Recent interest rate hikes for the average homebuyer equates to them needing a higher annual income to qualify for the same mortgage amount they did a mere six months ago. A typical home buyer with a $100,000 household income at the beginning of the year would qualify for around a $525,000 purchase with a 20% down-payment. Right now that amount has dropped down to a purchase of $450,000 with increased interest rates and qualification rates.
So what can a new homebuyer do? We spoke with veteran Calgary real estate experts May Davidson of The Group at Re/Max First and Diana Dorais of Mortgage Alliance.
DIANA ADVISES TO:
Put more money down. Cut down on discretionary spending or ask your folks for help with a gifted down payment. Take money from your savings, investments or RRSP’s. Put less money down. Insured high ratio mortgages typically carry a lower interest rate vs a higher rate conventional mortgage. This can mean that you qualify for a mortgaged amount with the lower monthly payments.
Look at government subsidies, and incentives for homebuyers. You can find details at www.cmhc schl.gc.ca.
Improve your credit score. A higher credit score is easier to qualify with, and can sometimes get you a better rate.
Apply for a variable rate vs the higher fixed rate (higher qualification rate for fixed rates).
Take a longer amortization period. Amortizing your mortgage over a longer period will reduce your monthly payments and allow you to qualify for a higher mortgage amount
Ask your parents to be a Co-Applicant on your mortgage.
Minimize your overall debt. If you want to go out and buy a fancy new car then do it after your home purchase. It’s much smarter to invest in appreciating assets than depreciating assets.
MAY ADVISES HER CLIENTS TO:
Buy more affordably. You should have the intent of working your way up in housing, not starting with your dream home.
Put a little sweat equity into it. Buy something with “good bones” and a smart layout. You can always paint yourself, replace cabinet doors, add a garage or develop the basement later.
Buy with someone else. Pick carefully and make sure it’s a good fit, but buying your first home with
Someone else can put you into homeownership much earlier than if you wait to do it on your own.
Look for the deals. A good real estate agent can advise you on where and how to find good value.
With any of these, talk to your accountant, financial advisor, mortgage broker and real estate agent first to make sure these things are done properly and fall under the rules of the CRA and your chosen lender.