First-time buyers may be particularly concerned with entering the expensive real estate market in Winnipeg, with the average home price escalating to around $230,000.
What can you afford?
As a first time home buyer, it’s essential to figure out what you can afford. A rule of thumb is that your household expenses should not add up to more than 40 per cent of your pre-tax household income. Household expenses include mortgage payments, property taxes, condo fees, utility and heating costs, and any payments on other loans such as car loans, credit card debt and lines of credit.
Do a household budget, list your assets and liabilities and meet with a mortgage broker to get pre-approved for a mortgage. Try the monthly payments on for size. Let’s assume that your current rent is $1,000 and your anticipated payment as a homeowner is $2,350 for principal, interest, taxes, hydro, etc. Try putting aside the extra $1,350 immediately. Not only will this help you save some extra money, but it will get you in the habit of allocating this level of payment every month. Consider the maintenance costs as well, from normal upkeep to potentially larger expenses like a new roof or furnace.
It’s important to find out how much you can afford before falling in love with a house.
Start saving before you start shopping — the larger the down payment, the lower the financing costs. Although it’s not always possible for first-time home buyers, try to come up with at least a 20-per-cent down payment. Any down payments below this level must be insured with Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial — another expense to factor in.
To assist with your down payment, consider using the Home Buyer’s Plan, which allows you to withdraw up to $25,000 from your RRSP for the purchase of a qualifying home. As well, there are other options for homebuyers with their down payment.
As well as a down payment, first time homebuyers should be aware of closing costs. Your mortgage professional will help estimate how much this will be so that you are prepared.
The first step for first time homebuyers is to get pre-approved to purchase. Contact an accredited mortgage professional today or apply online, and our mortgage professionals will help you determine the amount of mortgage you qualify for and you would be comfortable carrying. For more information on first time homebuyers, please contact us for our free First Time Homebuyers Guide.