Can I Even Afford A Home Right Now?

The idea of buying a home can feel like A LOT! With stubbornly high interest rates and pricey properties, homeownership can seem far out of reach for so many. From saving for a down payment and affording monthly mortgage payments to finding a suitable property within budget, there are a number of challenges to overcome.

Fortunately, there are several “homebuyer hacks” that can make owning a home more attainable than you think. Here are three lesser-known options you may not be aware of:

1. Down Payment Assistance Programs

Navigating the down payment hurdle is crucial but there are programs that can help:

Ourboro.com: This program focuses on the GTA and parts of Southwestern Ontario. It contributes between 5% to 15% of the home's purchase price as a down payment, up to $250,000. Ourboro's share in the equity and appreciation of the home equals their initial percentage contribution compared to the owner's.

Benefits Include:

- Achieving a 20% down payment without needing mortgage insurance.

- Lowering the amount of a mortgage needed with a larger down payment.

- No interest or monthly payments to Ourboro; it's an investment in the home's future value.

- Ourboro covers their share of the land transfer tax, reducing closing costs.

Regional Municipal Programs: Many regional municipalities also offer their own down payment assistance programs, which aren’t widely advertised. I always recommend contacting your region to explore potential programs and to inquire about their scope and eligibility criteria.

2. 30-Year Amortizations

Starting August 1, 2024, first-time homebuyers purchasing a new build can opt for a 30-year amortization period on insured mortgages.

Benefits Include:

- Lower monthly mortgage payments by extending the mortgage payback period from 25 to 30 years.

- Qualifying for a higher mortgage amount, opening a broader range of housing options.

- Improved cash flow, allowing for more money to be allocated to retirement savings, home improvements, etc.

3. Flexible Lenders

Beyond the “Big 6” banks, there are a number of lenders who provide more flexible qualifications for mortgages.

TDS/GDS ratios: Understanding TDS (Total Debt Service) and GDS (Gross Debt Service) ratios is crucial. TDS includes all monthly debt payments and divides this number by the buyer’s gross monthly income. GDS specifically covers housing-related costs divided by gross monthly income.

Lenders set limits on how high these ratios can be to determine one’s qualification for a mortgage. While the traditional banks set lower limits, other lenders like Equitable Bank, sometimes allow for higher TDS/GDS ratios (e.g., 60/60).

Benefits Include:

- Qualifying for a higher mortgage amount.

- Increased buying power, enabling the purchase of more expensive properties.

- Potential for quicker qualification and fewer financial hurdles.

Income Qualification: Some lenders will also consider non-traditional income (such as bonuses, part-time or seasonal employment, self employment with a shorter track record) to help boost the amount of income shown on the mortgage application.

Bringing It All Together

While there are serious points to consider with each of these “homebuyer hacks”, by understanding and utilizing these resources, you can navigate the financial landscape more confidently and accelerate your path to owning a home.

- Start by exploring down payment assistance programs like Ourboro.com and local municipal offerings if you need to bridge the down payment gap.

- Evaluate the benefits of a 30-year amortization period to manage initial affordability versus long-term interest costs.

- Investigate lenders offering higher TDS/GDS ratios to maximize borrowing capacity and property choices.

As the world of mortgage financing becomes more diverse, it’s best to stay informed of all available options. If you have any questions, are looking into buying a home yourself or know anyone that is considering it, don’t hesitate to reach out to me. I’m happy to answer any questions or look into any homebuyer scenarios.