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Show me the money: saving to buy a home

Purchasing a home is one of the biggest investments you’ll ever make.

One of the first steps to buying a home is saving for a down payment. Creating a savings plan and sticking to it will help you reach your goal of home ownership faster.

Here are a few considerations when saving to buy a home:

A savvy saver

Today, first time homebuyers can purchase a home with a down payment of five percent of the purchase price. Before starting a savings plan, you need to determine your current financial position. This includes reviewing all your assets and liabilities, and planning how much to save each month. Then decide how much you want to put down on a home. Talk to a REALTOR® to find out what price range you can afford. This will help you determine the amount need for a down payment. The next decision: do you want to put 5, 10, 15 or 25 percent (or more) down on the purchase price? Discuss your options with your REALTOR®. The larger your down payment, the less mortgage insurance you pay. For example, if your down payment is 25 per cent or more of the purchase price, you don’t require mortgage insurance.

Credible credit

Your credit rating is also important. A bad or declining credit can hinder getting a mortgage. A good credit history with minimal or low debt is ideal. Try to reduce your debt while saving for a home. This will increase the mortgage amount you qualify for. Pay your bills on time and if possible pay off your credit cards monthly. The general rule is that your household expenses should not exceed 40 per cent of your household income before taxes. Household expenses typically include property taxes, heating costs, mortgage payments and condominium fees as well as any payments on outstanding loans, leases and credit card balances.

Established Employment

Job stability is important when obtaining a mortgage. Having a lower paying job for a longer period of time will be considered more favourable if you’ve had a high paying job for a short time. This will show a lender that you have job stability.

These are the kinds of questions a lender considers when reviewing your loan application

• Have you held the same job for at least two years?
• Have you been in the same occupation for at least two years?
• Is the co-borrower (if any) employed?

With smart saving and careful planning you’ll be a homeowner in no time!