Being a first time homebuyer should be an enjoyable experience, but if you are not prepared it can become a very frustrating one. Here are six key areas during this exciting home buying process that need to be addressed;
1) Type of property to purchase and when.
Have you asked yourself; “Will purchasing a property now get me on the right path to obtain my real estate goals? Will this first purchase be a flip to obtain more capital? Do I want to live in the property and enjoy the lifestyle, then sell in a few years and use the profits towards my next purchase? Should I buy a place strictly as an investment and get someone else to pay the mortgage by renting it out?”
To help you determine which direction would make the most sense, I suggest you get a pre-approved mortgage. This will allow you to do all the realistic number crunching so you can make an educated decision.
2) Get Pre-approved
Shopping for a home is an emotional experience especially if you are out looking at luxury properties you may fall in love with but later find out they are out of your budget.
Get in touch with a mortgage broker to start the pre-approval process; it should only take a couple of days to get the answers you need to move forward. This process will determine a few of the most important things which are; budget, credit and employment or savings you need to work on before you look to purchase a property. It is best to know all of this before you put your valuable time into shopping for a place with a realtor. The last thing you want is to get an accepted offer to later find out that there is no way you can get the financing to purchase the property that you have already fallen in love with!
3) Hold off on major purchases
Once you are pre-approved, if you are thinking of making a major purchase discuss this with your mortgage broker before taking action. You will need to make sure that a major purchase will not decrease your home-buying power as pre-approval is only based on your expenses. If you go out and finance a major transaction this new transaction will be taken into account in your overall debt and how you will be able to pay for your expenses on a monthly basis.
4) Government offered Tax Credits, Rebates and Grants
There are excellent programs available to first time homebuyers as residents in the province of British Columbia.
- A) RRSP’s (HBP): This a federal government program, you can take advantage of using up to $25,000 (as a single person) or $50,000 (as a couple) of your registered retirement savings plan (RRSPs) to
purchase a home. There are a few rules to qualify; the complete information is listed on the Canada Revenue Agency site. Here are a few of the conditions as stated by Revenue Canada.
You must be considered a first time homebuyer. To qualify the RRSP funds must be on deposit for 90 days before you wish to withdraw those funds to use for the down payment. You must intend to occupy the qualifying home as your principal residence. You must be a resident of Canada at the time of the withdrawal. These funds are non-taxable as long as they are paid back into your RRSP within a 15-year period.
B) Tax Credit (HBTC) In 2009 the federal government came up with another incentive to help first time homebuyers with the expenses that occur when purchasing your first home. This credit provides $750.00 in federal tax relief within the calendar year you purchased the home.
It’s simple to claim. When it is time to file your taxes, make sure your accountant is aware of your home purchase and provide him or her with your Statement of Adjustments. The solicitor would have given you a copy of this document at the time you signed the final papers to purchase your home.
C) Property Tax Exemption: In the province of British Columbia, there’s a Property Transfer Tax, which was put into effect in 1987. This tax is based on the purchase price of a home and it is calculated at one percent of the first two hundred thousand and two percent of the balance. So on a $400,000 purchase, the tax would be $6,000.00. As a first time homebuyer you may qualify for a partial or full exemption if this tax. There are a few rules and regulation that you need to follow in order to make sure you qualify. For more information on this topic and other helpful home purchasing information, check out gov.bc.ca
5) Finding a Realtor
Since purchasing a home is a negotiation of price, dates and possibly other components, make sure you have your own realtor when going into the offering stage of any property. When searching for and purchasing a home, there are many things that need to be considered and occurrences that will take place during the process so having a trusting relationship with a realtor will help make the process run
smoothly. A good realtor is not only there to help you to find your perfect home, negotiate price and dates, they are also a source of information for neighborhood, schools, parks that would suit your family needs or best location for investment short term, long term, rental return etc.
6) Saving for a Down Payment/Closing Costs
To purchase a home, you need a minimum of 5% down payment. This can come from your savings, investments, RRSP, a non-refundable gift from immediate family or even borrowed funds. You will also need closing costs of roughly 1.5% of the purchase price. This covers expenses such as; conveyance fees, Tax Adjustments, title insurance, property transfer tax if applicable, and any other fees that may be applicable upon your transaction. When it’s time to close and take procession of your property, you will need an appointment with your predetermined conveyance lawyer/notary approximately five to seven days before the procession of your property purchase. For this meeting the conveyance lawyer/notary will ask you to bring a few things such as a couple pieces of photo identification, the balance of the down payment and closing costs minus the deposit you had already given at Subject Removal.
Keep in mind as with all mortgage programs, credit is VERY important in the interest rate you will pay, so maintain healthy credit habits. If you need some tips on how to keep your credit score increasing or have any questions on this article do not hesitate to contact me:firstname.lastname@example.org or 604-608-6905