Entering the housing market as a first-time buyer poses many challenges. From finding the perfect home to proving your financial capabilities, there are many hurdles you need to cross. Many Canadians find it challenging to navigate the housing market due to the rising prices and short supply of properties today. But, the market conditions haven’t stopped future homeowners from continuing their search.
Buying a home is a significant decision, and if you’re ready to become a homeowner, you might need to cross a few barriers before getting closer to your dream home. Here are some ways you can become an ideal homebuyer candidate in Canada.
Seek Financial Help from Family
As a first-time homebuyer, you might find it difficult to arrange sufficient funds for your home’s down payment. If possible, seek financial help from your family to smoothen the process. Many lenders accept mortgage gift letters when offering funds to buyers for a mortgage. A mortgage gift letter states that your family can provide you with the funds to make a down payment on your purchase with no obligation to get the money back.
If your family agrees to help, use a mortgage deposit gift letter template to prepare a document and present it to the lender. Your mortgage application will be stronger when the lender notices that you have financial support from your family to fund your home purchase.
Get Mortgage Pre-Approval
A mortgage pre-approval makes you an eligible buyer in the seller’s eyes. It proves that you’re financially capable of handling a loan based on your financial history.
When the lender gives you an estimated loan amount, it gives you a better idea of how much you can afford to spend on a home. It also allows sellers to view you as a serious buyer and increases your chances of finding a better home.
Boost Your Credit Score
Your credit score indicates your ability to handle finances. A good credit score increases your chances of getting a lower interest rate on your mortgage, reducing your costs in the long term. On the other hand, a bad credit score might reduce your chances of getting a mortgage or allow you to pay a higher interest rate to reduce the lender’s risk.
To become an ideal candidate as a first-time homebuyer, make sure your credit score is in good standing before starting your house hunt. You can do this by paying off existing debt and refraining from borrowing more money.
Arrange a Reasonable Down Payment
According to Canadian guidelines, you need to make between five to 10 percent of the down payment towards the purchase of your home, depending on the property’s price. However, you can make a larger payment to increase your chances of getting approved for a mortgage and securing your desired home.
Know the Facts
The best thing you can do to prepare yourself while house hunting is to know the facts. If you have enough knowledge about the purchase process, rates, and expenses, you’ll be considered a knowledgeable buyer, increasing your chances of purchasing your dream home.