Applying for your very first home loan can be an intimidating business. Understanding just what you should be looking for in a first time home loan can help you make a better decision.
First time home buyers almost always have it hard. Finding the money for a big deposit to put down on your first home can be a real challenge, especially if you are having to pay rent on a home you live in already (and renting isn’t cheap) To complicate matters further, banks really don’t do those 100% mortgage loans any more, the ones that used to let a first time home buyer borrow all the money they needed to buy their first place. But it’s certainly not all doom and gloom and purchasing your first Waterloo Region home may be more within your reach than you imagine.
Comparing First Time Home Loans
First time home buyers have a very different set of needs than those applying for their second, third, maybe even fourth home loan. The most important thing is to educate yourself about the different types of home loans available and about the way the different kinds of financial institutions that offer them work.
Banks, credit unions and specialist mortgage companies all have their own first-time loan products and they all differ in what they have to offer and what they require from first time home buyers in order for them to qualify. Matching a first time home loan to your individual circumstances is the highest priority.
How to prepare for homeownership is something that first-time buyers have to educate themselves on too. Tools like loan calculators and savings tools and assistance can be a real help. Saving the deposit to put down on your first home purchase is a lot easier if you are given some expert guidance on just how you make a budget that allows you to save and keep living at the same time.
What To Look for in a First Time Home Loan
Working with a lending institution who is willing to help guide first time home buyers through the whole, often confusing process of buying their first home is something that will prove invaluable.
Dealing with a lender who is willing to explain that confusing pile of paperwork, rather than just give you a pen and tell you to get on with it will make the whole thing far less intimidating and ensure that the loan you apply for is one that suits you and that has terms that you can meet, from the day the first payment is due until the loan is paid off years down the line.
If you can find a company that has done much of the hard work for you, and has compiled a list of all the pros and cons of a number of different home loan products you will be starting your search for a first time home loan from a much better place. Evaluating all of the offerings by yourself is never easy and the simple fact is that a first time home owner needs all the help they can get!
Downpayment Rules To Consider
As we mentioned, the days of the 100% mortgage are long gone. And so finding the money for a downpayment is a must. Unlike some other countries (including the US) in Canada there are rules about how much someone much have as a down payment. The percentage you must put down depends on the purchase price of the home:
- For homes less than $500,000, the minimum down payment is 5%
- For homes selling for between $500,000 and $1 million, the minimum down payment is 5% of the first $500,000 of the purchase price and then 10% of the purchase price between $500,000 and $1 million
- For homes with a purchase price of greater than $1 million, the minimum down payment is 20%
A good mortgage loan rep will explain these, and other rules, to you and help you figure out not only the right loan product for you but also how extras like mortgage default insurance as well as possible tax credits and specialist programmes designed to assist first-time buyers get into that much wanted new home.
The Waterloo Region First Time Home Buyers Programme
Wondering about those specialist programmes? There are more than a few out there. For example, here in the Waterloo Region there is an excellent first time home buyers programme that gives qualifying hopefuls a 5% loan to put towards their down payment. This loan is interest-free and fully forgivable if you stay in your home for 20 years. Obviously, there are conditions to be met, including that the home cost $386,000 or less. But it does apply not just to the City of Waterloo but also to the City of Cambridge, the City of Kitchener, and the Townships of North Dumfries, Wellesley, Wilmot, and Woolwich and a search of our local listings will show you that there really are some great first time buyer suitable properties available in our region that fall well within those limits.
Have more questions as a first time Waterloo Region home buyer? Don’t hesitate to give us a call, or drop us an email, we’ll be more than happy to answer them.