First-Time Home Buyers’ Guide for Kelowna Residents

With so many moving parts to think about, coupled with one of the largest monetary investments you’ll make in your lifetime, buying your first home is both equally exciting and daunting at the same time.

Fortunately, you’re not the first person to go through their first home buying experience, which has led to a general path that most home buyers will follow along the way.

Below we’ll go over some of those core steps you should be considering when looking to buy your first home in Kelowna.

British Columbia’s First Time Home Buyers Program

One of the first things to look into is to see if you qualify for BC’s first time home buyers program. This will allow you to take advantage of tax incentives that BC grants to a first-time home buyer.

To qualify, a buyer must pass these criteria:

  • An incentive applicant must be a Canadian citizen or permanent resident.
  • The applicant must have lived in BC for 12 consecutive months.
  • Alternatively, a first-time buyer must have filed at least two income tax returns as a BC resident in the past six years.
  • The buyer must have never previously owned or had an interest in a home elsewhere outside Canada.

Those qualified under this incentive program can get a partial or full reduction in their BC property transfer tax. The amount of the incentive will depend on the home purchase price. 

The maximum tax refund that a qualified first-time home buyer can receive is $8,000. This incentive applies to a home purchased up to $500,000.

How Much Can You Afford?

Buying your first home will tend to come with certain compromises on what your ideal home will look like and amenities it has, versus what you can afford.

With the average house prices in Kelowna reaching $830,000 and increasing, it’s more important than ever to be realistic with your budget.

Experts recommend that no more than 30-32% of your gross annual income should be put towards your mortgage expenses.

To figure out your budget, it’s important to first look into the following:

  • Total household income after tax
  • Monthly household expenses
  • Potential areas on cutting household expenses
  • Bank savings

Once you have a general idea of your budget, it’s worth playing around with a mortgage calculator to get a better feel for what you can potentially afford.

Down Payment

Figuring out your budget will help you decide how much of a down payment you can afford for your home purchase. The down payment amount that lenders require varies depending on the purchase price.

Typically, 5% of the purchase price is the minimum down payment for homes priced at $500,000 or less.

If you’re looking at buying a home that costs more than $500,000, the minimum of 5% down applies for the first $500,000, and the remaining portion of the purchase price requires at least 10%. This down payment calculator will help make those calculations easy for you.

With the Governments First-Time Home Buyer Incentive (FTHBI) you’ll have the opportunity to take advantage of their shared-equity program which contributes between 5%-10% to your down payment as a first time buyer.

Mortgage Options

First-time home buyers have several types of mortgages to choose from. Your choices include: fixed and variable rate mortgage, convertible mortgage, closed and open mortgages.

A five-year fixed-rate mortgage, however, is generally regarded as a good choice for first-time home buyers, as its payments are predictable and more manageable.

Since everyone’s home buying situation is different, you’ll receive more personalized advice from a Kelowna mortgage broker.

Getting a Mortgage Pre-Qualified

When you’re ready to start looking at houses to buy, it’s highly recommended to get pre-qualified for a mortgage first.

Getting pre-qualified means you have the lenders commitment to loan you the money for your home, which gives you peace of mind knowing how much you can afford for your new home, and better negotiating power.

To get pre-qualified, a lender will examine your gross debt service ratio comparing your housing costs versus your monthly pre-tax income. Another lender basis is your total debt service ratio comparing your housing costs and debt payments with your monthly pre-tax income.

Consider linking up with a mortgage broker in Kelowna who has experience with first-time home buyers.

It doesn’t cost you anything, and they’ll have a deeper understanding about the various mortgage products available to you and access to multiple lenders where they can negotiate the best deals for you.

If you ever have any questions about getting pre-qualified or wish to start the process of getting a mortgage pre-qualification, please feel free to contact me anytime.

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