate your payments – early and often
A mortgage is the largest debt you will probably ever take on, and paying it down faster can mean large savings on interest costs over the long-term. Get in the habit of making lump sum payments whenever possible, and consider making bi-weekly payments as a way to decrease the life of the loan. I can also provide strategies to help you pay your mortgage off faster and shave thousands off interest costs.
I look forward to helping you achieve your dream of homeownership!
If you would like a more comprehensive guide, phone/text/email me for FREE copy of my Home Buying Guide for first time home buyers so that you can take the guess work out of getting approved for a mortgage and prepare yourself for homeownership.
Ways to Improve Mortgage Qualifying Success
September 17, 2024
Whether you are a first-time buyer or looking to renew or refinance your mortgage with a new lender, getting a new mortgage can be stressful. That’s why you should get yourself mortgage ready well in advance. Here are some tips to help you do just that:
1. Get your credit report. Getting a copy of your credit report will let you know how you will be viewed by lenders. You can order yours for free through the mail or for a small fee online at www.equifax.ca or www.transunion.ca. If you spot a problem, contact the credit agency to resolve the issue.
2. Polish your credit. You can boost your score by several points quickly with continual good credit habits. Most importantly, pay your bills on time, every time. Don’t let your credit accounts exceed 30% of the credit available. Before you cancel any credit cards, get advice. And don’t apply for a store card just to save on your purchase that day. Make a habit of checking your credit score regularly and watch how those good credit habits push your credit score skywards!
3. Cash is king. Plan to go into homeownership with the maximum down payment possible. If you are in the "saving up" stage of preparing for homeownership, now is the time to meet. There are several down payment savings strategies available that we can put to work for you.
4. Start a dialogue early. Get in touch early to talk about your purchase, refinance, or renewal plans. I can help you be fully prepared to get you where you want to go, and to make sure you can take advantage of any opportunities that come your way.
Also remember, history has proven that it is almost impossible to perfectly time the market. Home ownership has proven to be a very solid investment over the long term, so focus on buying a home when you are financially ready and when it fits your lifestyle.
If you would like a more comprehensive guide, phone/text/email me for FREE copy of my Home Buying Guide for first time home buyers so that you can take the guess work out of getting approved for a mortgage and prepare yourself for homeownership.
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