Buying a home is an involved process. Whether you're planning on buying your first home, dream home, or retirement home, it's important to understand the process and required steps to making your new home purchase a reality. Depending on whether you’re buying a resale home, or a newly built home, the financial process is fairly similar, it's the build to possession time that is the big difference. As you begin looking for a new home, there are many items you'll need to investigate before making the decision on purchasing your new home, here's some sound advice you need in order to get the ball rolling.
If you're financing a home in Alberta you need to understand all your financial requirements and the fees involved in financing a mortgage. You'll need to discover how much you can afford for a home by talking to an approved mortgage specialist. Most new home builders have a preferred list of specialists that are available by phone at almost any time during the day to help make the process easier or log onto your bank's website to discover the list of mortgage specialists. Even if purchasing resale, a mortgage specialist is the way to go as they understand the lending needs and associated fees such as CMHC fees that are part of mortgaging a new home better than anyone sitting in a local branch.
Know Your Down Payment Requirements
There are a variety of options available to purchasers that'll help you achieve the funds necessary for your down payment, and if you are asking the right people, the right answers are easy to find. Check our post Ways to Save For Your Down Payment for some great tips to help with your savings. You may need to research the availability of cashing in RRSP's (for first time home buyers), the possibility of borrowing against investments with later maturity dates that might be tying up your nest egg, and/or discussing more in depth the down payment options available to you as provided through a mortgage specialist or new home consultant that works in a builders showhome.
Know Your Credit Score
If you've been planning on buying a new home for some time, you should know your credit score. A quick and easy process that's low cost, visit Equifax.ca or TransUnion.ca (select either Credit Score or Credit Report at Equifax or follow the prompts to Get your Credit Profile and Score on TransUnion) and receive an instant overview of your rating. This will let you know if you're a good candidate to receive a mortgage approval quickly. If your score is low, there is advice provided on what you can do in order to bring up your credit score and get into a Good Standing rating that'll help you qualify for a new mortgage.
Know Ahead of Time How Much You Can Mortgage
Once you have selected a mortgage specialist and know your credit score, it's quick and easy to obtain a pre-approval for a mortgage. You'll be required to provide the basic income information and some documentation (usually your last 3 pay stubs, or your Income tax return T4 from the year prior) to verify your income. The specialist will input the data to their specific mortgage system and within a week you should have the pre-approval. Simply put, the pre-approval will give you a top dollar figure you can spend, and guarantee an interest rate for you that'll allow you to shop smartly for a new home.
Know Your Mortgage Payment Options
Multiple mortgage payment options are available to you. Taking advantage of the information available to your through many resources available online, such as mortgage calculators, will help you determine the final payment amount you will have based on the amount you borrow. Select your preferred payment option, monthly, bi-weekly, accelerated bi-weekly, or weekly, input the interest rate you have qualified for, and the number of years you are planning to hold a mortgage for, and now your ready to hit the submit button to receive your payment amount. Knowing your overall monthly payments associated with purchasing a new home will boost your buying confidence and allow you to make a solid choice when purchasing a new home purchase.
Are You Buying a New Build Home or a Spec Model Home?
New Home Build: If you prefer a custom home that you can design from the ground up, it’ll take additional time to work with the builder to create a home that’s all yours. But the fun of a new build! You get to work with the builder to choose the features and options, design details, and interior colours – you truly have the ability to make your new home perfect. The additional time it takes to make your selections, approve your blue prints, and construct the home can be anywhere from six to eight months in length. The most reputable builders will give you a time frame and do their absolute best to deliver within that time frame.
Spec Model: If you want a new home that has already been built, or is under construction, most reputable builders offer spec models that are available for quick possession. Spec model homes have design packages selected by interior designers as finishing options, and are available for sale during the construction process, or in some cases the spec home is completely finished. While the opportunity to change the home plan or select colours may be limited or unavailable in spec models, the opportunity to move in to a new home planned and finished by a professional designer is an added bonus. So if you don’t have the time or patience to wait for the longer build time of a new home, then purchasing a spec home is the perfect option for you.
Seasonal Delays and Mother Nature
Every home builder is at the mercy of Mother Nature. Long spring rains, heavy winter snows, and early or late freeze/thaw cycles can appear to set back the building process, but don’t be discouraged. Your new home builder will have factored the possibility for bad weather into their build times and while it may seem like your new home build is taking longer than it should they are on target to meet your quoted build time.
As you see, knowing all the financial requirements ahead of time and planning in advance for your new home purchase will allow you shop in confidence, resulting in the home of your dreams becoming your reality.
Have you had experience with any of these factors? Let us know in the comment box!