First-Time Home Buyer FAQs

How Do I Know If I’m Ready to Buy My First Home?  

While the “right” time to buy will vary based on your unique circumstances, here are a few signs you might be ready:

1. Your credit is in good standing (more on that below) 
2. How have a stable job 
3. You’re planning on staying put 
4. You’ve saved a down payment 
5. You can afford monthly mortgage payments (as well as current debt payments, taxes, bills etc.) 
6. You can afford maintenance and upkeep 
7. You’ll still have money left over after you buy

Will My Credit Score Impact My Ability to Buy?  

Your credit score is one of the first things a lender will look at when deciding to qualify you for a mortgage. This is because your credit history is a clear indication as to whether you are a high or low-risk loan candidate.  

Lenders generally consider a credit score of 650 and above to be a “good” score. A score of 650 or less, on the other hand, is an indication that you’ve mishandled credit in the past. While this doesn’t mean you won’t be able to qualify for a mortgage, you’ll likely have to apply through a private lender and be subject to higher interest rates.  

If you’re unsure of your current credit standing, you can obtain free copies of your credit report through either Equifax Canada and TransUnion Canada (though both are recommended). 

How Much Home Can I Afford?  

A mortgage calculator is a great first step in getting an idea of how much home you can afford. Factoring in info such as home price, down payment, length of mortgage and interest rate, the calculator will give you an idea as to what you’ll pay monthly.  

From here, you’ll want to get pre-approved by a lender for two reasons:  

1) You’ll know “how much mortgage” the lender will be willing to give you 

2) You’ll be taken more seriously by home sellers  

How Much of Down Payment Do I Need?  

Edmonton homes priced at $500,000 or less require a minimum down payment of 5%. Whereas homes above this amount require 5% on the first $500,000 and 10% on the remaining purchase price.  

Buyers who put down less than 20% will be required to purchase mortgage loan insurance (it’s ok, most buyers do). Loan insurance is put into place to protect lenders in the event you default on your loan and is calculated based on the size of your down payment (the higher the down payment, the lower the premium). 

Are There Programs to Help Me? 

Yes! As a first-time buyer in Edmonton, you may be eligible for the following:  

The RRSP Home Buyer’s Plan – Allows you to withdraw up to $25,000 from your RRSPs to put towards your down payment  

The First-Time Home Buyer’s Tax Credit – Valued at $750, the First-Time Home Buyer’s Tax Credit can help you recoup on closing costs, moving costs etc.  

What Kind of Mortgage Should I Get?  

When it comes to mortgages, you’ll have two options- variable or fixed rate:  

Variable-Rate Mortgage – Your mortgage interest rate will vary depending on the Bank of Canada’s prime rate. As rates go up and down, so will your mortgage interest rate. However, you will still pay a fixed rate. This means if rates go up, you’ll be paying off more interest that you will be principal.  

Fixed-Rate Mortgage- No matter how rates fluctuate, you will pay a fixed amount for the duration of your loan contract – the same amount will go toward your principal every month. 

Generally, variable-rate mortgages are thought to be the least expensive. However, if you prefer a predictable, fixed principal payment every month, fixed-rate may be the way to go. Your lender will help walk you through your options.  

How Much Are Closing Costs?  

Closing costs generally range from 1.5-4% of your home’s overall purchase price. They can cover everything from lawyer’s fees and land transfer tax to disbursements and title insurance.  

While these costs will vary depending on the property you buy, be sure to save ahead of time to avoid any surprises come closing day.  

Do I Need Really Need a REALTOR®?  

While some buyers may be tempted to go it on their own, nothing tops having an experienced agent in your corner – especially if it’s your first time entering the Edmonton market. Not only will a great Edmonton REALTOR® save you time and money, they’ll always act in your best interest – negotiating on your behalf while protecting you from overpaying, buyer’s remorse and generally bad deals.  

Didn’t find the answer you were looking for? We can help! Contact Terry Parancyh Real Estate Group today and we’ll be happy to answer any questions you might have. Or, get your free copy of our Buyer’s Guide by simply clicking the button below!

Photo credits: freepik.com

Categorised in: First-Time Home Buyer

This post was written by Terry Paranych Real Estate Group