Buying your first home is a thrilling experience. It can be overwhelming, but you’ll pick up most of what you need to know during your initial research, and as you go through the process, and we’re always here to help answer any questions you have.
Dealing with banks can feel stressful, too, and that’s something we’re all too familiar with. This is why we’ve dedicated ourselves to making the home buying experience smooth, fair, and comfortable for people going through it for the first time.
What You Need To Know About a Mortgage for First Time Home Buyers
As a first-time homebuyer, you need to have a rough idea of what to expect from the whole mortgage process, from the moment you decide you want to own a home until you’re living there.
Here’s a quick list of things to consider before and during the mortgage application process.
- Determine how much you can afford to spend on a home and how to structure your mortgage for optimal performance and savings.
- Take advantage of programs and incentives that exist, like Canada’s First Time Home Buyer Incentive.
- Make sure you’re dealing with the best mortgage lenders for first-time homebuyers, who will be fair and upfront with you.
- Give us a call, email, or text to learn about how we can help you achieve the goal of homeownership. You can find our contact information at the bottom of this page.
If you have excellent credit and a steady income that indicates you’ll have no trouble making your mortgage payments, you should have an easy time being approved for a reasonable rate on your mortgage with favorable terms.
Mortgage Loans for First Time Home Buyers With Bad Credit
A mortgage on a home is the largest purchase that most people will ever make. Having a mortgage and making your payments on time is an incredible way to bring up your credit score, too. But if you don’t have that mortgage yet, and you have bad credit, it feels like it can be hard to get ahead, like being stuck in a catch-22.
The best way to bring up your credit score is by making mortgage payments, but you can’t make those mortgage payments until you get approved for your mortgage, so what are you supposed to do? Well, there are other ways to work on your credit, and that’s always a good start, but if you want to buy a home soon – you’ll need to consider mortgage loans for first-time home buyers with bad credit.
Getting a mortgage with less-than-perfect credit generally means that you’ll end up paying a higher rate, you may need to have a larger down payment saved up, and then you’ll end up paying more for the loan in the long run.
Nonetheless, you’re still making payments towards your own home rather than renting from somebody and missing out on the stability of a home that you know you’ll be in for years to come.
Preparing For Your First Mortgage When You Have Bad Credit
Taking some time to plan is a luxury that not every home buyer has, so you’ll want to get started on some of these things as quickly as you can, even if you’re in a hurry to buy a home.
Sometimes, taking your time can be one of the best decisions, but in a hot housing market and when you need somewhere to live soon, you can’t always wait for the “perfect” moment. With that in mind, here are some steps you can take to prepare for buying your home.
Know Your Starting Point
You can fill out a simple pre-approval or speak to one of our team members to get a general idea of where you’re at and what you could expect if you were to apply for a mortgage right away. If you have bad credit, you may want to work on that a bit before filling out a mortgage application to increase the likelihood of a positive outcome.
We can also help you work on your credit score with specific advice tailored to your situation. All of this helps to develop a baseline, so you know which targets to set for yourself.
Work On Your Credit Score
You might check your credit report and see that there’s some incorrect information on there, or an old debt that wasn’t removed, or something else that’s dragging down your score.
Sometimes, those easy wins are enough to push you over the line and get approved for a mortgage. Other times, you’ll need to work on paying down some existing debts before it makes sense to apply for a mortgage with bad credit.
Get Approved Before Shopping for Homes
Before you start shopping around for homes and going to viewings, you should apply for your mortgage so that you know how much house you can afford. It doesn’t hurt to start browsing some listings ahead of time, but keep in mind that the listed price is rarely the exact price that a house ends up selling for.
With many homes selling well above the listing price, you could give yourself a false sense of what to expect once you start putting in some offers.
Nonetheless, browsing listings online is an excellent way to figure out which features you may or may not want.
Time To Start Shopping!
Once you’ve established your starting point, worked on your credit score as much as you can, and found a mortgage – it’s time to start shopping around for your new home. Be patient! You don’t need to make an offer on the first home you see, even if that first home buyers mortgage feels like it’s burning a hole in your pocket.
Every month, plenty of new homes enter the market, so don’t fret – what are the odds that the perfect home for you will just happen to come onto the market the moment you start shopping? It’s unlikely – so take your time to find something you love – because this is the biggest purchase most people will make in their lives. Once you have the financing sorted out, the rest of the process is a lot more exciting!
Avoid These Common First Time Home Buyer Mortgage Mistakes
Here are some regrets that are felt by first-time homebuyers in Canada. These are things that many home-buyers wish they would have done differently.
- Only dealing with one major bank: If you walk into a major bank in Canada for a mortgage, you’ll see the specific mortgage products and rates that just one single bank can offer you. Instead, you should shop around a bit. This is something else that we can help you with, so reach out to us when you’re ready to buy your first home in Canada, and you want to explore all of your options to find the best course of action.
- Not planning ahead: The sooner you start planning ahead, the more you’ll be able to fix your credit if you’re in a bad credit situation. Our team offers free consultations to help you improve your credit which will help greatly with finding a great mortgage offer. Taking some time to tidy up your credit report and increase your score while you shop for houses and mortgages and everything else involved is still a good idea, even if you aren’t doing it months or years ahead of time.
- Using too small of a down payment: A larger down payment means you don’t have to borrow as much money, so even if the minimum is 5%, it’s good to save up more if you have enough time to do so.
Also, this gives you equity in your home faster and allows you to pay less money in interest. The First Time Home Buyer’s Incentive is another way to essentially get a free loan for a portion of the cost of your house, which helps give you a larger down payment without any borrowing costs on that extra money.
- Spending all of your money on the home: It’s easy to get caught up when you’ve been saving for a house and to over-extend, but this can be very risky! Ensure that you can afford your home in the long run, even if you run into some financial hardships in the future.
This doesn’t mean that you should move into a little shed or anything, but just don’t let yourself get carried away – there could come a time where you’ll be very thankful that you kept your monthly mortgage payments a bit lower by not spending every possible penny you could on your home.
Also, if all of your cash goes into your down payment and mortgage payments, what happens when you need a new roof or your furnace breaks down in the middle of a cold spell? There are plenty of additional costs associated with owning a home, which need to be considered when calculating how much home you can comfortably afford.
How To Find The Best Mortgage Lenders for First Time Home Buyers
The best way to learn about buying and selling a home is by going through the entire process. Many first-time homebuyers are learning as they go. This is just fine, as long as you understand your options before signing anything or making any major decisions. This also means that once you’re ready to buy your second or third home, you’ll be much better prepared.
As such, first-time homebuyers are typically the people who know the least about this process. From the point of view of a mortgage lender that caters to first-time home buyers, the buyers will need to be educated on many things.
Some lenders genuinely enjoy helping people get into their first homes and going through the process with them, but some lenders see this as an opportunity to get one over on a naive client.
We pride ourselves on working with the absolute best mortgage lenders because a first-time home buyer’s mortgage should be a great experience. We’re here to help explain everything that you need to know, to answer any questions that you come across at any point in the process, and to ensure that you’re getting the absolute best mortgage product for your budget, your needs, and that fits your plans for your financial future.
Canada’s First Time Home Buyer Incentive – Do You Qualify? Is It Worth It?
Canada has a special program for people who are buying their first home. This program will help you with your down payment in the amount of either 5% or 10%. If you’re buying a newly-built home and meet the other criteria outlined below, you can receive a down payment incentive of up to 10%. If you’re buying an existing home that’s being resold, you can receive the same incentive in the amount of 5%.
How To Qualify
- You must be a first-time homebuyer to qualify.
- Your annual income needs to be $120,000 or less (In some provinces, this amount has been raised slightly to adjust for local conditions.)
Is it worth taking advantage of? Definitely! You’ll need to repay this amount over the course of 25 years, but it’s essentially an interest-free loan. The alternative is not to take this incentive, and then you’ll need a larger mortgage, and you’ll be paying interest on that additional 5-10%, which will add up to a substantial amount of money by the time it’s all said and done.
Cashback Offers for First-Time Home Buyers – Are They Worth It?
When you’re shopping around for a mortgage for your first home, you may see several different big banks that are offering you cashback incentives or headphones or tablet computers, or some other special offer. After signing your mortgage, you’ll get a specific amount of cash or one of these various items.
Now, you probably realize by this stage in your life that banks usually aren’t in the business of just giving away money, right? So, while these cashback bonuses can be tempting, just remember that you’re paying for them in one way or another.
Don’t let a cashback mortgage offer be the deciding factor without running the numbers and seeing how much that “free money” is really costing you.
That’s not to say that you can never come out ahead with these offers, but just remember that you’re usually better off going with the more flexible mortgage that best suits your lifestyle and needs (such as Manulife One), or the one that will give you the best interest rate. A small difference in the % of your interest rate can make a much bigger impact than a small cashback bonus over the course of your mortgage.
Taking The Next Step Towards Mortgage Loans for First Time Home Buyers
Are you ready to take the next step? Are you ready to see what kind of mortgage will suit you the best? Do you have any questions?
Please find our contact info at the bottom of this page to get started with improving your credit, pre-qualifying for a mortgage, getting a great mortgage, and then shopping for your home. If your credit is already solid, you’ll have an easy time! If your credit score could use some work, we’re here to help you navigate that so that you can move on with your life in a beautiful new home that’s all yours.