Get Preapproved
To plan your budget, you need to know how much you can afford to borrow. Talk to your banker or to a mortgage broker. They will analyze your situation, check your credit, tell you if you can get a loan, and if so, for how much. They can give you an approximation of what your monthly payments would look like, and what you need as a cash down.
Make a Mortgage Budget”
Now that you know up to how much you can borrow, make a mortgage budget. Make a budget with your current income and expenses. Now switch your rent with your mortgage, your apartment insurance for house insurance. Change your current electricity bill for what it approximately costs in a house. Add mortgage life insurance and taxes. Now you have a pretty good idea of what life as a homeowner looks like. Does your income still exceed your expenses? Can you still put some money aside for emergencies?
Figure Out How Much You Want to Borrow
Your mortgage budget helps you determine if you can afford to repay the maximum amount the bank said you could borrow. It’s always better to aim lower than that amount. It gives you more breathing space, especially if you have other debts that you need to pay off. Figure out which amount you’re comfortable with.
Save the Cash Down
Save your cash down. A good place to start is to put aside the monthly difference between your current budget and your mortgage budget. Put any extra money that you receive—tax returns, gifts—in your savings account. Save at least $5000 more than the amount you need for a cash down. You’ll need it for the notary, the welcome tax, the Canada Mortgage and Housing Corporation (CMHC) tax, and moving day.
Make an Emergency Fund
Every homeowner should have an emergency fund. So many things can happen on a house: a leaky roof, broken plumbing, a window to change, and these are just a few examples. Your budget should allot a monthly amount to put in your savings account. If you miscalculated and need a few extra dollars for moving day, take a look at online loans. Online lenders make small short-term loans with no credit checks, so it could be a good solution for you if your borrowing capacity is maxed out with your mortgage. Just make sure you can afford to repay the loan.
Find Your Dream House
Now that you have your cash down, it’s time to start shopping for a house within your price range. When visiting houses, bring a friend that knows a thing or two about houses. You want to make sure the house is well built and has no major problems. You can always have it inspected afterwards, but you will save a lot of time and money if you bring a knowledgeable person with you in the first place.
When everything is planned and prepared, there are no surprises and the whole process goes smoothly. All that is left is for you to move in and enjoy your new home.