April 15, 2023 | Buying

A First-Time Buyer’s Guide to Financing

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As a first-time buyer, acquiring a mortgage is one of the most vital processes in your home purchase. With this in mind, getting acquainted with the ins and outs of financing ahead of time can provide you with a smoother buying experience and elevated market position. 

As industry veterans, Bahia Realty Group has helped countless buyers land their dream homes – navigating the market with unmatched precision and familiarity. Passing this knowledge on to you, we put together this blog post to provide a crash course on the process of securing a mortgage as a first-time home buyer. 

Seeking more insights tailored to rookie home buyers? Explore these related readings from our blog. 

Interest Rates & Costs of Lending

As a first-time buyer, one of the most influential factors in the total cost of your mortgage will be interest. Right now, interest rates are a hot topic in GTA real estate. 

Since the Bank of Canada began to hike interest rates last year, some buyers have become nervous or hesitant about heading to the market. However, things aren’t really as negative as they may seem.

Consider this perspective. As a buyer, interest rates are out of your control. However, what is in your control is the timing of your purchase. While they could surge in the near future, real estate prices in the GTA are currently relatively stable. 

With that in mind, buying in today’s market gives buyers the opportunity to capitalize on neutralized price points and less competitive buying conditions. Although interest rates are comparatively high compared to three years ago, there are options for future refinancing. 

Looking for unique insights about buying property in the GTA’s vast real estate landscape? Click here to download our comprehensive Buyer’s Guide

Steps to Financing 

Before offering you a mortgage, your lender will want to know key details about your existing financial resources and personal credit – along with other personal information. Therefore, first-time buyers should have certain documents prepared before approaching a lender or broker. Such as: 

  • Up-to-date government-issued identification and SIN
  • Proof of income and employment information
  • Employer contact information
  • Statement of savings and investments
  • Credit report
  • T1 Form and NOA

This is a basic list and requisites will vary by the individual buyer. When the time comes, our team can help ensure you have all the necessary requirements ready to go. 

The Stress Test

In Canada, all federally regulated lenders are required to verify that you will be able to afford your mortgage payments before signing on the dotted line. They do this by performing a Mortgage Stress Test. 

During this process, your lender will assess your ability to cover payments in the event of an interest rate increase. As a buffer, the lender will use a baseline rate of 5.25%, or their offered rate with an additional 2% added on. Once your financial health checks out, you will be one step closer to owning your first home. 

Getting Pre Approved 

With your financial details in place, you’ll want to get pre-approved for a mortgage before heading to the market. Getting pre-approved sets you up with a predetermined amount that a lender is willing to offer you toward your home. With this number in your back pocket, you’ll have a clear understanding of what your buying budget will be. 

Another advantage of pre-approval is that you’ll be locked into a guaranteed interest rate while you shop for your first home (approximately 45 to 120 days depending on the lender). If rates drop during this time frame, you’ll be able to reapply for a more favourable rate. 

Looking to optimize your real estate investment? Explore these other posts from our blog for helpful tips. 

Our Lender Network

Maximizing your first home purchase requires expert guidance. Providing end-to-end support, Bahia Realty Group can direct you through a full-service buying experience. 

Regardless of what’s happening in the market, we can assist you in sourcing a favourable, high-quality mortgage to ensure you have the financial resources needed to purchase your first home. As steadfast leaders in the GTA’s competitive real estate arena, Bahia Realty Group have motivated, trustworthy lenders in our Rolodex. When you work with us, these strong industry connections become your advantage. 

Gearing up to purchase your first-ever home? Bahia Realty Group can guide you through a seamless purchase in one of the world’s toughest markets. Click here to send us an email.

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