Buying a home for the first time can be a daunting task. Find the right home, saving enough money to pay for all it entails – and having a poor credit score can make this process even more challenging to say the least.
Another element relevant to this situation is the soaring house prices in major Canadian cities like Toronto and Vancouver. Even with a great credit score, becoming a first-time home owner in areas like these may seem like it is far, far beyond your grasp.
When looking to buy a home the truth of the matter is that house prices in Toronto have been reported to have risen by 12% in recent months – making the average cost of a single family home in this region reaching approximately $680,000. By comparison, Vancouver homes have skyrocketed even further, making the average home well above the $1 million mark.
While this surge is speculated to be linked to first time buyers jumping at the chance to get on the property ladder, prior to the now implemented new down payment restrictions, then perhaps the housing market may experience a slowdown period later on in the year. Another factor said to be fuelling this market is lower interest rates. Again, this has also likely been a key ingredient in the race to become a home owner before interest rates creep up again.
Regardless, of the reasoning and what the future holds for house prices, the fact is that currently individuals seeking home ownership, especially those with bad credit are not in the best position to secure the financing they need – not to mention the difficulty they are likely to face when trying to save enough money for the upfront and more long-term costs.
Since many Canadians also continue to struggle with debt, a bad credit score is also likely to follow and to be their reality. With the high cost of homes in these areas, in particular potential home owners will not only likely to be relying on mortgages, they will also need to find the means to secure the funds for the upfront costs – an even higher feat it seems in a booming house market like this one.
While in the beginning it may seem overwhelming and even a little bit impossible – there are ways that you can overcome this hurdle and increase your chances of obtaining your mortgage. Ultimately you can improve your overall finances so that you can in fact enter into the property ladder, despite the high cost of homes across the country.
Improving your financial position can begin with re-building your credit score. That being said, by having a lot of unpaid debt, this can certainly be a reason behind a poorer credit situation.
Looking for ways to pay down your debt can be your first step to improving your score. Being sure to pay your bills on time and in a consistent manner is a key factor in rebuilding your score as well, as payment history is heavily weighed when your credit score is being determined.
As mentioned, these Canadian mortgage regulations now require that down payments for new mortgages on homes ranging in price from $500 000 to $999 999 will now be as high as 10% – up from 5%. This 5% will still of course apply to homes valued below $500 000. As such, first time buyers seeking home in the higher price range will need to step up their game even further to prepare for this down payment.
Particularly for individuals with bad credit, saving for your down payment is also key to your home buying/mortgage obtainment success. More specifically, the larger the down payment you can make, the lower the total balance you will be have to pay back towards your mortgage. Each monthly mortgage payment will decrease and on top of that, the amount of interest you have to pay will also be significantly lower too.
Now, if you are struggling to find methods of paying down your debts and/or saving towards your down payment – perhaps with a little creative thinking, you can come up with some effective avenues for increasing your income. Here are just a few to get you started:
Have a series of garage sales. Here you can sell some gently used items and add the money to your savings fund and/or start by using it towards your debt.
List re-sale items on sites like Kijiji and eBay. This is another opportunity to earn some extra cash and sites like these can attract a lot of potential buyers looking for these specific items.
Finding a secondary source of income in the form of an online/work-from home position can also help you earn some extra income. This employment role can be performed in your spare time and does not need to take away from your other weekly responsibilities.
When all is said and done, making your debt repayment a priority and raising your credit score will be a great place to start as you journey forward into home ownership territory.
With the recent changes to mortgage down payment values, as well as the high price tags currently associated with Canadian homes, don’t give up hope as there are alternative methods of finding the funds you need for your down payment. After all, home ownership can be in your future, you just need to remember to pay attention and to implement some key steps and strategies to help get you there.
