Getting lower mortgage rates mean great saving but increased affordability is what attracts more homebuyers. Anyhow, there are few more ways available to first-time homebuyers that offer affordable housing along with financial tactics that increase our savings to the point where we feel comfortable. Here are some time-tested strategies to consider in the light of our updated present economical situation to further increase mortgage affordability:
Pre-Qualification! Know What You Can Afford
The first thing I recommend to all homebuyers to find a mortgage broker and get pre-qualified or pre-approved for a mortgage. A mortgage pre-approval helps you establish a price range and the maximum mortgage you can reasonably afford. There are many lenders who offer pre-approving facilities to their potential borrowers for a mortgage to lock-in a rate for up to 120 days.
Fixed-Rate Mortgages! Fix The Rate For A Longer Term You Afford
Consider locking in your rate for a longer period of time! If you’re uneasy about fluctuating interest rates and your ability to meet any increases, then a fixed-rate mortgage could be an ideal fit. Many lenders are open to longer fixed terms that may be up to 10 years in some cases.
Down Payment! Pay Maximum You Can Afford
Increased affordability comes from increasing the size of your down payment that results in 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 more than before which is up to $25,000 each from an RRSP (registered retirement savings plan) 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.
Debt Restructuring! Revisiting Your Current Debts
Your total debt service ratio (TDS) is what your lender will look at while considering your mortgage application to see how much of your total income is going towards various types of consumer loans, including your personal loans, credit cards, charge cards, child support, car loans and other. To increase your affordability and success that your TDS ratio is acceptable to prospective lenders, your mortgage broker can advise on restructuring your current debt (by increasing the amortization and lowering payments on your consumer loans like a car loan, etc.,).
You could get more valuable advice and practical tips to boost affordability specific to your own situation by your mortgage professional. However, first-time homebuyers need to be very careful when finding a mortgage that is several times their income. If you lose your job or get into financial difficulty, you could easily miss mortgage payments and lose your home. It is vital you are borrowing no more than you can afford to spend each month. Although the present real estate market and its soft home prices along with the low-interest rates have been making affordable house plans to further enhance the mortgage loan market about which economists believe interest rates will stay at their lowest position for the next two years or so but you should not treat this as a guarantee.