As a first-time house buyer, you’re probably well aware that you’ll need a portion of cash for a down payment. However, when you jump into the real estate market, lots of unforeseen expenses may arise, so it’s wise to save up for them and be prepared to make an offer. Here’s how one first-time buyer saved up for their dream home.
Start Budgeting Early
When you decide to purchase a house on your own, you will recognize that you have a lot of homework ahead of her, including determining what you could afford.
TIP: Use an online tool like the The BEST HOMES ON EARTH WEBSITE’S Mortgage Payment Calculator to calculate your mortgage costs.
You must also budget for your other (living) expenses, such as car payments, house insurance, and more, while you’re planning for the biggest purchase of your life.
Before you are pre-approved for a mortgage, it would be best if you could hire a financial consultant who can assist you with computations.
Even when you get figures suggesting that you can afford a $3,000-a-month mortgage, you need to understand that’s just your mortgage payment; utilities, property taxes, and condo fees are still to consider. It’s best to overestimate what you really require to pay each month so you don’t get any nasty shocks later on.
Start Saving For A Down Payment And Other Expenses
Ideally, you should start saving up for a down payment as soon as possible. If you don’t have the full amount, there are still options available to you, such as taking out a guarantor loan or using a government-backed program like the First-Time Home Buyer’s Program.
Other expenses to keep in mind are land transfer taxes, which vary by province, and legal fees. You will also need to factor in the cost of home insurance and get quotes from different providers to ensure you’re getting the best deal.
As well-experienced realtors in Chilliwack, we would also recommend setting up a meeting with a mortgage broker to understand all the different products available and what would work best for your situation.
Get Pre-Approved For A Mortgage
Once you have an idea of what you can afford, it’s time to get pre-approved for a mortgage. This will give you a better idea of how much money you can borrow from the bank and what your interest rate will be.
TIP: Check out The BEST HOMES ON EARTH WEBSITE’S First-Time Home Buyers Guide for more information on getting pre-approved for a mortgage.
Being pre-approved for a mortgage gives you a clear idea of your budget and helps to narrow down your house search. It’s also a good bargaining chip when it comes time to make an offer on a home.
When you find the perfect property, having a pre-approval in hand will show the seller that you’re a serious buyer who is able to close the deal.
Save For A Rainy Day
As a first-time home buyer, you should always have a contingency fund in case of any unexpected repairs or maintenance that may come up.
A good rule of thumb is to set aside 1-3% of your home’s purchase price to cover these costs. So if you’re buying a $600,000 home, you should have at least $6000 set aside for repairs and maintenance.
This contingency fund will come in handy if your home inspector finds any problems with the property or if you need to make any repairs after you move in.
By following these simple tips, you’ll be on your way to budgeting for your first home like a pro!
Prepare For Extra Costs Associated With Buying A Home
You could end up spending more than you expect if the property requires a down payment, additional repairs, or some other expense. Aside from the large deposit on your house, you might have to pay for a parking spot if you buy a condo. You’ll also need to save money for a professional home evaluation, which may cost anything from $500 to $750. You must also budget for your other (living) expenses, such as car payments, house insurance, and more, while you’re planning for the biggest purchase of your life.
General Property Transfer Tax
For all taxable transactions, the general property transfer tax applies. The general property transfer tax rate is:
- 1% of the fair market value up to and including $200,000
- 2% of the fair market value greater than $200,000 and up to and including $2,000,000
- 3% of the fair market value greater than $2,000,000
Notary Or Attorney’s Fees To Pay
Notary and attorney’s fees will also be required, which cover the study and paperwork involved with property transfers. Other smaller expenditures are possible, such as reimbursing sellers for prior utilities or a charge to change the locks if you choose to do so. It’s also vital to maintain a reserve for items like installing a security system, as well as unexpected repairs that may crop up, such as a broken water heater or a leaky roof.
Set Up Your First Home Maintenance Fund
A home maintenance fund should also be established to help with future repair and improvement costs. This can be done by setting up a separate savings account and contributing to it every month.
Let your REALTOR® Guide You Through The Process
When you’re a first-time homeowner, you’ll probably have a lot of concerns. Working with a REALTOR® is the greatest answer when it comes to finding your new home.
For additional information, look into our Home Buyers’ Road Map, which includes even more excellent ideas for buying a home? Looking for your first place can be both exciting and daunting. But don’t worry—we’re here to help. First-time home buyers often have many questions, from “How much house can I afford?” to “What kind of mortgage is best for me?”. We’ve compiled a list of key budgeting tips for buying a home.