Are you a first time home buyer or repeat buyer feeling frustrated in your price point qualification due to the new mortgage lending guidelines that created an affordability issue for most borrowers?
The general consensus in the industry is that first time home buyers are getting very discouraged due to the tight lending rules and the increasing affordability gap together with rapidly increasing home prices in peripheral markets outside the GTA that are experiencing increased demand, short supply, sellers markets and rapidly increase home values.
There will also be a cost of living, but the benefit of ownership and building your equity for long time financial success and net worth growth, far outweighs continued renting pared with saving instead. The sooner you get your foot in the door in the real estate market, the sooner you’ll start realizing that benefit – even if it means purchasing a smaller home, a condo instead of the freehold property, or a property in another more affordable market that may require commuting.
A recent article by Neil Sharma indicates that According to a report by Altus Group, the preponderant reason for the languid housing market this year has been the absence of first-time buyers—but they’ll be back soon and the market will resultantly recover. “With all the policy changes we’ve had and additional stress testing, they have knocked many first-time buyers out of the market for a while, but part of what they’re doing is saving money. They’ll be back,” said Patricia Arsenault, vice president of research and consulting services at Altus Group. “Particularly among younger renters; they’re inclined to buy homes. Because of their ability at the moment, they’re saving longer and tapping resources from parents to help them out, but they’ll be back in the short-term. There’s nothing out there that says they don’t want to own homes anymore.”
Arsenault added that, by autumn, housing sales will markedly improve. “People are saving for down payments,” she said. “Savings rates are up in Canada and that money is being used for better down payments.” The Altus Group Housing Report furthermore elucidates how instrumental first-time homebuyers are to the health of the Canadian real estate market. They account for somewhere around half of all housing sales, but, unlike years past, they have been forced to the sidelines in 2018. Given the housing market’s interconnectedness, fewer first-time buyers occlude other buyers from moving up the housing ladder. “The important role that first-time buyers play is that if I’m a repeat buyer trying to move up to something more expensive, I need somebody to buy my house,” said Arsenault. “If first-time buyers aren’t there, there’s nobody to buy my house, so they make the world go around, if you want to put it that way.”
The good news is that there are solutions if your current pre-qualification falls short of your needs and goals.
Connect with an experience mortgage broker to review these options with you:
1. Gifted funds for 20% Down Conventional Mortgage.
There are select A lenders that will still qualify borrowers under traditional non B20 guidelines, which will place you at a higher price point for qualifying. Contact an experience mortgage broker for access to those lenders.
2. Strong co-signer.
With a strong Co-Signer to help you qualify for the mortgage financing you could qualify at a much higher price point. This option will be a 4-5 year plan during which you’ll fully a program created by your broker to help you qualify by yourself at renewal. At maturity we will refinance and remove the co-singer/s off mortgage and title and original the best mortgage in your name only. Title will at closing be registered tenancy in common at 99% in your name and 1% for the co-signer to minimize future tax implication and maximize land transfer tax rebate benefits for first time buyers.
3. Alternative Lender Combination Mortgage Up To 95% LTV.
With alternative lenders the interest rate and cost of ownership will be higher. This will be a combination 1st mortgage up to 80% loan to value, and 2nd mortgage up to 95% if you qualify. With this mortgage solution you will follow a guideline and goal to qualify you for an A lender lower rate mortgage once you have grown your equity position qualify to refinance at 80% loan to value with and A lender mortgage. It will take estimated 3-5 years depending on your property and original LTV.
4. Rent to Own.
Another options that you may consider is Rent to Own. This could allow you to get into your desired home now instead of waiting years. During the term you will build equity in your home while making monthly rent payments, and at the same time you will follow the rent to own program guideline in order to qualify for the mortgage once the rent to own term is complete and you can exercise your option to purchase from the investor and take ownership and title of your home. Consult with your mortgage broker to see if you would qualify for a Rent to Own Program and time find out more about it.
5. Vendor Take Back Mortgage.
A vendor take back mortgage as part of the agreement of purchase and sale could allow you to purchase with as little down as the buyer and seller agrees to, with interest rate and terms as negotiated with the vendor. Depending your your original down payment amount and mortgage loan to value, this option will be a 3-5 year plan during which you’ll follow your mortgage brokers guideline to help you qualify for an institutional mortgage at maturity to pay out the sellers mortgage.
6. Joint Venture / Co-Ownership.
Purhcase with another like minded person that you trust, and that shares in your goals. Consult with your broker for the important ins and outs and need to know details about such a venture and qualification options under this program. You will also get independent legal advise and create a joint venture / co-ownership agreement prior to entering into this type of ownership.
7. Prepare to Qualify for an A Mortgage 2 year Plan.
If not of the above options suit your preference nor works out for your needs, then follow the custom home ownership plan your mortgage broker creates for you to help you get to the place where you qualifying for your desired home. This normally includes plans to help you increase your income, fully establish your credit and save up for the future home purchase down payment and closing cost. The timeline will depend on your personal circumstances and needs.
Contact us today if you have any questions or need assistance.
We are always at your service and ready to assist you with your mortgage financing needs!