Financing Tips For Buying Your First Home

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Simple Tips To Help Your Financing

The reality today is that a lot of young people are finding it difficult to buy their first home. Research conducted a few years ago found that the number of Millennials (defined as 18 to 34-year-olds) who owned their own home was at a thirty-year low.

The reasons for this are complex, but it may have something to do with the fact that the global economy suffered a crash in 2008 and that for nearly the last decade, things have only been slowly improving. As a point of reference, in 2009 alone over 3 million households received a notice of foreclosure. The fact that so many established adults with full-time jobs were not able to pay their mortgages on time suggests that it is a lot more difficult than it may seem, especially in the current political and economic climate.

However, owning your own home is a rite of passage and it represents a time in a person’s life when they have everything sufficiently in hand to be able to take on what will likely be the single biggest purchase they will make in their life. It is also part of the capitalist narrative of life that we are taught as children: happy people grow up, get a job, meet someone and marry them, buy a house and start a family.

Financing Tips For Buying Your First HomeOf course, the reality is that none of these things are truly necessary (although not having a job would be quite difficult), but a lot of people still aspire to them. As unfortunate as it can sometimes seem, a person’s house is not just the way in which they protect them and their family from the elements, it is a status symbol.

This is why lots of people purchase houses that are much bigger than they really need them to be. In any case, the process of buying one does not change that much. Here is what you need to know if you are thinking of taking the first steps towards being a homeowner:

Mortgage Financing

Unless you are independently wealthy and can simply afford to pay for a property in cash, you will likely need to get a mortgage. This is not as simple as just going down to a bank and telling them how much you need. You will have to prove that you are responsible enough to pay it back.

The first thing that they will check is your credit rating. If your credit rating is not as good as it could be, you do not need to necessarily give up on the idea of buying a house. You can easily improve it since it is just a metric that is used to assess your reliability. You therefore need to demonstrate how good you are at paying off your debts.

It may be a good idea, if you can spare a little extra cash, to set up a direct debit payment to a charity every month. Your credit rating will acknowledge that you have set up a debt (however modest) and then paid it off promptly.

Besides paying off all your debts, you should reduce your ability to create any more in the future. It is a good idea to close down any credit cards, store cards or mobile contracts that you may have.

Also, while it may seem unrelated, you should definitely sign up for your local or national electoral roll. Apart from now being able to perform your civic duty, it will demonstrate to potential lenders that you are a serious, settled, conscientious member of society, and therefore, the sort of person who would not default on a mortgage.

And also, make sure you understand all the closing costs when buying a house or condo.

Look at Houses in your price range

Next, you need to look for houses for sale. It costs a lot of money to buy a house, and it costs a lot more to sell it again which is why you need to be absolutely sure that you have picked the right one before you make an offer.

Financing Tips For Buying Your First HomeFor instance, buying a stylish one bedroom apartment in a chic part of town is great if you want to lead an independent lifestyle, but it is not as good if you intend to start a family. This still applies if you are thinking about having children five to ten years later.  There are lots of other factors to consider though.

When looking around a house, check the shower. You cannot find out about the water pressure any other way. Also, do not look at the place as it is but as it could be. Before you buy it, it is someone else’s home, and you are not welcome to live in it, but when you buy it, you can change anything you want.

If you are planning to start a family, you should check out the catchment areas of local schools. If they are not schools that you’d like to send your children to, you should reconsider the purchase. If you think that you may be able to claim your children live at another address so you can send them to a particular school, you should be wary. The number of parents who have been caught committing this sort of fraud is rising. There are not usually legal consequences, but some children have had their offers rescinded and have had to move schools part way through the academic year, which is not a good way to start high school.

Report the purchase to Revenue Canada

The law changed in Canada recently, and while you still do not need to pay tax on the capital gains made during the sale of your principal property, you now need to disclose this information to the Canada Revenue Agency. Once you declare the sale and reassure them that you meet the conditions for the tax-exempt status, you will be fine. However, failure to do so could result in fines of $8000. Buying, as opposed to selling, a property is taxed though. The land transfer tax rate in most of the country is between 0.5% and 2%. Failure to pay it could lead to legal problems, which are often quite expensive.  

And be sure to check out the 7 worst mistakes made by first time home buyers in any market.

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