For a first-time homebuyer, getting a mortgage is one of the most important steps. Many people getting their first mortgage may be entering with some unrealistic expectations. At The Mortgage Centre, we’re committed to helping every one of our clients own their dream home – that’s why we’ve compiled this list of expectations versus realities of getting a mortgage.
Expectation: You’ve saved enough for your down payment!
Reality: Often, first-time homebuyers come to their mortgage broker after saving for a number of years to amass a down payment, and learn that they’ve come up short. This can be a result of setting sights on a property that’s out of their price range, or having an unrealistic idea of how much a down payment should be.
As a general rule of thumb, for houses with a price of less than $500 000.00, you should be aiming to save at least 5% of the total price. Over 500,000 the minimum down payment requirement slightly changes ( 5% on the first 500K, and then increases to 10% of the remainder) Ideally, if you have 20% of the house price as a down payment you can avoid having a high ratio mortgage, as well as avoiding mortgage insurance premiums and have the option to chose a longer amortization period of 30 years rather than 25 years.
Expectation: Once you have a down payment, you’re ready to buy!
Reality: Though it’s easy to pull the trigger on buying a home the moment you’ve saved enough for a down payment, there are other costs that can be easy to forget. Some of these associated costs include:
- Property transfer tax
- Costs of moving (Movers, truck rental, handling fees, shipping costs, etc)
- Legal fees
- Appraisal fees
- Title insurance
These costs can rack up an additional 1-2% of your home’s price, so make sure to account them into your financial planning.
Expectation: Paying a mortgage is no different from paying rent.
Reality: When comparing your monthly rent costs to a monthly mortgage payment, at first glance it can seem like there won’t be a change! What many first time homeowners forget, however, is the hidden costs associated with upkeep and maintenance of owning your own home. When you own your home, you can’t rely on landlords or maintenance staff to take care of home repairs anymore – whether it’s as simple as changing a light bulb or is a larger fix.
To get a better idea of the monthly costs of owning a home, renters should try to practice saving additional money after paying other bills. Have a sit down with your budget, and factor in an additional 3-8% of your monthly costs to “practice” the strain of paying for your own home.
Expectation: The mortgage you qualify for is how much you should pay!
Reality: This can be one of the most dangerous misconceptions for new homeowners. When you get your pre-approval, it can be easy to start looking for homes at the max of your approved limit. By looking for homes that are below your qualified loan amount, such as properties needing renovations or other work, you can save lots of money and minimize your loan from the bank. If you keep an open mind during your house-hunt, you can find savings that can make all the difference down the line. A qualified real estate professional can assist you in narrowing down your searches to include the things that are most important to you in your search for your dream home.
With so many caveats in the mortgage process, it can be discouraging as a first time homebuyer in 2018 – but by following the tips in this guide, and saving diligently with realistic goals, your dream home is within your reach! If you need advice on how to attain your dream home and the mortgage process, call your Port Coquitlam mortgage broker Milka Lukacevic at the Mortgage Centre TMK TEAM
For all your Port Coquitlam mortgage brokerage needs, contact Milka Lukacevic at The Mortgage Centre.