You’re thinking of buying a house, that’s fantastic! Buying a house is a rewarding experience but requires a lot of planning and thinking ahead. More specifically, you need to think about your future financially if you choose to buy a house. What is your current financial situation like? Are you in a good enough place to buy a house? Maybe you’re well on your way or maybe you’ve just begun planning. Whichever it may be, one thing you need to think about when preparing to buy a house is a down payment.
To help you jump start your savings, these are a few smart steps you can take to help you achieve your dream of buying a house!
1. Set a goal budget
First, you need to decide how big of a down payment you will need. To break it down, here are the requirements for down payments based on the price range of houses you are looking at:
- If you’re looking at houses that are $500,000 or less, you need a down payment of at least 5%
- If the price range you’re looking in is between $500,000 to $999,999, you will be required to have a down payment of 5% of the first $500,000 of the purchase price as well as 10% for the portion of the purchase price above $500,000
- If you are looking at houses above one million dollars, you will need to have a down payment that is 20% of the purchase price.
This may seem a bit daunting, especially if you’ve just begun saving. But have no fear. No one saves this kind of money overnight. That is why it’s also important to set a timeframe for yourself as well. Based on your time frame, then see how much you need to save each month to hit your goal. Once you start to break down your savings goal monthly, your goal will feel and will be more attainable because smaller steps in the right direction are more manageable and easier goals to obtain.
2. Start saving by cutting expenses
When you start saving, you may find that your current lifestyle doesn’t allow you to save as much as you had hoped. Don’t give up and don’t let that discourage you. What you may need to do here is evaluate your spending habits and see where you can cut expenses to save more. Think about your daily routine. Let’s say for example, during a regular workweek, you eat out for lunch every day. On average, lunch may cost you around $10. That’s $50 in a week, and $200 each month. Yes, a $10 lunch doesn’t seem like a lot until you see it start to add up. If you also cut out that morning coffee you buy on the go, you’ll see even more “found” money stay in your account.
3. Think about paying off some debt
A mistake some people make when saving for a house is coming up with a great down payment but letting their debt and other financial obligations build up. There needs to be a good balance, and when you’re looking to get approved for a mortgage, it’s better to have a low amount of debt than it is to have more money in the bank. Next time you get a bonus at work, think about assigning a portion of it to pay off your debt and putting the other portion towards your down payment savings.
4. Know what’s available from the government
In Ontario, there are several programs available to help you purchase a house and provide financial relief for you if necessary. As an example, the First Time Homebuyers incentive, which helps those buying their first home by providing anywhere between 5-10% of their down payment. You of course have to read through the fine print to make sure you qualify for these offers but, the experienced mortgage broker you work with will be able to tell you if you will qualify or not.
5. Speaking of local mortgage broker…Talk to one!
Want to drill down on your current financial situation and evaluate what your next steps are towards saving for your future home? I can help you. With my experience as a seasoned mortgage broker, and financial advisor I can give you the right financial advice to reach your goal and help you get approved for the mortgage you need. I’m also happy to answer any questions you may have and explain to you the ins and outs of mortgages too. Reach out to me today to set up a virtual meeting by calling (705) 315-0516 because your future home awaits and it’s time I help you get a head start in the game of homeownership!