Preparing For Your Greatest Investment
Are you planning on buying a home some day? Do you know about all the simple steps you need to take before you ever get ready? In this blog, we will discuss the different steps you can and should be taking in order to better prepare for the purchase of your your first property.
This step is the most crucial and also the most obvious. If you think that one day down the line, you would like to purchase a home, the sooner you start investing and saving, the better it will be for you. So make it a habit to put away a certain amount of your paycheque, the higher this amount is, the better it will be. This will be helpful to you for 2 reasons. First of all, you will need a downpayment of 5% or higher. The higher your downpayment is on the property, the more equity you will own in it, and the lower your monthly mortgage fees will be. Finally, you will be creating a good habit of budgeting while keeping a close eye on money going in and out of your account, which will be essential when you are a home owner.
Create Budgeting Habits
Home ownership can be stressful and costly if you aren’t able to budget. Although saving money alone will help you create a good habit and budget around your savings, you should create additional habits in order to make saving and spending easier for you. Even something as simple as limiting the amount of times you eat out every month could help. Thanks to our basic educational system that teaches us practically nothing about finances, most people don’t have any ideas on how to save and spend. Credit cards have been making it very easy for people to spend money and worry about paying it later. This makes it very difficult for a lot of people to get out of their credit card debt. The main purpose of creating a budget in my opinion is to create a habit of keeping a close eye on your finances, so that you are more aware of your spending habits. Once you become better at managing your finances, you are more prepared to purchase and care for your home.
Keep A High Credit Score
A very crucial aspect of purchasing a home is your credit score. Most people do not have enough money to buy a house outright. This is why there are lender’s, such as banks, that allow you to pay as little as 5% of the purchase price of the home, and they cover the remaining amount. These lender’s want to make sure that if they lend you money, they will be able to get it back. This is where a solid credit score and history come into play. The more confidence they have in your ability to pay back the amount, the more money they would be willing to lend to you, at a lower rate.
How do you increase your credit score? You want to show that you pay your bills on time, whether it’s a cellphone or internet bill, car payments, or even your credit card payments. Credit card payments are the easiest way to increase your credit score and you can get started at a very early age. One of the best habits to create when using your credit card to build your score is to only spend amounts that you currently have, and pay it off in full as soon as possible. You should also avoid using more than 35% of your total credit limit. So for example, if you’re credit limit is $1000, you shouldn’t use more than $350 of it at a time. You can maintain this 35% limit by increasing your credit limit when you can, and doing what I said earlier. It’s always better to have a high credit limit and only use a small portion of it, so don’t be afraid of having a large amount of credit. Just make sure to stay disciplined and continue to only spend amounts you can pay off in full.
Take Advantage of Programs
Most countries have some sort of first time home buyer programs that will assist you on your purchase. Most of these programs take place at the federal level, however, there are provincially/state run programs aswell. Some of these available programs in Canada and Ontario are; RRSP Home Buyer’s Plan, Land Trasfer Tax Rebate, First-Time Home Buyer’s Tax Credit, GST/HST New Housing Rebate. Be sure to read up on these programs to get a better understanding before the time comes. We will have blogs explaining these programs in more depth.
If you have any other questions regarding home ownership, do not hesitate to reach out to us on the contact page or leave a comment down below.