Buying a property is not quite like buying most things. It’s not just an investment; it’s a home where you and your family reside for years, making memories together. Before you can settle down, you need to establish a few things first to ensure your finances and the home itself are on a solid footing.
Please keep reading to learn about the three most important things you must do before securing your property.
1. Prepare Your Finances for Borrowing
Almost nobody has the cash sitting in their bank account to buy a home, especially as prices have surged dramatically in recent years. Prices might be cooling as of late, but a bit of a comedown after years of steady increases still means homes are expensive. You’ll need a mortgage.
In Toronto, the average home price is over $1,000,000, and while the cost of a home is dropping across the province, it’ll still be 15% more expensive than at the start of the pandemic. If you factor in changing interest rates, you’ll get a picture of the difficulties.
To help you get pre-approval for a loan, inspect your finances the way you anticipate the bank or a mortgage broker would — purchasing a property is a major undertaking, and you need to have your ducks in a row.
You need to show that you receive a regular stream of income from work. To maximize your credit score, try to wrap up any outstanding payments. Of course, this may be easier said than done! Everybody is in a unique position when it comes to their finances, with different levels of family support, obligations and responsibilities, and more.
Burke Financial offers mortgaging refinancing solutions that can help existing homeowners consolidate outstanding debts, so they have an easier time getting back on their feet. If you’re considering a home equity loan, home equity line of credit, or a second mortgage to leverage your existing home’s equity to free up capital to borrow, Burke Financial can help find the right path for you.
We also specialize in bridge financing for situations when you find your dream home but haven’t yet sold your existing property. Whatever the scenario, Burke Financial has the answers.
Set a Budget
You might be interested in browsing homes way out of your price range for curiosity’s sake, but you need to draw a realistic line in the sand between what you can and can’t afford.
Working backwards can help. First, itemize your regular monthly expenses, including things like credit card payments, student loans, car payments, or any other recurring items. Then, fit in all the current expenses related to your new home, such as a mortgage, property taxes, homeowners’ insurance, and mortgage insurance.
You won’t have specific numbers for some of the above since you haven’t bought the home yet, but there are online calculators you can use to get a general picture of what the situation will look like. It’s ok to use placeholder data, but the closer these numbers are to the eventual total, the more accurate your mock-up will be.
Finally, divide your total monthly income against your total monthly expenses to get a figure known as your DTI, or debt-to-income ratio. This number often determines whether a home is affordable. Ideally, you want to be under 43%, and managing to stay under 36% should help you secure better borrowing rates.
You may need to weigh which pull factors you can live without having. For example, you might require a home in a certain neighbourhood or location, but you can flex on the square footage or the amenities. Perhaps it’s the exact opposite situation, and you’d rather live outside your favourite neighbourhood because the home is larger.
There’s no one right answer! The main thing is to prepare the financial groundwork responsibly, so whatever you ultimately choose, you know what you’re getting into. Burke Financial offers mortgage loans in Canada that are flexible and accommodating.
Our financial experts can work with you to optimize your credit and borrowing rates, even if you’re declined for a bank loan.
Speak to a Mortgage Lender to Get a Pre-Approval
The pre-approval for your home doesn’t lock you into any commitment. Talking to lenders before you begin shopping for a home has two advantages.
You want to get a feel for the type of mortgages for which you’ll qualify. You can probe them about possible terms, interest rates, and specific mortgage requirements for credit scores and DTI. Burke Financial is happy to answer any of these questions!
Also, you can receive a mortgage pre-approval, which doesn’t guarantee you’ll get a loan but states that you’re financially qualified for one based on a preliminary financial inspection. The maximum loan amount will give you a more solid idea of what you can spend on a new home.
Burke Financial helps to make buying a home more affordable for Canadians. We’ll sit with you for as long as it takes to crunch the numbers and show you all your options and make sure you understand them. Our mortgage professionals have loads of experience and have guided countless Ontarians through this crucial process.
Don’t be intimidated by the large sums of money or the years of commitment required for your eventual mortgage. Buying a home is probably the most expensive and important purchase you ever make — we’ll help you do it correctly.
It’s best to go grocery shopping with a list, and you’ll also want a list when buying your home. The above three factors to consider aren’t exhaustive by any means. You’ll also need to plan for things like a home inspection and connecting with the right real estate agent.
But you’ll be better positioned for these things once you establish a solid economic foundation on which to build. Keep the above three things in mind and let Burke Financial get you across the finish line, so you and your family can get a move-in date sooner and start making those priceless family memories.
