Buying your first home is one of the largest financial decisions (and investments) you will ever make. It’s a smart move to get out of the rental world if you can and start putting that money toward your own property, but it’s also only smart if you are financially truly ready for it. Here’s how to know you’re ready to take the plunge.
Your income is stable. If your job is secure and you have no worries about a potential loss of income in the future, that’s a good first sign that you might be able to start looking. If you have any doubts or worries about your career standing, it’s worth it to wait. Your financial obligations will increase significantly as a homeowner compared to what they are as a renter, especially in some of Canada’s pricier cities, so you need to be positive you will be able to make all your payments on time.
Your debt is under control. While being debt-free would be the ideal, at the very least, you should have a good handle on whatever debt you do have. You should always be making consistent payments on time. Your debt-to-credit ratio will be a big factor in securing your mortgage, so having a positive ratio will ensure you get the best mortgage deal possible.
Your credit score is as good as it can be. If you have no debt, congratulations, you’re on the right track. But even then, you can be making a concentrated effort to raise your credit score by using your credit cards and paying them off in full every month. Ensuring your score is as high as it can be should be goal No. 1 before you begin house hunting.
You have enough saved up to cover the down payment. Even better, you also have a little extra left over to cover an emergency fund. If you can safely pay the down payment and still have money left over in case an emergency arises, you are in a good position to consider buying a home.
You‘ve outgrown your current space. If your family is growing, or the scope of your life or work is changing, it might be time to consider homeownership, so you can have more control over your space. If all the financial factors are in place and you’re just waiting for a sign, this might be it.