Buying a home is one of the most significant financial decisions you will make. Understanding your financial situation helps ensure you purchase a home that you can comfortably afford. Here’s how to get started on the right financial footing.
Get Your Mortgage Pre-Approved
A mortgage pre-approval is a valuable first step. It provides clarity on what you can afford and strengthens your position when making an offer. To get pre-approved, you’ll need:
Personal Information: Identification, such as your driver’s license.
Employment Details: Proof of your salary and job stability.
Financial Information: Details about bank accounts, assets, current loans, and debts.
Down Payment Information: How much you’re putting down and the source of the funds.
Closing Costs Proof: Funds to cover closing costs, typically 1.5–4% of the property price.
Trouble Qualifying for a Mortgage?
If your pre-approval amount is lower than expected, consider these options to improve your chances:
Pay down existing loans or debts.
Save for a larger down payment.
Adjust your home price expectations.
Understand the Importance of Your Credit Rating
Your credit score reveals your reliability in repaying debts. If you have no credit history, consider building one by using a credit card responsibly. If your credit history needs improvement, focus on timely payments. For more guidance, consult with a credit counselor or discuss options with your lender.
CMHC Tools to Help You Plan
Canada Mortgage and Housing Corporation (CMHC) offers free online tools to help you budget and estimate costs:
Household Budget Calculator: Compare your income and expenses to determine a comfortable home price.
Mortgage Affordability Calculator: Calculate a mortgage amount that fits your budget.
Mortgage Payment Calculator: Estimate monthly payments for different mortgage options.
Debt Service Calculator: Review your financial situation and calculate an affordable mortgage amount.
Premium Calculator: Calculate your CMHC Mortgage Loan Insurance premium if your down payment is under 20%.
For more tips, contact me or visit CMHC’s Step-by-Step Guide to homeownership.