Buying a home is an important milestone in your life. It’s likely that your home will be the most valuable asset you own, and it’s also likely going to be the most expensive to maintain. Therefore, it’s essential that you find a property that fits your needs and budget both now and for several years to come. Let’s take a closer look at who is classified as a first-time buyer, what you’ll need to obtain a mortgage, and how to determine if a given property is worth acquiring.
Who Qualifies as a First-Time Home Buyer in Ontario?
In Ontario, a first-time house buyer is anyone who has not owned a principal residence in the past four years. It’s worth noting that you might not make the cut if you lived in a home owned by a spouse or civil partner during that same period.
What Are the Requirements to Obtain a Mortgage in Ontario?
New homebuyers will typically need to show that their total housing costs will not be more than 39% of their overall monthly income. Furthermore, they will need to show that their total expenses do not exceed 40% of their monthly income. This is to ensure that you don’t overextend yourself and increase the risk of a default.
Most lenders will also require that you have a credit score of at least 600 before approving your financing request. However, you are more likely to get the lowest advertised rates if your score is 680 or higher.
In addition, your lender will likely want to appraise the home you’re trying to purchase before approving your application. This is done to ensure that its market value is equal to or greater than the amount you want to borrow. If it is not, there is a chance that your application will be denied. Alternatively, you may be required to make a larger down payment to cover the difference between the home’s value and your desired loan amount.
How Do You Know if a House Is a Good Investment?
Ideally, you will look for homes that have the potential to generate passive income today while also helping you build wealth for the future. Buying a duplex can be wise because you can rent out one side of the house while living in the other. Depending on your area’s going rate, the rent you collect from your tenant may be enough to pay your mortgage each month.
You can also look for homes that have finished basements or other dedicated areas where tenants can live without interfering with your privacy. If you don’t mind interacting with strangers, you can agree to rent an unused room while sharing common areas such as a kitchen or bathroom.
In addition to collecting a monthly rent check, you can also benefit from long-term price appreciation. Since 2005, home prices in Canada have increased by an average of 6.11% per year. In recent years, some markets have seen prices increase even faster.
Of course, your home won’t increase in value simply because it exists. Its actual value will depend on how well it has been maintained, whether it is in a neighborhood close to good schools, or its specifications. For instance, a home with three bedrooms is almost always more attractive than one with two bedrooms, assuming it’s in a decent area and in good condition.
What Should You Know About a Property Before You Buy It?
As a first-time buyer, it’s understandable that your initial focus will be on attributes such as how big the home is and if it has a yard big enough for your dog. However, it’s important to verify that the house doesn’t have significant issues such as a leaky roof, a cracked foundation, or a mold problem.
You will also want to find out how old the furnace, water heater, and other important components are. In some cases, a seller will agree to replace older HVAC items or help pay for the cost of repairing or replacing a leaky roof. Regardless, knowing about potential issues helps you determine how much it will cost to acquire a given property and if you can afford it.
Make Sure to Conduct a Private Inspection Before Buying the Home
When touring a house, you may not realize that only one wall in the bedroom has fresh paint on it. You may also fail to realize that only a single corner of the living room was covered by a large object while the rest was open for all to see. These may be signs that the seller is trying to hide signs of water damage, foundation cracks, or other problems that might cause you to reconsider buying a property.
During a formal inspection, you will have as much time as you need to review the property in a cold and objective manner. During such an inspection, it may be possible to move that object in the living room or check behind the wallpaper to see what it may be trying to hide. Ultimately, you will have a chance to verify what the seller or the seller’s agent told you about the house when you first toured it.
The person you hire to help with the inspection may also provide more insight into the condition of the home that you want to buy. He or she may also be able to answer questions you didn’t have a chance to ask during an open house or didn’t feel comfortable asking in the seller’s presence.
Buying a home can be a complicated and stressful situation for anyone, regardless of how many times they have done so. However, it is crucial to be thorough when evaluating a property and determining if you can afford to own it. Otherwise, you could be stuck in a house that has negative equity, or that can’t be sold because it has a serious defect.