Buying your first home requires much more than a down payment. Each step of the buying process requires a specific budget, while managing the transition between these different budgets requires a holistic view of the process . From your first savings to the moment you move into your new home, here are some tips to help you plan your finances and avoid surprises.
Step 1: Saving
To encourage you to save, it’s important to set a realistic goal based on your current income. Meeting with a mortgage advisor will help you calculate the true cost of a property and give you an idea of the requirements of the buying process.
For example, a mortgage advisor will check your credit score early in the process, explain what’s affecting it, and give you tips for improving it. The advisor can also help you develop a savings strategy and inform you about fees to consider, such as the welcome tax and moving expenses.
Step 2: The down payment
To purchase a property, it is recommended to have at least 6.5% of its value. These costs cover, among other things, notary fees and the premium for obtaining mortgage loan insurance, if your down payment is less than 20% of the property’s price.
To properly budget for your down payment, it’s advisable to get a mortgage pre-approval , which will guarantee you the maximum loan amount you’ll have access to. With this information, you’ll be able to calculate how much you’ll need to have saved for your down payment before you go on open houses.
Step 3: Visits
Now that you’ve saved enough for a down payment and have a mortgage pre-approval in hand, it’s time to start viewings. Once you’re on the property, be sure to inquire about property-related fees , such as municipal taxes or condo fees , if applicable.
These fees vary depending on the type of property and can sometimes significantly increase the monthly cost of your new home. Ideally, the monthly expenses for your new home should allow you to continue saving for other projects while maintaining the same lifestyle.
Step 4: Purchase
Consider including an inspection clause in the purchase offer. Is everything in order? Does the house have any hidden defects? An inspection will help you determine what work you might need to do as the homeowner.
A pre-purchase inspection costs an average of $450 to $550, depending on the type of property and its year of construction.
For this step, it’s recommended to budget around $1,000. If you followed the advice in the second phase of the process, the fees related to this step will already be included.
Additionally, if the seller has paid their municipal or school taxes for the entire year, you will have to reimburse them for the amount that covers the period of the year you will be the owner.