When the dream of home ownership go sideways or slips away, being a smart buyer helps make a big difference. Since 2008, job losses, big mortgages and plunging home values have left buyers with huge debts. They are also struggling to stay afloat. Still, buying a house is a good experience provided that it is done with open eyes and a clear plan.
In the Canadian Real Estate Market, dreaming of owning a house and achieving it really requires smart home planning that is equals to smart home buying. In this regard, follow the steps mentioned below for your complete understanding:
Consider Building Equity and Investing in yourself than Paying Someone Else’s Mortgage
You may have heard it several times that you must consider building equity and invest more in yourself than pay someone else’s mortgage. In this regard, you may invest in your home and you may increase for its value. Also, remember that with more equities, the better. There are certainly two ways for you to consider when it comes to building equity; property values that increases and debt amount that increases. If you want, you may follow a passive or active approach to building equity that will still depend on your resources, your goals and your luck.
In building equity, always remember that the market value of your home will always be an essential element in the equity calculation. If ever this increases, you will also expect for more equities.
Home improvement is also another essential way to invest in a home and for it to increase in its value. Updating bathrooms and kitchens, improving landscaping and even making a home energy-efficient will all pay off. If you will do some improvements to build more equities, just choose projects with the high ROI (return on investment) results.
Get a Pre-approval from the Bank to Determine your Borrowing Power
If you are aiming for ownership and of owning a home as little as five percent down, it is a lot better if you decide on getting a pre-approval from the bank to help determine your borrowing power. This way, if ever you are experiencing financial difficulties because of unexpected life event, you may still have an idea if you can still be approved by the bank for a particular loan. And thus, you will be able to achieve your dream of owning a home.
In Canada, it is essential for you to understand that it is very different from the USA. The usual mortgage insurance requirements (CMHC & GENWORTH) depend on the amount of down payment. High-risk is 5-20% low risk while 20% + down payment on a mortgage is usually what makes or breaks qualifying for a home purchase. The banks will usually weigh what you are worth (income) versus what you owe.
In this regard, a mortgage calculator will help you determine the amount of mortgage that you are qualified for. It will also be based on the current expenses and household income including the maximum price of home that you could afford. The best suggestion here will be to increase the down payment. This way, you will be qualified for more.
In addition to that, you may save a lot of your money and you may learn how different options/payments will help reduce the interest you pay than that of the mortgage term.
Know the Difference between Bad and Good Debt to help you Manage and Reduce Debt
When you find it difficult repaying debts, student loans, car payments and credit card bills, it will leave you even finding it difficult if debt is really good. But, actually, if you will think of it closely, it is not exactly the case. In fact, other debts are far better or even worse as compared to others. In this regard, it is essential to know the exact difference.
For beginners like you, debt will always be a debt. Nevertheless, the difference between bad and good is exactly based on the purpose wherein the debt is taken on. Bad debt may be used for the present, the here and now. Good debt, on the other hand, helps an individual to get ahead financially.
Good debt, in particular, is an investment just like a piece of land, a home or a stock. It is usually taken to be able to buy something that is of value and which increase in the years and months to come.
Credit cards are another form of bad debt. The majority of Canadians have more than 1 credit card. Credit cards usually carry higher interest rates. This only means to say that the balance may increase further. They also carry with them higher carrying costs. When these costs have not been paid off completely, the cost compounds carried and the amount owed will continue to build up.
For a future homeowner like you, you need to know exactly the difference of bad and of a good debt. When you carry a higher debt on your credit card, it might mean huge trouble. This is especially if you want to secure a mortgage. It will also reflect poorly on your credit rating and history.
Canadian banks usually base their decision of lending a major purchase on the ability of the borrower to repay. If ever the evidence is not visible, lenders will unlikely to approve the homeownership/mortgage.
Significant Tips to Fix Spending Habits
You need to concentrate further on fixing your spending habits. You must make an effort of paying off all your debts in avoiding accruing interest. This will also help avoid bad debts that continue to increase overtime.
In addition to that, you may save ahead for the purchased and lower the amount of the budget for household for this spending. If possible, develop a habit of saving on a regular basis, including “get ahead savings” and “consumer purchases”.
Seek out the Right Realtor/the Right Professional
As a buyer, you need to be aware of the options available. This is especially true if you have a damaged credit standing or bruised credit. You may seek out the right professional or a realtor for guidance.
Genworth MI Canada Inc. can be your trusted financial mortgage insurance company that will help and guide you through the channels of owning a/your first home!