16 Home Financing Tips for Beginners in 2024

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As a future first-time home buyer, you might be as excited as uncertain about what’s ahead after buying a home. With home values rising each year, saving for a down payment takes time. Buying real estate will depend on how you finance it, and financing is challenging.

As you navigate buying your first home, here are some home financing tips for beginners. These tips will support your journey toward eventually closing in on your dream property.

1. Use a Home Affordability Calculator

Find out how much you can afford to spend on a house according to your income, debt, down payment, credit score, and where you plan to live.

2. Use a Down-Payment Calculator

Punch your numbers into a down-payment calculator according to the home values you intend to aim for. This will help you decide what your down payment goal should be.

3. Research First-Time Home Buyer Programs

Many first-time home buyer programs are available in Canada. These programs help homeowners save for their down payments and then receive tax credits to assist with financing. These include the First Home Savings Account (FHSA), the Home Buyers’ Plan, GST/HST housing rebates, and more.

4. Shop Around for a Mortgage

Speak to a mortgage agent as you explore different options. Mortgage rates fluctuate. You may find better rates at certain banks, credit unions, or alternative lenders than elsewhere. Consider different mortgage loan types, such as variable or fixed-rate mortgages.

5. Increase Your Income

If there is a way, find a way to increase your income. Most importantly, be ready to demonstrate to a lender that you have steady employment.

6. Eliminate Debt

If you have credit card debt or a similar high interest rate, you will want to clear it off your name. This will help you secure the preferred mortgage while elevating your credit score.

7. Work on Your Credit Score

Get a free copy of your credit report and dispute any errors you find. Pay your bills on time, keep credit cards low, and work on improving your credit score. The higher your score, the lower your mortgage interest rate will be.

8. Don’t Close Any Credit Cards

Closing a card decreases the amount of available credit you can use. This lowers your credit score.

9. Avoid Opening New Credit Accounts

When you are within a year of applying for a mortgage, try not to open new credit accounts. A hard inquiry on your credit report will lower your credit score. You want your score to be as high as reasonably possible before home financing.

10. Start Saving

If you think you can’t afford to save, start saving now. Even if it’s just putting in $5 every paycheque, every dollar you put into a savings account to buy a home will net interest. With every deposit, you grow your savings more.

As you save for a down payment, set up your chequing account to automatically withdraw a specified amount every paycheque. This ensures it’s done every time; you won’t need to consider it.

11. Keep Saving for a Down Payment

When you hit your downpayment threshold, don’t quit. Keep saving while looking for a home. The bigger your down payment, the better. Continue putting it into it.

12. Set Aside Closing Costs

Closing costs may be anywhere from 2-6% of your mortgage, and you must contribute these funds. Factor this into your savings goals.

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13. Budget for Home Repairs and Upgrades

As you move into your home, you may need immediate home repairs, upgrades, and furnishings. These will need to be budgeted for and funded by you, independent of residential mortgages.

14. Length of Term for a Mortgage Matters

A longer 30-year mortgage is paid off over thirty years with lower payments than a 15-year loan. Define for yourself – largely based on your monthly payment – what term length is best for you.

15. Get Preapproved for a Mortgage

When you look for a home, get preapproved for a mortgage. This will give you a firm handle on what you can afford. Making an offer shows you’re ready to close the deal immediately without approval.

16. Always Get a Home Inspection Done

A home inspection – before you buy a home – will tell you what to expect regarding renovations and repairs that need to be done. This way, there are no surprises. It’s critical for home financing, yet first-time home buyers sometimes skip the inspection to save money, only to be hit with unexpected costs later.