Millennials in Ontario who are astute with money are realizing that purchasing a home is one of the best long-term investments they can make and are jumping at the chance to become homeowners.
The process of purchasing a property, whether it be a house, condo, or townhome, may be rather intimidating, and you may find that you are unsure of where to begin. Learn all you need to know to successfully buy residential Real Estate in Ontario by reading our comprehensive step-by-step guide.
Put aside money for a down payment
The first thing you should do before you start looking at houses for sale is to start putting money away for a down payment. The initial sum of money that you put toward the purchase of a property is referred to as the “down payment.” When applying for a mortgage, it is typically easier to do so when you have a higher down payment saved up.
The minimal amount required is determined by the sales price of the property. People will often put down anywhere from five to twenty percent of the total buying price as a down payment in Canada.
If you make a larger down payment, you can avoid having to pay the Canada Mortgage and Housing Corporation’s (CMHC) mortgage default insurance, which is another motivation to do so. This significant fee, which is calculated based on the size of the mortgage and the down payment, is intended to safeguard the lender and, as a general rule, can only be avoided with a down payment of at least 20%. So, get started saving right away!
Make sure you have enough money for closing the purchase
In spite of the fact that putting money down for a down payment should be your top financial priority, you should also put some money aside (usually between 1.5 and 4% of the price of the home) to cover future closing fees.
Legal and administrative costs are paid at the closing of a real estate transaction. These fees are typically between 1.5% and 4% of the selling price of the property. It is imperative that you put money aside to cover these costs before purchasing a home so that you are not in the red when it comes time to close on your property.
Get your finances in order
Before you start looking at real estate listings, you need to have your finances in order. This procedure will assist you in determining how much you are able to spend on a purchase and in organizing the important documents that are necessary to support an application for a mortgage.
Check the status of your credit rating.
A credit score is a number that ranges from 300 to 900 and is used by financial institutions to determine the level of risk associated with providing credit to an individual. If you have a lower credit score, there is a greater likelihood that you will not be approved for a loan. Prior to completing an application for a mortgage, it is recommended that you check your credit rating so that you may determine where you are on the scale and how you might improve your score.
Organize the mortgage
After getting your financial house in order, the next thing you should do is determine how much money you have available to spend. The amount of your down payment, the schedule of your amortization (repayment), the total selling price, and so on can all be factored into a budget with the help of a mortgage calculator, which is a good place to start. In addition to this, a mortgage calculator can also provide you with a total selling price estimate.
Visit a mortgage lender to get “pre-approved” if you want something more official to show potential buyers. This indicates that a possible mortgage lender investigates your financial situation and decides how much money they are willing to lend you, as well as the interest rate they will charge you for the loan.
It is not required to have pre-approval; however, doing so is strongly recommended. The price of a property that you are able to afford is determined by a pre-approval, which also serves to define your budget for house hunting.
In fact, some real estate agents will not work with you until you provide them with it first. Having pre-approval for a mortgage shows sellers that you are a serious and qualified buyer, and it also helps you avoid the agony of finding your dream house and then finding out that it is completely out of your price range.
After your offer has been approved, you will need to make another trip to your mortgage lender in order to receive the formal stamp of approval.
Go house hunting!
You have some money saved up and a pre-approval letter in your possession right now. This is the most thrilling phase of the process of purchasing Ontario residential real estate.