Kelowna First Time Buyers made up 27% of the market in February and home ownership is one of the greatest dreams a young professional or family can have. The thought of having your own place that you can customize to your heart’s content is appealing, and many home owners are thrilled to stop handing rent money to a landlord. Once you’ve started to make the leap from renting to owning, you need to get prepared for your first time buying a home! Most home buyers need to obtain a mortgage, and 34% of Canadian families currently pay a mortgage. A mortgage is a loan that gives a lender security for a borrower repaying the loan. The mortgage is like a promise to repay the loan, and the house is a form of security toward you keeping that promise.
Get Started with Mortgages
There are two mortgage types. The first is a conventional mortgage, and occurs when a home buyer has at least 20% of the house’s purchase price as a down payment. The down payment is typically accompanied by proof of two years of employment. If you have a down payment and qualify for a conventional mortgage, you aren’t required to purchase default insurance. However, a conventional mortgage must not exceed 80% of the total purchase price or value of the home, or default insurance will be required. It covers the life of the home, and is a one-time purchase. You’ll also be required to purchase the default insurance if you do not have a 20% down payment. This insurance serves to protect the lender if you default (fail to pay) on the mortgage.
The second type is a high ratio mortgage. New home buyers in Kelowna must have a high ratio mortgage if their down payment is less than 20% of a home’s purchase price, or a loan for more than 80% of the home’s value. When ready to purchase a home, you can approach a reputable bank for a mortgage or a local mortgage broker. Many banks offer pre-approved mortgages, so you know exactly what price range you can consider when shopping for your first home. The pre-approved mortgage will also come with an expected interest rate that is held for around 90 days after completion. You’ll have a good idea of how much your monthly payments will be, so you can figure our your finances accordingly. However, the pre-approval isn’t set in stone. Each property will need to be approved on a case-by-case basis for your mortgage. Your bank will let you know whether you can have an open mortgage or closed mortgage. An open mortgage lets you repay the principal amount at any time, without risk of penalty. If you want to pay off your mortgage fairly quickly, you might get an open mortgage. If you want a longer amount of time to pay your mortgage, you would probably do well with an closed mortgage. The interest rates are lower, and give you a longer length of time in which to pay off your mortgage.
If you’re confused on the best options for your home purchase, your lender will walk you through every thing you need to know about your individual financial situation. Finding out the amount you’re approved for, and the terms of your mortgage is your first important step on the journey to home ownership.
If you are considering buying your first condo or home please call me I would be happy to help you plan how to get started.