Buying a home is an exciting rite of passage. If buying a home in Toronto, Ontario, is in your future plans, there are some things you should be doing now in order to be adequately prepared. By getting your finances in order early on, you will have a more pleasant and smooth process when the right home comes up. Read on for 5 tips for getting ready to buy a new home, and use this advice to help you reach that goal.
Figure Out a Budget
While your financial situation may change over time, it is smart to figure out just how much house you can afford. Take a look at your monthly income as well as your expenses and debts, and determine how much you can reasonably pay each month for a home. Consider plans and contingencies like starting a family, single or multiple incomes, career changes, or other things that may come up.
Why Savings Are So Important
As you may know, saving up for a down payment can result in massive savings over the life of your loan. Depending on your situation, that down payment may be between 3% and 20% of your total loan. The more you can put down, the less you’ll lose to interest over time. Another expense to save for will be closing costs. Consult with a financial professional for more specifics, and start saving as soon as possible.
Improve Your Credit Score
In more ways than one, low credit scores can hurt you. When it comes to buying a home, certain credit scores will help you get approved to borrow, and higher scores will get you better rates. Credit scores above 750 will get you the best rates on the market, while landing in the 700 to 720 range is still a great place to be and staying above a 640 to 660 will keep you in a good place. That’s not to say that you will automatically be excluded if your scores aren’t that high, but it is worth putting in some effort if you know you want to buy a home down the road. Ways to improve your credit score include paying off balances, checking on your score to ensure you’re not being unfairly penalized, and refraining from applying for new credit for a year before financing a home.
Get Preapproved for a Mortgage
In addition to building your savings and strengthening your credit score, try to get preapproved for a mortgage before you begin looking at houses. There is a lot of documentation needed around income and assets, and by having everything in order, you will be in a good position to act once you find the perfect home.
Once your ducks are all in a row, it is time to find a home for sale in an area you like. Start with a broad search and narrow it down over time. Keep in mind things like renovation costs, schools, neighbourhoods, space for your family, places to park your vehicles, and other essentials in addition to fun considerations like bigger bathrooms.