During your residency, you spend many hours studying, working long shifts, and caring for your patients. As the next chapter of your career takes shape, a new dream is likely starting to take shape. Buying a house, for example.
Are you thinking about becoming a homeowner, but don’t know where to start? Here are four questions to check if you are financially ready.
1. What is the state of my finances?
It is possible to buy a house during your residency, but your financial situation must be good. Most residents have significant student loan debt and earn modest salaries. Lenders will therefore study your credit reports to measure the credit risk you represent and determine the type of loan and the rate they can offer you. If your credit history is poor, now is the time to improve your score. Even if your credit limits are high, avoid getting into debt and remember to make all your payments on time. Without exception.
Then think about your down payment. First-time home buyers have several options available to them for saving, including the tax-free savings account for the purchase of a first home (CELIAPP) and the RRSP. However, accumulating the money needed for a down payment can take a long time, so it’s best to start monitoring your spending and putting money aside each month.
2. How much does a house cost?
People buying their first home are usually surprised by the magnitude of the hidden costs. In addition to the mortgage, down payment and closing costs, there are monthly insurance fees to pay if your down payment does not reach 20% of the value of your property. Not to mention utilities (like electricity), homeowner’s insurance, maintenance and property taxes. In total, these amounts can be much more than you initially thought you would pay each month. It’s no longer as simple as paying a fixed rent each month.
3. What are my long-term life plans?
Your long-term personal and professional plans can also influence your decisions. Remember that your income will increase after residency. You will therefore have more options than at the moment in terms of price, size and type of house you want. Do you intend to stay in the same city to practice after your residency? If you’re planning to move elsewhere, it may be best to wait before purchasing a home to maintain some flexibility.
On a personal level, now. Do you want children? Will there be two of you working? Do you or your partner plan to return to school? These questions can help you determine your budget, the size of the home you want, and the best mortgage for your situation.
4. How will I handle unforeseen events?
To find out if you can afford a house, you can try the monthly payments test.
Lenders assume the purchase is affordable if housing costs do not exceed 32% of the household’s annual pre-tax income and total housing costs and payments on other debts do not exceed 40%. of gross income. Start by seeing how things work out if you put into your savings account the equivalent of the monthly mortgage payment you estimate you will have to make each month. Are you struggling to make ends meet? Are you in the red? Can you maintain the lifestyle you love?
Before you buy, check whether you can meet your new financial obligations. This will help you determine what mortgage payments you can afford, prioritize your spending, and make the transition smooth.
Related articles :
First-time home buyers: beware of costs that could blow your budget
Buying a condominium 101: 7 questions to ask yourself before buying a condominium
This article is intended to provide general information only and is not intended to provide legal, financial or other professional advice. Please consult a professional advisor regarding your particular situation. The information presented is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be considered an exhaustive analysis of the subjects discussed. The opinions expressed reflect the judgment of the authors as of the date of publication and are subject to change. Royal Bank of Canada and its entities do not promote, either explicitly or implicitly, the advice, opinions, information, products or services of third parties.
2023-09-29 19:56:35
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