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Should I buy a house or continue renting? Has this question been floating around in your head for some time now?
For someone who is considering buying their first home, it is normal to think whether this is the time to jump into home-ownership or continue to rent. After all, buying a first home is a major decision and rising home prices don’t help much, either. Important thing is that it all depends on your circumstances, including your lifestyle and finances.
So, let us talk about the 5 things you should look at to see if you are ready to buy your first home.
First, determine what price you can afford
You need to have a reliable source of income. Lenders will take a look at your regular income before deciding how much they're going to lend you. Your regular income also tells that you'd be able to make monthly payments on your mortgage. Try to calculate your debt-to-income ratio to see if you'd have enough cash flow to get a loan. Talk to a mortgage professional to determine how much mortgage you can qualify for. And don't forget, mortgages are long-term commitments. Assess if your primary source of income is reliable for making monthly payments for the next 25 or 30 years depending upon the amortization period.
Second, prepare for the down payment
The down payment is the payment you make towards the purchase of a home. The bigger your down payment, the easier for you to get a loan and the lesser your monthly repayment amount. But how much money do you need for a down payment? In general, homebuyers usually need between 5% and 20% of the purchase price. When your down payment is 20% or more, you can avoid paying extra on CMHC mortgage default insurance. For a high loan to value mortgage, this insurance protects lenders in case a borrower defaults on his or her mortgage loan.
Third, check the current housing market condition
If you have no financial constraints, you can buy a house right away. But, you also need to be in touch with what's happening in the housing market. What are the current home prices? Is it a seller or a buyer's market? What are the current trends in the local housing market? Is a neighbouring market more affordable? For example, buying in the Durham region may be cheaper than buying in Toronto. Consider this as a long-term investment. As your home value appreciates over time, you can later resell it for a higher amount or take out equity that is built up in your home to buy other investments or on home projects.
Fourth, assess your current lifestyle
Purchasing a home is a big commitment. Where do you see your life heading in the next few years? Will you move to a new city? Change jobs? Or are you planning to settle down soon and start a family? How much space do you actually need?
Another thing you need to consider is whether you are ready to make an adjustment on some luxuries and extra spending on vacations in order to stick to your budget once you take in a home mortgage. Either you cut back on your expensive hobbies or maybe get a less expensive home.
Fifth, know the different costs of homeownership
Besides down payment amount and monthly mortgage payment, there are other costs that you need to know so you can prepare your budget well. Some of these costs include home insurance, property taxes, closing costs, utilities, and maintenance. Unlike renting, you will now take care of your own water, electricity and repairs each month.
So, buying a house can be overwhelming for a first-time home buyer. Make sure you are ready for various financial commitments before you buy. These points can help you assess whether you should buy a house now or wait.
If you have any questions or need help buying a home, I can help. You can contact me at 647-834-9928 or send an email to firstname.lastname@example.org