5 Signs You’re Ready for Home Ownership

Kelly Hudson • Jul 19, 2022

As a mortgage broker, it is my job to ensure that each one of my clients is getting the best service I can provide. 


Part of this means educating as much as possible when it comes to buying a home, which is why I’ve put together a list of 5 signs that may tell you that you are ready to become a homeowner.


  1. You Can Afford the Down Payment 


You’ve finally saved up enough to make a down payment.  Depending on your situation you will need to deposit anywhere from 5-20% of the home’s price tag. You also need to make sure that you have saved money for any applicable taxes and closing costs. 


However, if you don’t quite have enough saved up on your own, but you have a family member who is willing to give you a gifted down payment to assist you, that works too.


Paying for a home goes well beyond just making your mortgage payment every month. As a homeowner you’re responsible for fixing anything and everything that may break. If you don’t have an emergency savings fund, you may end up putting yourself in debt paying for repairs or issues around the house that need to be dealt with immediately.

  • As a rule, it’s advised to have 3 months’ worth of your living expenses saved in case any emergency costs come up.


   2. You’ve Got Good Credit 


This might seem obvious, if you don’t have a good credit score, chances increase that you could be declined altogether or stuck with higher interest rates = higher mortgage payments. 


Lenders are more likely to give those with good credit a mortgage plus better interest rates. Good credit tells the lender you are unlikely to miss mortgage payments, so a less risky investment. 


If you already have good credit, you are one step closer to buying your first home. If not, start working to improve that credit score one day at a time. 


If you’ve had some credit issues in the past, it doesn’t mean you aren’t ready to be a homeowner, however, it might mean a little more planning is required! 


Most Canadians carry some debt (loans, credit cards, vehicles, student loans, etc.) you don’t have to be debt free to buy a home, but it helps. The less debts you have, the more of your income that can go towards paying the mortgage, giving you higher home buying affordability.


A co-signor can be considered here as well


   3. You’re Sick of Spending Money on Rent


As the old saying goes… you can pay your mortgage OR you can pay your landlord’s mortgage.


One of the biggest disadvantages with renting is that you’re essentially throwing away money every month – or at least, throwing it into your landlord’s wallet. 


If you’re tired of spending your hard-earned money on monthly rental payments, then buying a home may be the right decision for you. 

  • Unlike rental payments, a portion of every mortgage payment goes towards building equity in your home. 


Building equity is one of the most important benefits of owning a home. The more money you put towards your home, the closer you’ll be to owning the home outright. 


When you own your own home, you won’t have to worry about rent increases or being kicked out of your home if the landlord sells.


    4. You’ve Got Enough Income to Cover the Mortgage Payments and All the Additional Costs of Home Ownership

While no job is ever 100% secure, the longer you’re established at a certain job, the longer you’ve been practicing within a specific career, or the more years of self employment you have under your belt, the more likely your job will be seen by the lenders as “steady enough” to support home ownership.


It’s all about providing confidence to the bank/lender that you’re capable of holding down a steady job and will, in turn, be able to make your mortgage payment on time every month.


If you’re going to borrow money to buy a house, the lender wants to make sure that you can pay it back. The ideal situation is to have a permanent full-time position where you have past probation. 

  • If you rely on any inconsistent forms of income (self employed, casual, hourly etc.), having a two-year history is required.


A good rule of thumb is to keep the costs of homeownership to under a third of your gross income, leaving you with two-thirds of your income to pay for the rest your life (i.e. taxes, food, medical, household expenses, entertainment, etc.).


   5. You’ve Discussed Mortgage Financing with Me, your Mortgage Broker.


Buying your first home can be quite a process. With all the information available online, it’s hard to know where to start. While you might feel ready, there are lots of steps to take; way more than can be outlined in a simple article like this one.


I specialize in FIRST TIME HOME BUYERS! I will walk you through the mortgage process to help you buy you first home! It can be very complicated & overwhelming!

  • We work together to set a realistic home buying budget
  • I set up your mortgage PreQualification to ensure you stay on budget with what you can afford.
  • I educate you about mortgages, so you can decide which mortgage is the best fit for your situation 
  • I work with a team of realtors who specialize in First Time Home Buyers


Buying a home is both exciting and nerve wracking. My goal is to simplify and educate you about mortgage financing, so you make good decisions based on your situation. 


I specialize in Mortgage Intelligence, educating people about mortgages, how they work and what lenders are looking for. Everyone's home purchasing situation is different, so working with me will give you a better sense of what mortgage options are available based on the 4 strategic priorities that every mortgage needs to balance: 

  • lowest cost
  • lowest payment
  • maximum flexibility
  • lowest risk


The fine print in the mortgage contract can far outweigh the rate being offered. Most people are blinded by the rate, in their quest for a mortgage.


If you want to understand how mortgages work BEFORE making the biggest purchase of your life, let’s set up a time to chat.


Kelly Hudson

Mortgage Broker

604-312-5009

Kelly@KellyHudsonMortgages.com

http://www.KellyHudsonMortgages.com/

Kelly Hudson
MORTGAGE ARCHITECTS
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First Home Savings Account (FHSA) - 5 Things You Need to Know

By Kelly Hudson • 09 Apr, 2024
Canadian homebuyers face a significant challenge when it comes to accumulating the hefty down payments required to purchase homes in our increasingly expensive housing markets. According to the National Bank of Canada's housing affordability index from February 2024, the down payments needed for the median homes in cities like Toronto and Vancouver surpass $200,000. In response to this growing concern, the federal government introduced the First Home Savings Account (FHSA) on April 1, 2023, aiming to help improve the financial down payment burden on prospective homebuyers. However, while the FHSA offers promising opportunities, it's crucial for would-be buyers to understand its workings and potential risks. Here are five essential things prospective homebuyers should know before opening their own FHSA: 1. How does the FHSA work? The FHSA allows account owners to put as much as $8,000 in savings away annually, and up to $40,000 over five years. Contribution room starts growing the first year the FHSA is opened. If you don’t have the whole $8000 now – consider starting your FHSA account this year with $100. Then if/when the rest of the cash comes available you can top up the account to a maximum of $8000/year (maximum contribution $40K) That money is tax-free on the way in and on the way out, meaning any contributions can count as deductions on income tax and are not taxed when withdrawn for a down payment on a qualifying home. The FHSA is “the best of both worlds,” with funds behaving like a registered retirement savings plan (RRSP) on the way in and a tax-free savings account (TFSA) on the way out. Moreover, funds in the FHSA can grow tax-free for up to 15 years, after which they must be withdrawn or transferred to an RRSP. It's important to note that withdrawing funds for purposes other than a home purchase results in the amount being added to your taxable income for that year. 2. You don’t have to be a first-time buyer Contrary to popular belief, the FHSA is not exclusively reserved for first-time homebuyers. Eligibility extends to Canadian residents aged 18 (or 19 in some provinces) to under 71. You also must not have lived in a home owned by you OR your spouse in the year that you open the account or any of the preceding four years. This means Canadians who owned their home but sold more than five years ago, or currently own the property but don’t live there as their principal residence, are qualified to open an FHSA. That opens the account up to anyone who owns and rents out a property but also rents themselves. 3. What do you do with the money once it’s in the FHSA? Funds within the FHSA can be held in various investment vehicles, including high-interest savings accounts or securities. The choice of investments depends on individual risk tolerance and time horizon. While long-term savers might opt for stock market investments to capitalize on potential gains, those nearing their purchasing goals might prefer more conservative options like guaranteed investment certificates (GICs) or fixed-rate savings accounts. 4. Multiple accounts can work together Individuals can open multiple FHSAs across different financial institutions without exceeding annual or lifetime contribution limits. Although joint accounts aren't permitted, funds from multiple FHSAs can be pooled towards the purchase of a single home. Additionally, the FHSA can be used alongside other savings vehicles such as TFSAs and the Home Buyers' Plan (HBP), further enhancing purchasing power. Home Buyers Plan (HBP): Qualifying home buyers can withdraw up to $35,000/each from their RRSPs to assist with the purchase of an owner-occupied home . The funds are not required to be used only for the down payment, but for other purposes to assist in the purchase of a home. These funds are withdrawn, with the condition that the funds are paid back into the account over the course of 15 years (or you are taxed on the portion not being repaid into your RRSP). Please note that RRSP funds MUST be in account for 90 days BEFORE removing for down payment. A down payment is not the only thing buyers need to prepare to be financially ready for a home. Canadians should consider their “credit-worthiness,” as well, and make sure they’re paying down debt so that when they’re ready to buy and cash out their FHSA, that they will qualify for the mortgage amount they need. BLOG 8 Credit Rules You Need to Know, Before You Buy a Home BLOG 5 C’s of Credit to get a Mortgage 5. Don’t forget about the tax implications Opening an FHSA entails tax obligations, including reporting contributions and transactions in the annual tax return. A T4FHSA slip provided by the lender details these transactions, with individuals required to fill out Schedule 15 for deductible contributions. Notably, contributions to the FHSA are tax-deductible, but transfers to an RRSP are not. Individuals have the flexibility to carry forward deductions to future tax years if desired.

Understanding Debt and Its Impact on Mortgage Approval

By Kelly Hudson • 13 Mar, 2024
Securing a mortgage significantly depends on your credit score and debt load. Understanding how different types of debt affect mortgage affordability is crucial. Debt falls into two categories: secured and unsecured. Secured debt, backed by collateral like a house or car, provides lenders security in case of default. Unsecured debt, such as credit cards, lines of credit, and student loans, poses higher risk for lenders and typically carries higher interest rates. Here's how different types of debt influence your credit score and mortgage approval: Credit Cards are unsecured debt, offering revolving credit lines with interest rates based on creditworthiness. Responsible credit card usage can positively affect credit scores, but defaults or late payments can lead to higher interest rates and decreased creditworthiness. Line of Credit : Like credit cards, lines of credit are unsecured and provide borrowers access to a predetermined credit limit. Responsible use can improve credit scores, while defaults can have negative credit repercussions. Student Loans: Despite being unsecured, they can enhance credit scores if paid on time. They contribute to the debt-to-income ratio. Auto Loans: Auto loans are secured debt, with the vehicle serving as collateral. They can diversify debt portfolios and improve credit scores. Existing Mortgage Loans: Secured by the property, timely payments enhance credit scores. Missed mortgage payments raise red flags for new lenders. Maintaining a balanced mix of debt types strengthens credit scores and mortgage eligibility. However, over-borrowing can be harmful.
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