Moving out of your parents house is an exciting milestone, but one that can come with questions and uncertainty. If you are a first-time homebuyer, you may be wondering how to apply for your first mortgage, how to receive the best rates, or how to consolidate your existing debts through a new mortgage loan. Luckily, Clover Mortgage is here to help!
Canadian housing prices hit an all time high in February of this year. The average cost of a Canadian property was $816,720 during this time, but that figure has since come down to approximately $640,480. As an aspiring homebuyer, you may be wondering why this happened and what that means for you.
Earlier this year, the Canadian government began raising the overnight lending rate, with the most recent hike occurring just last month. The benchmark rate is now 3.25%, the highest it has been since 2008. While these new conditions may make it more difficult to qualify for a mortgage loan, the goal of this new policy was to curb inflation, which has indeed begun dropping in the last few months.
Despite the recent inflation cooldown, it is uncertain whether or not the Bank of Canada will continue to raise rates in the coming months, which makes the residential housing space especially difficult to navigate.
Canadian housing sales are down 31% since last year, indicating a hesitancy to take on new loans given market conditions. If you are thinking of moving out of your parents’ home, you may want to consider the repercussions of investing under the current rate policies. For more information about the pros and cons of property ownership, check out our guide on buying vs. renting.
Moving out of your parents’ house comes with a number of logistical considerations. Before diving into a property search, you first need to determine a time-frame for your move, consider which region you are looking to move into, and decide on a property type to browse. You will also want to begin looking for a good realtor that can help you navigate the housing process.
In addition to these plans, however, you will also need to begin planning financially. The following are a few best practices to help you prepare for this major step:
One of the easiest ways to improve your odds of mortgage approval while also upgrading the rates and terms you qualify for is by getting your credit score sorted ahead of time.
If you have never taken on a major loan before, the easiest way to improve your credit score is by taking out a credit card, making small purchases (around 10% of your limit) and paying them off immediately. If you repeat those steps over the course of a few months, your credit score will start to slowly increase.
It is also a good idea to avoid taking out any other loans or major debts while you are planning for your first home, this will help keep your credit score as high as possible. However, if you already have debt— such as student loans or car payments— making regular, timely payments can actually help increase your score over time.
A down payment is the amount of the purchase price of your home that you are paying up front, typically with your own money or money that was given to you as a gift. It is one of the biggest upfront expenses you will have to deal with when purchasing a property. The more you save up for your down payment, the lower your overall mortgage costs will be.
To prepare for this expense, it is a good idea to come up with a savings plan. Over the course of a few months or years, try to put aside a large percentage of your disposable income into a savings account. You may also want to create a monthly budget and cut costs wherever you can in preparation for this payment. For more information on how to save for a down payment, check out our comprehensive guide.
Once you move into your new home, you will need to account for independent living expenses as well as monthly mortgage payments. Before making the move, you may want to create a monthly budget outlining your mortgage, utility, and expected tax expenses, while also accounting for food, recreation, and miscellaneous costs.
If you already have a budget, remember that you might need to change some figures when moving into a new home. Your new location may come with increased parking costs or a higher average cost of groceries. It is a good idea to research these factors ahead of the move.
The better you manage your budget, the more likely you are to make your monthly mortgage payments. Missing your mortgage payments can lead to increased costs over the lifetime of your loan and negatively impact your credit score.
When you apply for a mortgage, your lender will evaluate your income, credit score, debt history, and debt ratios to determine whether or not they want to approve you for a loan. The better your finances, the less risk you pose to your lender. The less risk you pose to your lender, the higher the chance they will approve your mortgage application.
The size of your mortgage loan can vary based on your qualifications and your personal preferences. You do not need to take out the largest loan you can qualify for. In fact, choosing a home that falls comfortably within your price range allows you to make your monthly payments with ease, and will likely qualify you for lower interest rates.
Here are a few elements of the mortgage application process to consider:
Applying for your first mortgage can be tough, but Clover Mortgage is here to help. Once we have a full picture of your income, credit, and debt information, we can start looking into finding the mortgage that would be best for you. Based on an evaluation of our 50+ working lenders, different mortgage products, their structure, features, and risks, we can present you with the best options for you.
Contact Clover Mortgage to book your free consultation today! Email us at firstname.lastname@example.org or call us at 416-674-6222 anytime!