The Canadian Association of Accredited Mortgage Professionals (CAAMP) undertakes two consumer research reports a year. These reports are based on consumer surveys and Canadians’ attitudes towards their home or the purchase of a home. Last year, 55 percent of all properties purchased in Canada were by first-time homebuyers. It is a very important segment of the housing market.
Knowledge is power
A home is often the most important financial purchase an individual or couple will make in their lifetime. As such, first-time buyers should be prepared before they go looking for a home. Fortunately, there is a lot of information available. In addition, mortgage lenders, mortgage insurers and mortgage brokers all have websites that provide excellent information to assist homebuyers, particularly first-time buyers.
There is no substitute for being prepared. Educate yourself and get the facts you need to make the right mortgage decision. Here are some key steps:
- Save for a down payment This is the portion of money that you will contribute towards the purchase price of your home.
- Understand your credit score Be aware that any negative information may adversely affect your ability to qualify.
- Build your homebuying team Look for the services of a mortgage broker.
- Determine how much you can comfortably afford.
- Understand mortgage basics such as principal, rates, terms, and amortization.
Questions are key
Some key things to find out from your mortgage professional include what their role is in helping you buy a house, as you need to know exactly what they do to help you buy a home. Also, find out why they are recommending this particular mortgage; it’s important to understand the different options and ask why the product they are suggesting is best suited to your needs. As well, find out how long they have been in business as you want to ensure they are knowledgeable, competent, and maintain minimum education standards. Lastly, find out what documents you need to provide — from confirmation of income and evidence of your down payment to agreement of purchase, you need to understand everything that is required to close the deal.
Help along the way
For first-time homebuyers — who actually made up the majority of new purchasers last year — there are government programs available to assist with a down payment. This is often the most difficult aspect of purchasing a home. The federal homebuyers’ program allows first-time buyers to access up to $25,000/person from their RRSP without a tax penalty. Similarly, the federal government has a $750 tax credit for first-time buyers to assist in covering closing costs.
“There is no substitute for being prepared. Educate yourself and get the facts you need to make the right mortgage decision.”
Provincial and municipal governments also have programs that assist the first-time buyer. In Ontario, there is a refund of up to $2,000 on the Land Transfer Tax. The City of Toronto has a similar program for its Land Transfer Tax. Such programs help with closing costs or can be used to purchase furniture or make minor renovations.
Bottom line, when buying a home make sure you do your homework and be prepared. Ask lots of questions to ensure you are getting the right mortgage product for you.
JIM MURPHY, AMP PRESIDENT AND CEO,
CANADIAN ASSOCIATION OF ACCREDITED MORTGAGE PROFESSIONALS