Renting? Here’s how to become a first-time home buyer

KEY TAKEAWAYS:
✔ It’s challenging to become a first-time home buyer in Canada but it’s possible with a little focus, discipline, and a plan.

✔ The first step towards home ownership is to know what you’re spending and how much you can put towards your savings goal.

✔ Check out the Canadian government’s first-time home buyer incentives which can help you save for your down payment faster.  

There’s been a lot of talk in the news lately about how high prices are making it challenging for renters to own their first home. Saving for the down payment while covering rent and expenses may make it feel like the idea of homeownership is impossible.
 
But if your goal is to become a first-time home buyer in Canada, there are steps you can start taking right now to make your dream happen. Whether you’re eyeing a small home in the suburbs or a downtown condo, home ownership is possible with a little discipline and focus, and by having a plan and sticking to it.

Know where your money goes

Two things are standing between you and your goal of home ownership: time and money.  By completing a household budget you’ll get a clear picture of how much you spend, and where you can start to save for your down payment. Then, you can figure out how long it will take to make the move to your new home.
 
If your budget shows that some of your money is going to debt, the best plan is to pay it off quickly so that more of your income can go towards savings. We can show you how. 
 
As your debt goes down, you can start to save faster. 

Check your credit score

Lenders offer better interest rates to home buyers who have a good credit score. A lower interest rate means lower payments, so your home becomes more affordable and you can put more money aside for savings and an emergency fund.
 
Your credit score is a three-digit number between 300 and 900. 650 or higher is good for a first-time buyer. If your score is low, don’t panic. Between now and the time you apply for your first mortgage, there are many ways improve it. Here’s how to start boosting your score.
 
For more information, check out how your credit score affects the monthly cost of a mortgage. 

Know how much you’ll need

In the early days of planning to buy your first home, you can start to estimate how much you’ll need to save and how much money you can borrow. Here are the most important three numbers you need to know.
 

These are general guidelines intended to make mortgages available and affordable without putting too much stress on a family’s income. When the time comes, your lender will help you estimate costs more accurately. In the meantime, the Canada Mortgage and Housing Corporation offers an easy-to-use online calculator that lets you experiment with a variety of home costs, mortgage options, and interest rates.

Take advantage of government incentives  

There are first-time home buyers incentive programs in Canada designed to help you save for your down payment faster. 

          The Tax-free Savings Account (TFSA)

          A TFSA lets you earn tax-free growth on your money. It’s yours to withdraw at any time and use any way you wish. Shop for the TFSA that lets you invest your money in ways that match your comfort with investment risk. Learn more. 

          The Home Buyers’ Plan

          This government plan lets people with a Registered Retirement Savings Plan (RRSP) withdraw a portion of it to buy or build a qualifying home. As of April, 2024, you can withdraw up to $60,000. Learn more. 

          The First Home Savings Account 

          This is also a government plan that allows you to open a first-time home buyer savings account at a financial institution and save for up to 15 years, tax-free. Learn more. 
 
Regardless of how you choose to save for your first home, setting up automatic transfers to your savings account is a great way to keep up the momentum and watch your goal get closer every day.

Keep cash windfalls

Gifts, bonuses, and any cash you make through a side hustle can feel like free money. So can getting a raise and seeing a little more money on your paycheque. When these things happen, it’s tempting to treat yourself to something nice. But if you want to own your first home sooner, tuck those windfalls into your home-savings plan and treat yourself to knowing that you’re taking control of your financial future.
 
Once you start to save for the down payment for your first home, you’ll start to see some momentum. The key is to stay positive and focused on your savings goal – and remember home ownership isn’t about IF, it’s about WHEN.

Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.