Episode One: Basics of Buying Real Estate
what you need to know:
Before starting your home search, it’s important to evaluate your financial situation, confirm your budget, familiarize yourself with mortgage options and secure pre-approval from your lender. This will help you conduct your search with confidence and negotiate your desired home successfully.
1. Establish Your Budget
As a general guideline, total monthly housing costs for your primary home, including mortgage payments, taxes, maintenance fees, insurance, interest charges and utilities, should not exceed 32 per cent of your gross monthly household income. Many financial advisors also suggest that total monthly debt, including mortgage payments, credit card and car payments, should not exceed 40 per cent of your gross monthly income.
Those purchasing a real estate investment property should consult their real estate and financial advisor to understand tax and financial implications of their purchase.
2. Confirm Down Payment
If your downpayment amount is less than 20 per cent of the total purchase price, you will need to purchase mortgage loan insurance that guarantees the debt against default. In most cases this will be added to the mortgage loan.
3. Check Your Credit Rating
Your credit report plays an important role in your mortgage approval process and in determining the interest rate and other loan terms that a lender offers you. Before meeting with a potential lender, you may wish to confirm your credit rating so you have time to resolve any issues.