Many home buyers who wish to buy a property will save their down payment for years in advance. Once some money has been collected, it's important to know how much is enough. Knowing when to stop saving and when to start buying is a multi-step process that takes research.
How much is needed for a down payment?
The minimum down payment for a house of $500,000 or less is 5 percent. For homes that cost over $500,000, the down payment must be 5 percent of 500,000, plus 15 percent of everything over $500,000.
How do you know if you have enough?
In addition to the amount that the home buyers have saved for their down payment, home buyers must also meet minimum debt to income qualifications. The best way for many home buyers to find out whether or not they have enough money saved for their future home is to talk to a lender. A qualified lender can help home buyers determine how much house they can afford for their City Centre home given their down payment size, debt to income ratio and other factors.
It can be helpful to call a lender early in the saving process, even if the home buyer doesn't plan to purchase a property for the next few years, because the lender can help a home buyer set a realistic personal goal. Knowing how much needs to be saved can help the potential home buyer budget money and set aside savings.
Falling short? Make a budget
A budget can help home buyers determine how much they need to save in order to make their goal by a projected date. A basic budget takes into account the buyer's full income, expenses and savings. These tips can help home buyers keep their budget realistic:
- Set aside separate money for the move and home repairs after move in.
- Look at homes in a variety of price ranges to determine how much is needed for the down payment.
- Build padding into the budget for unexpected expenses, like car repairs, family emergencies and more.
Yes, you can get assistance.
Many home buyers have questions about whether or not they are allowed to accept money from their parents to put toward the down payment. The answer is yes, but there are a few caveats for accepting gifts.
- The down payment must come from an immediate relative.
- The money must not be a loan; it must be a gift. In some cases, parents who lend their children money must write a letter promising not to accept money as repayment.
- The government allows home buyers to make a one-time RRSP withdrawal of $25,000 for the purchase of a new home.
Home buyers who need more information about their upcoming home purchase and down payment assistance can contact their lender. A good lender will be able to answer all questions accurately and quickly.
Work with a real estate professional.
A good real estate professional can help home buyers find the right lender and determine which homes and price ranges are right for them. If you're a home buyer with questions about the down payment or home buying process, contact a local reputable real estate professional today.