7 Financial Tips Every Homebuyer Needs to Essentially Follow for Buying Success in Kitchener 

You have finally decided to buy a home in Kitchener, the thriving tech hub of Ontario. That’s great!

Buying your first home is a big step. But apart from the exciting part, know that the home-buying process can be a little risky, financially. Alongside paying the huge upfront down payment cost, you have to brace up for the mortgage payments, property taxes, and many other unexpected expenses.

However, do not worry, with the right financial planning and strategies, you can secure the key to your dream home in Kitchener without any hurdles and obstacles. Here are the key financial points you need to keep in mind before exploring houses for sale in Kitchener -

Practical Tips for Homebuyers about Their Finances

1. Assess Your Credit Score and Work on Improving It if It's Poor

Your credit score will play a big role in determining your mortgage loan eligibility and terms. If you have a higher credit score, above 680, it means that you have the ability to manage debt responsibly. So, you will be able to bag a loan with favourable interest rates and better loan terms.

The exact opposite happens when you have a credit score below 680. In such a case, you will only qualify for loans with high-interest rates, large down payment, and stricter terms and conditions.

This is why before you start shopping around for homes for sale in Kitchener, evaluate your credit score. To do that, request a copy of your credit report from Equifax and TransUnion.

Thoroughly check the report for any errors or inconsistencies in your credit history. If you see any mistakes in the report such as late payments that you made on time or accounts that don’t belong to you, resolve that immediately.

Or else if you find that your credit score is truly “bad”, try to improve it. To do that, attempt to make all your bill payments on time. Even a single late payment can badly impact your credit score.

2. Clear Your Current Debts Before Adding More to Your Plate

This financial step during home-buying is usually referred to as improving your debt-to-income ratio (DTI). To find your DTI ratio, simply divide your total monthly debts by your gross monthly income.

The lower the DTI ratio, the stronger your financial position and the lower the chance of defaulting on your loan. So mortgage lenders usually prefer borrowers with a low DTI ratio (43% or lower). To make your DTI ratio low, pay down your existing debt before taking a new loan to buy a house for sale in Kitchener.

3. Figure Out the Maximum You Can Spend on Your New Home

To fix a budget for home-buying, first, take a look at your monthly income and expenses. This will give you a clear picture of your financial situation and help you determine how much you can afford to spend on the Kitchener property.

Next, try to figure out the costs involved in purchasing a house. This includes down payment, closing costs, property taxes, insurance, and potential repairs and renovations you may have to do before making the property “yours.”

The last step is to determine the expenses you will have to bear after buying your dream home for sale in Kitchener. This includes mortgage payments, property taxes, home insurance, and maintenance expenses.

PRO TIP - Use a free affordability calculator to easily determine your home-buying budget. These tools give you an estimate of your budget based on your income, debt, down payment, and other factors.

4. Gather Cash for the Upfront Payment on Your New Property - "Down Payment"

Here is the minimum down payment required to buy a house for sale in Kitchener based on the purchase price -

• 5% - Properties under $500,000

• 10% - Properties between $500,000-$1,000,000

• 20% - Properties above $1,000,000

To save for the home down payment, refer to the income and expenses data that you calculated while estimating the budget. This will help you to identify areas where you can cut back and put more funds towards savings.

Set up automatic transfers from your checking account for the home down payment to your savings account. Consider saving for the down payment on a high-interest savings account or Tax-Free Savings Account (TFSA) to maximise returns while saving for your down payment.

5. Take Into Account the Area's Cost of Living Along with the Home Price

Don’t just check the price tag of houses for sale in Kitchener. You must also consider the living expenses in the area before committing to a property.

It may be possible that the property price falls within your budget. However, the cost of living in the neighbourhood may turn out to be too expensive for your wallet.

Here are a few aspects of the neighbourhood you must consider to stay on the safe side, financially -

• Property Taxes - A high tax rate can significantly impact your monthly mortgage payment and overall expenses.

• Cost of Living - Consider how the cost of living in the area including groceries, utilities, healthcare, and transportation will affect your budget.

• Commute and Transportation - Calculate the distance to work and check the availability of public transport options from the home for sale in Kitchener. A long commute can add stress and expenses to your daily routine.

6. Know Your Borrowing Capacity Before House-Hunting

You need to do this by getting a mortgage pre-approval. In the mortgage pre-approval process, a mortgage lender evaluates your financial situation and creditworthiness to determine if you can qualify for a mortgage loan.

Remember, this is just a pre-approval for the home mortgage loan, not the final approval.

By following this step, you can set realistic expectations for your home-hunting. You can focus only on those houses for sale in Kitchener that align with your budget, saving you from wasted time and disappointment.

7. Hold Off on Big Purchases Around the Time of Home Buying

Buying a home will probably be one of the biggest financial commitments of your life, one that will deplete all your savings. This is why, if possible, refrain from major purchases right before and after home-buying. Big buys can further strain your finances, making it challenging to cover unexpected expenses or repairs that may arise after moving into your new Kitchener property.

Own Your Dream Home with Confidence

By following these key financial tips, homebuyers can navigate Kitchener’s real estate market with confidence. Apart from abiding by these strategies, make sure to hire a financial advisor while looking at homes for sale in Kitchener. A financial advisor can assess your financial situation, provide personalised advice and guide you through the entire home-buying process.

Best wishes for your homeownership journey in Kitchener!