What to do Before Buying a Condo [Guest Post]

If you’ve decided you want to buy a condo, you’ll need to do a little bit of financial preparation before you can start looking at properties.

Here are a few things you should do to get your finances in order.

Find out your credit score

If you have good credit, you’re more likely to get a better mortgage rate. Lenders want to see that borrowers who have different types of credit (such as a car loan, line of credit, and credit cards), don’t use all of their credit, and pay their bills on time. If you have an excellent credit score, then you should qualify for the best mortgage rates. It’s easy to get your credit rating. You can contact one of the two major credit reporting agencies, Equifax or TransUnion.

Pay off high-interest debt

If you carry a balance on your credit card or have other high-interest debt, you should pay it off. Not carrying this debt will reduce your interest costs and you might even sleep better. The money you were using to pay off debt can be used for your mortgage or the additional expenses you’ll have as a homeowner, whether it be for property taxes, condo fees, or other costs.

Decide how much you can afford

Once you’ve paid down some debt, you should be able to qualify for a larger mortgage. A mortgage affordability calculator will help give you a good idea of what you can afford. While you may be able qualified for a certain amount, you shouldn’t purchase the most expensive property because there may be unforeseen expenses in the future. Condo fees will likely increase if the building needs major repairs or if maintenance costs rise.

Budget appropriately

If you’ve been renting for a long time, you’ve probably only had to pay rent and didn’t have a lot of other expenses. Now that you’re going to be a homeowner, instead of making rent payments, you’ll have to make mortgage payments. On top of that, you’ll also have condo fees, home insurance, property taxes, and sometimes energy costs (depending on the building).

Get your financial documents ready

Now that you’ve budgeted appropriately, it’s time to get all your documents in order. What you need with depend on your mortgage broker or lender. Whether you’re buying a resale property or a pre-construction condo, you may need many or all of these documents to get pre-approved: photo identification, proof of income (pay stubs and a letter of employment), proof of down payment and ability to pay closing costs (you’ll need some recent financial statements of bank and investment accounts), proof of any other assets (such as a car or cottage), and information about other debt (credit card debt or a line of credit as well as car, student, or personal loans) you may have. Your lender will check your credit (that’s why it’s best to check to make sure it’s correct) and let you know what you’re allowed to borrow.

RateHub.ca is a website that compares mortgage rates, credit cards and deposit rates with the goal to empower Canadians to search smarter and save money.