5 questions all first-time home buyers should ask

(NC) Buying your first home can be both exciting and overwhelming, but doing your research and asking the right questions can help you reduce stress and make your purchase with confidence.
Here are five questions every first-time homebuyer should ask themselves, according to Royal Bank of Canada.
1. What shape are your finances in?
Your finances need to be in good shape to qualify for a mortgage and a good interest rate. Lenders will look at your credit report to determine your credit risk. If your credit history isn’t the best, now is the time to work on your credit score.
2. How much will a home cost?
Most first-time buyers are surprised at the hidden costs that go into buying a home. Beyond the mortgage, down payment and closing costs, there are insurance fees if your down payment is less than 20 per cent of the value of the home. Other expenses include setting up utilities, legal fees, insurance, maintenance costs and property tax. Collectively, they can add a lot more to what you originally expected to pay.
3. How will you save for your down payment?
Saving for a down payment can be one of the most challenging steps for first-time home buyers, but there are savings tools that can help. For example, the First-Home Savings Account is a registered account that can help you save for your first home, without paying tax on the money you earn or take out. You can contribute up to $8,000 a year tax-free to this account, up to a lifetime limit of $40,000.
4. What are your non-negotiables and trade-offs?
It’s important to think about whether you have any “deal-breakers” you aren’t willing to compromise on and if there are any trade-offs you are open to making when buying a home. Would you be willing to embrace a smaller living space or a different location to buy a home sooner? Are you willing to wait for a home that checks more boxes, or do you want to get into home ownership as soon as the price is right? Your answers to these questions are likely to influence when and what you buy.
5. How will you deal with bumps in the road?
The surest way to learn if you can afford a home is to test-drive your monthly payments. Start by estimating your monthly mortgage and home-maintenance costs. Then, look at your current monthly costs, including rent and what you are putting into savings. Would you have enough to cover the cost of owning a home or would you need to find a way to cover any financial gaps?
Knowing how well you handle the payments before you buy can help determine the size of the mortgage that you are most comfortable with.
More advice on buying your first home is available at rbc.com/mymoneymatters.
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