Are you trying to save for a home in 2023? Buying a home this year means dealing with changing market conditions, from interest rates to housing prices and supply. 2023 will likely shape up to be an interesting year for market activity, but how can you prepare for it as a buyer? The good news is there are several tips to help you save for a home, and they are useful no matter what market conditions we’re dealing with. Here’s what we recommend you keep in mind!
#1 Strategize your down payment
A down payment is the biggest upfront cost of buying a home, which means it’s a huge part of saving for a home. As you probably know, your down payment has to be a certain amount of the home’s purchase price. For homes up to $500,000, you require a five per cent down payment. For homes up to $1 million, you need a 10 per cent down payment after the first $500,000. Finally, homes over $1 million must have a 20 per cent down payment. The amount you save for your down payment will determine the maximum purchase price of your future home. When you start saving your down payment, think about how much you want to spend on buying a home. Keep in mind, too, that home purchases with down payments under 20 per cent require mortgage default insurance. This is an extra cost to protect lenders, and is something to consider if you opt for a smaller down payment.
#2 Start spending more carefully
Before you were looking to actively save for a home, you may have had a lot of disposable income you used for purchases that weren’t strictly necessary. When saving for a home, you’ll likely want to use a lot of that income to help save for your down payment and closing costs. With this in mind, it’s time to spend a bit more mindfully. Before you go on a major shopping spree, think about what you really need, and what could instead be used as savings. The same goes for big new purchases. Unless it’s essential to replace your car, furniture or phone right now, hold off on these expenses.
#3 Be specific about your needs
The more specific you are about what you want and need in a home, the more a real estate agent can narrow down housing options and prices for you. Take a moment to think hard about what is non-negotiable for a home. This might include access to public transit, a two car garage, or a certain number of bedrooms. Odds are it doesn’t include an inground pool or media room. The things you need will help determine a rough purchase price, which will help you know how much you need to save. You will have a clear idea of your financial end goal, and you will also know exactly what types of properties to look for once you’re ready to hit the market.
#4 Make room for closing costs
Don’t forget that closing costs are a big part of saving for a home! These expenses might slip your mind, so we’re here to remind you of their importance. Closing costs are those expenses like legal fees, land transfer tax, and moving costs, which pop up once you become owner of your new property. They can cost thousands of dollars, so you’ll likely want to actively save for them. Plus, remember that once you own your home, you’ll be paying for utilities, internet, and maintenance costs. These are essential and unavoidable. Make sure you have the budget to support them on top of your down payment and monthly mortgage payments.
#5 Let a broker be your guide
Finally, use a mortgage broker! Brokers can help you save for a home right from the beginning. You can meet with them early in the process to discuss your savings and credit score, and how much you are willing to spend on a home. Brokers can walk you through typical lender requirements, and the type of mortgage financing you might be likely to qualify for in your situation. Using a broker helps clarify your situation and tells you what you need to do before you can buy a home. Plus, once you find a home you love, brokers are there to help you secure a mortgage approval.
The way you save for a home will depend on a variety of factors. These include your current circumstances, your housing needs, and your timeline. However, a mortgage broker is a hugely valuable resource for any homebuyer. We can work closely with you, and with lenders, to find the mortgage product that suits you best. If you’re ready to buy a home, we’re ready to help you get there.
If you have any questions about your mortgage, get in touch with me!