Becoming a First Time Home BuyerAdmin
First Time Home Buyer Brampton
For those of you that are considering buying a home for the first time, here is some advice that you can take with you to the bank. Becoming a first time home buyer can be a scary process for those who have no idea exactly how the home buying process works. The first thing you should do is consult with your local bank or finance company to figure out how much you can actually afford to pay for your mortgage.
It’s important to be realistic when making these decisions because you don’t want to purchase a home that you cannot afford to make punctual payments on. The bank or finance company will take into consideration your amount of income, how long you have been employed, your credit score and whether or not you have saved up a down payment for your first home.
What about the New Rules for First Time Home Buyer?
Another contributing factor for first time home buyers is the new rules that have been set forth by the government of Ontario. They have tightened the lending amounts for people buying their first homes, meaning that people who are first time buyers, may very well have to undergo a type of stress test, specifically those that have opted for variable or fixed mortgage rates for a term of less than 5 years with less than a 20% down payments. This means that they must be able to qualify for their mortgage using a higher interest rate than they will actually be paying on their actual mortgage.
Essentially, you aren’t going to be paying more but you will be getting less house, speaking in terms of exactly how much you are going to be paying for your first home. Basically, the government wants to be sure that in the event that interest does rise in the future, that first time home buyers can afford to pay the interest rates that occur. Under the old rules, estimates have shown that on a 5 year fixed rate mortgage of 2.44%, that people would be able to afford to purchase a house worth $370,000. However under the new stress test rules, using the rate of 4.64% the same buyer could only afford a house worth $280,000. This is quite a steep jump for first time home buyers. It really gives you something to think about when you are considering buying your first home in Ontario, doesn’t it?