The 2022 federal budget made way for a new tax-free savings account (TFSA) designed specifically for first-time home buyers in Canada. The account ultimately combines the advantages of the existing TFSA and registered retirement savings plan (RRSP) – popular down…
How to buy a house in Prince Edward Island
Every successful house purchase in Prince Edward Island starts with a plan. As one of the largest investments you’ll ever make, preparing yourself for this exorbitant purchase will ensure you are not cut off guard with the expenses required to complete the process.
Are you paying outrightly or taking out a mortgage? If mortgage, then have you to build good credit and organize your finances? These and more are what you need to be put into consideration before setting out in search of a house to buy.
You’re in the right place if you need information on how to buy your new house in Prince Edward Island and the best neighborhoods you can call home.
Step 1: Determine if you’re ready to buy a house
Buying a home is a huge decision both for your future and your finances. That’s why you need to consider several factors before concluding you’re ready to purchase a house in Prince Edward Island. Making the leap from renting a house to buying one is liberating yet it signifies great responsibility for you, especially if you’re looking to acquire a mortgage to make the purchase. Here are a few things to consider before venturing into the Prince Edward Island market in search of a house.
Income And Employment Status
The first thing you need to consider is your income. Are you employed or unemployed? As an employee, you receive a certain amount of money as payment for your labour every month. Even if you are self-employed, you will still receive income, although it may not be as consistent as an employed person.
Debt-to-Income Ratio (DTI)
While your employment status is crucial in determining your readiness to buy a house, your gross and net income are equally important. If you incur too much debt, then your net income will be too low to save anything significant to buy a house. As such, it is recommendable to keep your debt-to-income ratio below 42%.
If you do not have enough funds to pay for a house in Prince Edward Island outrightly, then you can go the mortgage way. But every mortgage requires you to have a down payment. A down payment is the amount you pay for a house upfront. While how much you pay as a down payment depends on the lender, generally, the down payment should not be less than 5% of the purchase price. Moreover the higher your down payment the less you’d have to pay in interest.
Before accepting a down payment your lender will assess your credit score which is also referred to as your risk profile. Importantly, when you want to buy a house using a mortgage, it is crucial to have a good credit score. Most lenders will require you to have a credit score of 650 which also provides you with mortgage options and lower interest rates. However, this does not mean there isn’t hope for people with a bad credit score. There are other options people with a bad credit score can capitalize on when they want to buy a house.
Step 2: Calculate how much you can afford to buy in Prince Edward Island
As a long term commitment that requires stable financial standing, taking out a mortgage loan to finance your home purchase means you have to know the amount you can qualify for. Using your credit score, amount of down payment, DTI ratio and other factors, a mortgage affordability calculator can provide detailed information on how much mortgage loan you can look to get from your bank. This information will also help prepare you for the house search so you don’t go looking at houses above your financial capabilities.
Step 3: Save for your Down Payment, Closing Costs & Fee
It goes without saying that purchasing a home is a costly endeavor. It could be one of your most significant purchases. But, don’t be alarmed; if you’re serious about purchasing a home, it all begins with small actions like saving.
Any small sum you come across should be saved. Because, at the end of the day, buying a house costs a lot of money, from the down payment to the closing costs, legal expenses, and so on.
Step 4: Choose your mortgage rate type and term
As soon as your down payment situation is settled, what’s next is to shop around for a mortgage lender with suitable terms and rates. You can either get a mortgage loan from a mortgage lender or a mortgage broker. How a mortgage lender lends money differs from how a mortgage broker. Make sure to carefully go over their terms and rates before choosing to work with them. A great move would be to hire an experienced mortgage lawyer who can review your terms to check for suspicious clauses.
To find the best mortgage lender for your needs, talk with several lenders about their products. Some great questions to ask yourself when seeking a mortgage lender includes:
- How long do you want the mortgage to be?
- What type of mortgage do you need?
- Do you want a mortgage with a rise or fall interest rate or one that is fixed?
- How often do you want to make a repayment on the mortgage?
Step 5: Get pre-approved for a mortgage
After finding the ideal mortgage broker or lender, what’s next is to organize your documentation to submit a mortgage application. Getting a pre-approval for a mortgage gives you peace of mind knowing you can confidently bid on houses you like. Getting pre-approved also means the lender has determined the mortgage amount you would qualify for so that you can have that price range in mind when house hunting. Typically, you will be asked to present several documents like your bank account or investment statement, proof of assets, proof of income, information about your debt, your identification, and so on. A pre-approval for a mortgage tells you the following:
- The mortgage interest rate available to you
- Your maximum monthly mortgage repayment plan
- The amount you can afford to spend on a house
Step 6: Begin house hunting
At last, the best part – house hunting! Shopping for a house in Prince Edward Island has never been easier with online resources available at your convenience. When you go house-hunting, the maximum purchase price of the house should not exceed your mortgage pre-approval. You can contact a real estate agent or house hunt yourself. When searching for houses in Saskatchewan to buy, consider the following:
Popular Cities & Neighborhoods in Prince Edward Island
CHARLOTTETOWN PEI: As the capital of Prince Edward Island, Charlottetown boasts an attractive city life, full of the energy of its people and varieties of cultural activities. It’s one of the best cities on the island you can call home as it has great amenities and affordable housing.
SUMMERSIDE PEI: Famous for its shipbuilding history, Summerside is another popular city on the Island with a growing economy and a reserved lifestyle. It has all the best city amenities, affordable housing, less tax, and a flourishing downtown that adds the spark of liveliness to the city.
STRATFORD PEI: Stratford an outstanding city where you can live and work comfortably. With low expense transport, moderate standard and cost of living, recreational activities, and locations, it makes a great location for people looking to buy a house in Prince Edward Island.
CORNWALL PEI: Cornwall is another beautiful city on Prince Edward Island boasting an exceptional livability score and moderate cost of living. The residential real estate in the city is quite affordable and the infrastructure also makes it a wonderful place to settle and live comfortably.
KENSINGTON PEI: This makes our list of the top places to live in Prince Edward Island because it’s a good description of a place to call home. It’s a small town with affordable housing, great amenities, and a vast green environment.
Helpful home buying resources in Prince Edward Island
Access to a home buying resource in Prince Edward Island comes in handy, whether buying a condominium or house. The resource will give you more precise information like requirements, cost, tax, and so much more. Down Payment Assistance Program and CMHC SCHL are great resources to find helpful information about buying a house in Prince Edward Island.
Step 7: Make an offer on a house
Having access to a sponsored home buying resource in Saskatchewan is beneficial whether you’re buying a condo or a house. The resource will provide you with more detailed information, such as requirements, costs, and taxes, among other things. The Incentives for Homebuyers, First-Time Homebuyers’ Tax Credit and Canada.ca websites are excellent places to go for information about buying a home in Saskatchewan.
Step 8: Close on your new Prince Edward Island home
Before you pay for the house you want to buy in New Prince Edward Island, request a home inspection; after the inspection, the house’s purchase price can change depending on the finding in the house inspection. Contact your real estate lawyer as you may make a down payment and transfer the title of ownership. The entire process shouldn’t take more than 30 to 60 days.
First-Time Home Buying Resources in Prince Edward Island
If it is your first time buying a home, there are certain difficulties you will face. However, the provincial and federal governments have developed an FTHB program to make buying a house easier for first-timers. As a first-timer, you are eligible for the following:
- Down Payment Assistance Program: The Down Payment Assistance Program (DPAP) is a pilot program to assist qualified residents of Prince Edward Island, who have modest incomes, in purchasing a first home.
- First-time house buyer incentive: As a first-timer, you get an interest-free mortgage on a second loan. It covers 5% or 10% of the purchase price of your home. You can repay the government after 25 years.
Are you ready to buy a house? If yes then the next question is always how much you can afford. But affordability isn’t simply how much you have in your bank. There are several factors as described above that come into play to determine the type and price of houses you should be looking to buy. Nevertheless, the entire process of buying a house usually becomes less challenging once you have your financial and credit factors figured out.
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