Plan Your Home Purchase

In this article, we will explore the first stage, ‘Plan Your Home Purchase’, in detail. You always want to set your preliminary budget before meeting with a mortgage broker or real estate agent. Remember that summer and early fall favour homebuyers because of the annual real estate cycle.

For clarity, we’ve grouped the activities into three areas.

Decide how much of your savings you will put toward the purchase.

A mortgage lender will require that you put some of your savings toward a down payment. The amount of money you can contribute as your down payment will determine the amount you need to borrow through a mortgage. Most home buyers make the minimum down payment allowed, so they have money left for closing costs such as furniture, movers, and minor repairs.

Generally, lenders will match 4 dollars for every dollar you put in (e.g., $80K mortgage with a $20K down payment). If you pay for mortgage default insurance to protect the lender, then they can lend you a maximum of $95K to match your $5K contribution, but default insurance can be expensive as it can cost up to $4K for every $100K you borrow.

Not all first-time home buyers rely entirely on their savings for a down payment. According to Mortgage Professionals Canada, 92% of first-time home buyers draw on their savings for their down payment; however, many get help from their parents. 43% are gifted money from their parents, and 19% borrow from their parents.

This table helps you to calculate the total cash you feel comfortable putting toward buying your home (including the closing costs). If more than one person contributes to the purchase, you must add the contributions from the additional people as “co-borrower(s)”.

Use "What Can I Afford" to determine your estimated homebuying budget.

What Can I Afford is our advanced mortgage calculator that estimates your maximum homebuying budget, including closing costs and mortgage default insurance. It isn’t recommending that you spend that much on a home, but it is providing a fair estimate of your upper price limit.

Define Your Home Requirements.

When defining your requirements, you should be thinking about what you need from your home rather than how you want that need met or potential bonus features.

Separating what from how can be confusing initially, but it’s pretty simple and essential because you don’t want to pay for features you don’t need. Requirements are features that are structural and difficult to add in a renovation, such as the number of bedrooms in your home. To alleviate any confusion, we have provided a table below listing possible requirements, wish list items, and deal breakers. Your requirements should be listed in order of importance; the list we have provided is only an example. You should figure out your priorities and re-order the lists.

Download our Home Requirements checklist templates to begin writing your requirements today!

You want to limit your requirements to those things that you feel are absolutely necessary. The more requirements you have, the harder it will be for your real estate agent to match you with properties that match. When you have too many requirements, you may be presented with the most expensive properties because they are the only ones that meet ALL your requirements. If you haven't prioritized your requirements for the real estate agent, they will use their own judgment to prioritize them and they may not value the same things that you do.

Deal breakers are items that you absolutely never agree to and are not willing to compromise on. In the example above, they cannot live in a building that allows dogs because of allergies.

Make a list of amenities you need in your neighbourhood.

This is similar to the home requirements, but focused on factors that are intrinsic to the area where you will be living.

Set your financing priorities.

Most people focus entirely on the interest rate but this overlooks fees, insurance premiums, loan size, and other ways that a mortgage can add value to your home purchase. Don’t be blinded by the lowest rate. Rate is only 20% of the full financing picture.

When identifying financing priorities, most people focus entirely on the mortgage rate; however, fail to pay enough attention to fees, insurance premiums, loan size, and other ways that a mortgage can add value to your home purchase. Don't be blinded by the lowest rate, as it may not always be your best option.

Find a suitable mortgage broker and real estate agent.

The Basics

At a bare minimum, you want a competent mortgage broker located conveniently to where you live, and a real estate agent with intimate knowledge of the neighbourhood in which you are searching. Both should speak your preferred language. At Mortgage Sandbox, we wholeheartedly believe you deserve this and more.

Custom Matched Professionals

We believe that Canadians want to work with and give business to people who share and understand their interests and values. Considering that home buying is possibly the largest financial investment you will ever make and that the process can take up to 5 months from beginning to end, it is important to embark on this journey with professionals who are predisposed to work well with you.

MatchFinder is our proprietary app that gathers information about you and connects you with local professionals who can best anticipate your needs and help you get settled into your new neighbourhood.

Read about the ‘Search for Your Perfect Home’ the next stage in the home buying process.

If there is anything unclear in the explanations above. Please let us know so we can improve our advice for the next reader.