What are the key ingredients in helping first-time buyers to purchase a home? The obvious ones are: time, patience & handholding/nurturing. But what else is required to get a first-time purchaser to get into the real estate market in 2022?
Challenges!
- There are some challenges that are out of your control – constrained real estate supply and prices that continue to move upward (some markets more than others, but virtually every market has seen some upward movement) is obviously one of the major challenges.
- Supply and pricing issues will likely continue until some dramatic changes in the real estate market (higher interest rate, increased supply, elimination of the stress test etc.).
- Increasing house prices has certainly created access issues for many first-time purchasers. While this isn’t the only challenge, it has made it even more difficult for buyers.
- There are some challenges that are out of your control – constrained real estate supply and prices that continue to move upward (some markets more than others, but virtually every market has seen some upward movement) is obviously one of the major challenges.
For many first-time purchasers, the pricing issue has underscored the importance of having a:
Quality Down-Payment. Having a larger down-payment that will ensure that they have a better LTV% will also give them access to a larger pool of lenders.
Better credit score. Having a solid payment history and borrowing behavior will help to ensure that they can get the possible interest rate and terms from lenders. And if their credit score is low, it might require working with one of the various groups to help consumers to improve their credit score.
Debt-to-Income ratio (including GDS and TDS) The amount of debt they have relative to income—including mortgage payments – will have a direct bearing on getting the loan they desire. Every lender is different with respect to the maximum amount allowable, but TDS is often capped in the low 40%. If TDS is too high, they may need to look for less expensive property.
Work history. Proof of employment and having a stable income are factors that most banks will consider. And that might mean that your client will need to stay with an organization (rather than leave) to demonstrate stability.
Value and condition of the home. Ensuring that the purchase price is consistent with the value of the home as identified in an appraisal or valuation report. Our inhouse Real estate agent can also be a help. And that the home is in good condition relative to that price. That might mean that they can’t get the ‘home of their dreams’ initially, but it will give them an opportunity to build up equity in that home before moving to a more expensive home.
Would More Borrowers Qualify for Mortgages?
If the goal in Canada is to find ways to allow more borrowers to qualify for mortgage loans, wouldn’t the longer amortization period help them to more easily qualify? Of course, they would have to qualify for a low ratio mortgage but if they did, let’s remember that they aren’t stuck with a 35-year amortization period forever
If they can renew their mortgage and are in a place where financially they can now afford a short amortization period, borrowers are within their right to obtain the shorter period. The reality is that here in Canada, you will have to work harder to find a lender that offers a longer amortization period.
Would the longer amortization period help any of your clients to get a mortgage loan and purchase the home they desire?
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Call us at 403-253-2022 for a chat and explore your option or email [email protected]