What you should consider before purchasing a home?
Mortgage Payments are often the most obvious thing we think about when looking for a house. But you may also want to consider the following when deciding on a home.
When putting less than a 20% down payment you will have to pay Default Mortgage Insurance which protects the bank. It is a one time fee that gets added to your mortgage. You may want to consider saving more money for your down payment to avoid having to pay this insurance.
Legal Fees $1500
Title Insurance $300
Home Inspection $600
Home Appraisal $500
Property Transfer Tax 1% of the first $200K 2% of anything over that (Exempt as a First Time Buyer)
Property Tax Adjustments
Annual Property Taxes
As long as you live in the home you can deduct $770 as the Home Owners Grant (BC Only). It is a good idea to pay them monthly so you don't have a big bill to pay each year. You can pay them through your mortgage lender or directly with the city or district. We assist you with setting this up at closing.
Sewer, Water, Garbage (If you plan on purchasing a home out of town with a cistern you want to consider what your monthly water bill would be to have your water hauled or cost and equipment to haul the water yourself)
Home Maintenance Costs
Things happen and you want to make sure you have the savings available to cover them when they do. You don't want to be tapping into more debts once you've taken on a new mortgage.
We highly recommend you get a Home Inspection so you are prepared for any repairs and maintenance you will have to perform on the home and what kind of costs you would be looking at to do them. If anything major comes up in the inspection it may be grounds to re-negotiate your purchase price or purchase a different home.
Home Insurance Costs
You want to consider where you purchase your home and what coverage is available in that location. Flood zones may not cover against a flood. If you are too far out of town you may not be covered in the fire protection zone. Maybe the home has a wood fireplace that requires an inspection that you will have to pay for. Home Insurance can be a large monthly cost that you want to consider before committing to a home.
Life & Disability Coverage
It is important to think about what you would do if you were disabled and unable to make your payments. Life & Disability Coverage is something we would highly recommend and we can offer you some options when we put together your mortgage financing. So I would consider this in your monthly costs. Payments will vary greatly depending on your health, age, and size of mortgage.
This can change based on location. If you are too far out of town and maybe you work from home or rely on having good internet connectivity, you will want to consider this in your options.
Talk to your Mortgage Broker
As your Mortgage Broker we help you evaluate all of these things. Make sure to speak with us before you start looking for a home so we can put together some numbers for you and confirm what you would qualify for. This will involve having your credit reviewed, completing an application, and providing documents to verify the information you provided. Things move rather quickly once you make an offer on a home so you don't want to have any delays once the process has been started.
A few things to keep in mind:
Do not cancel your credit cards. Having open active credit is essential. As a rule of thumb, lenders want to see 2 active items of credit with a 2yr history
Do not get a new loan as adding this debt could affect what you qualify for
Lenders are going to need to see a 90 day transaction history for your down payment funds so try to avoid moving the funds around between accounts
Wait until you have purchased a home if you are considering being self-employed as a lender will require 2yrs in business before we can use the income to qualify
Do not co-sign for someone if you are looking to get financing of your own as you will have to include that as a debt in your own qualification