Planning on Buying a Home? Get Your Financial House in Order
Friday Apr 27th, 2018
Like most millennials, you’re in the stage of life where you are moving on from being a student and into your professional career. You may also feel weighed down by student loans and high costs of living, especially if you reside in the city. You might also be ready to purchase your own home in the near future.
Like every other generation of home buyers, you share the same concerns of saving for a down payment and securing a mortgage at a good interest rate. However, millennials face additional challenges, like not having a solid credit history – or a good one at that. Millennials, most commonly, are also first-time buyers and can’t pull from the equity in their current home to help with the down payment and approval process, thus narrowing their options.
But, before you start to feel discouraged, there are ways to get financially fit when preparing for a future home purchase. Here are some steps that you can take now so your finances are stronger come pre-approval time.
Request your credit report
If you’ve dug your head in the sand and ignored your credit score, it’s time for a reality check. When you apply for a mortgage, lenders will review your credit report, so you need to be aware of where you rank. There are various ways to check your score for free, but Equifax and TransUnion are the most popular. These reports list your loans and credit card accounts, as well as any financial lapses, such as missed or late payments, bankruptcy declarations, and foreclosures.
Review your credit score
As you review your reports, be mindful of your score – in Canada, credit scores range from 300 up to 900 points. According to TransUnion, 650 is the magic number that will likely qualify you for a standard loan while a score under 650 may be more difficult to obtain new credit. If you fall on the lower end, seek advice from a financial advisor on how to increase your score. You should also look for mistakes on your report and have them corrected by the credit bureau, as these can hurt your overall number.
Build strong credit
The best way to build a strong credit score is to pay all your bills on time every month. If you pay certain bills late, like your credit cards, auto loans, student loans, and cell phone bills, your credit score will take a hit. Set-up a budget and spend only within your means. This hard work will pay off down the road, it just takes diligence and determination.
Pay down your debt
Another way to boost your credit score and help you get approved for a mortgage is by paying off your debt. Lenders look at your debt:earnings ratio and if they feel it isn’t to their standards, they may not approve you for a mortgage.
Build up your savings
This goes without saying, but buying a home is expensive. You’ll have to come up with a down payment, be able to afford your moving costs and any repairs your new house may need. Plus, if you are a first-time buyer, you may not have furnishings for your new home, so that is something you’ll need to save for too. Having a nice nest egg will also help you when it’s time to apply for a mortgage.
There are many other ways to get financially fit before embarking on your journey to home ownership. But, the best thing you can do for yourself is to have a trusted real estate sales representative in your corner, along with a mortgage broker. Together, they can help you learn how much of a mortgage you can afford and how much you should have saved to make it happen. A realtor can also help you narrow down your ideal neighbourhoods and housing types to suit your budget, need for space and other criteria.
Your Mississauga Real Estate Sales Representative
Over the years, I’ve had the pleasure of helping real estate buyers of all ages find their dream homes across the Greater Toronto Area (GTA). I am with my clients every step of the way, from getting qualified by a financial institution, finding a new home, negotiating the best price, arranging home inspections, choosing a lawyer and even suggesting movers. And I can help you too! To learn more, please contact me, Deborah Clerk, Real Estate Sales Representative, ASA, with Keller Williams Realty Solutions Brokerage, for further details.