Saving for a House

Getting Your Finances In Order To Buy A House

Getting ready to buy a house? Don’t know where to begin?

Perhaps what causes the most stress when buying a house is the finances. You may not know what you need to do before purchasing that dream house, so to help you out, we’ve compiled a list of a few things that you need to do and consider before finally getting your home. These are things that you must do if you are buying a home, but also things that are good practice for anyone intending to make a significant purchase at some point in their life.

1. Pay off as much debt as you can.
The bank likes to see less debt when they are considering someone for a loan. The more of your existing debt that you pay off before applying for a loan, the more money the bank is likely to lend you. Start doing this several months before purchasing a house, so that you are not left with a large sum to pay off immediately before you would like to buy.

2. Save, save, save!
Save as much money as you can for the house’s down payment. Saving money means that leading up to your house purchase, there should be no unnecessary purchases; only buy the essentials. Save a portion of every paycheck you receive, and look for other small ways in your life to save money. Check out this website for money saving tips.

3. Check your credit score.
Your credit score is important in determining your mortgage, loan and the interest rate. There are a variety of factors that can determine your credit score such as: whether you have ever declared bankruptcy, debts, late payments on loans and credit cards, and credit card balances nearing the card limit. Start by talking to your bank about what an ideal credit score for getting a loan and mortgage would be. Then, when you have your credit score, you can assess the different factors that may help improve your score.

4. Create a budget.
It can be easy to get pulled in by lavish accessories and features in a house but think about what you need in your home. Decide how much your current financial situation allows you to pay for a home, and look at houses in that price range. Think about whether you will need to do any renovations to the house or if there are things you will need to buy after moving in and include this all in your budget. You don’t want any surprise costs that will put you over the amount you are comfortable spending. For more information, check out this article about Closing Costs and this article about Wants vs. Needs.

5. Build an emergency fund.
An emergency fund is a good way to ensure that you do not get caught in an unpredictable situation with expenses you cannot pay but must. For example, after moving into your house, you may realize that there is something that needs to be repaired or replaced. If you have established an emergency fund, it should make paying for something like this a little more comfortable. The emergency fund could also be used to pay for several months’ living expenses and mortgage in the case that a member of your family experiences a job loss. Hopefully, you will not need to use the emergency fund, but if you do, you will sure be glad to have it!

These are just a few steps to take to make your experience buying a house a little less stressful. Of course, talking to your bank and a financial planner is always important as well. If you are still hesitant about the financial aspect of buying a home, talk to a financial professional or one of the knowledgeable realtors of the Key Exchange Team!

(The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by CREA and identify the quality of services provided by real estate professionals who are members of CREA. )

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