Regardless of whether you’re a first-time buyer or an experienced owner looking to purchase your second (or third, or fourth) home, the fact remains: buying a home is a huge financial undertaking. The good news is, the ability to afford a new home is anything but impossible; all you need to do is utilize the right home buying strategies ahead of time.
Improve Your Credit Score
When it comes to securing a mortgage loan, your credit is the number one determining factor - and the higher your score, the more affordable your loan will be overall. For this reason, we recommend getting your credit in tip-top shape before approaching a lender or bank. After all, who doesn’t want to save thousands of dollars over the lifetime of their loan?
A few simple tips to improve your credit score include:
- Make payments on time
- Make more than the minimum payment
- Focus on your highest debts first
- Correct any disputes on your credit report
- Keep old accounts open (even if you don’t use them)
- Keep credit checks to a minimum
- Utilize mixed forms of credit (i.e. credit card, line of credit, car loan, etc.)
Figure Out Your Finances
Next, you’ll want to take a deep dive into your finances so you can determine exactly how much home you can afford to purchase. In short, your affordability will be weighed according to your current income, debt and living expenses. In order to qualify for a mortgage loan in Canada:
- Your housing costs (mortgage payment, taxes, heating costs, etc.) should take up no more than 39% of your overall monthly income. This is also referred to as your GDS (Gross Debt Service) ratio.
- Your total debt load (this includes housing costs) should take up no more than 44% of your overall monthly income. This is also referred to as your TDS (Total Debt Service) ratio.
Before seeking a lender, we recommend using a mortgage affordability calculator to ensure your
finances fall within the debt service ratio guidelines mentioned above.
Shop Around For the Right Mortgage
Now that you have your credit in check and your finances in order, it’s time to seek a mortgage pre-approval from a lender. However, if you hope to gain some significant savings over the lifetime of your loan, it’s important you shop around for a mortgage first.
Save yourself the time and stress of going from lender to lender in search of the right deal by partnering with an Edmonton mortgage broker. Not only will a broker have forged solid relationships with many reputable providers, but they’ll also do the legwork for you – finding you the perfect loan product to meet your unique needs.
Note: Your Edmonton REALTOR® can help connect you with the right mortgage broker.
Don’t Max Out Your Pre-Approval Amount
Just because you’ve been pre-approved for a certain amount doesn’t mean you should use it all. Why? Because spending at the high end of mortgage loan puts you at risk of becoming house poor. With a higher mortgage amount comes higher monthly payments - giving you less leftover for other essential expenses, including your savings.
Of course, spending less doesn’t mean sacrificing your new home needs. An expert Edmonton REALTOR® can help you find a property that both meets your new home criteria AND leaves you with financial wiggle room. Consider also, with the money you’ll save on mortgage payments, you’ll have the freedom to make any changes you’d like to see in your new home.
Bonus: You’ll also be able to pay your mortgage off faster.
Get the most out of your Edmonton home buying experience with the help of my free guide: The Ultimate Edmonton Home Buyer’s Guide. From saving your down payment to closing the deal, I’ll walk you through the entire process from start to finish.
Related:
- 9 Steps to Buying a Home
- Buying a Home: 14 Hidden Costs to Prepare For
- How to Get Pre-Approved for a Mortgage in 5 Easy Steps
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