Tips for Boosting Affordability

Lower mortgage rates have meant increased affordability for home buyers.  For first-time buyers looking for a home of their own, there are some ways to further increase mortgage affordability and stretch one’s housing dollar.  Here are some tips to consider: 

Know what you can afford.  A mortgage pre-approval helps you establish a price range and the maximum mortgage you can reasonably afford.  Many lenders will lock-in a rate for up to 120 days when pre-approving potential borrowers for a mortgage.

Revisit your current debts.  When applying for a mortgage, a lender will look at your total debt service ratio (TDS), or how much of your total income is going towards various types of debts, including car loans, credit cards, and other consumer loans.  A mortgage broker can advise on restructuring your current debt (by increasing the amortization and lowering payments on your car loan, for example), to ensure that your TDS ratio is acceptable to prospective lenders. 

Increase the size of your down payment.  Increasing the size of your down payment means a lower monthly payment.  A common way for first time buyers to come up with more cash for a down payment is to make use of the federal Home Buyers' Plan.  With this Plan, you can now withdraw up to $25,000 each from a registered retirement savings plan (RRSP) without tax penalty to buy or build a qualifying home.  Also, many lenders allow the down payment to come from a properly documented gift, and a borrowed down payment may be possible for some borrowers. 

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