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How to afford your first home in Ontario

How to afford your first home in Ontario

young couple looking for a mortgage they can afford

young couple looking for a mortgage they can afford

As it is widely known, Ontario is one of the most expensive provinces to live in, second to British Columbia. According to a recent report, Milton, Mississauga, and the GTA are the three most expensive cities in all of Ontario to buy a house in 2021. Prices are high, and there are tons of first-time homebuyers struggling to make their way into the market. But what if I told you that there are still ways for you to make your dream of homeownership a reality. Well, I’m here to tell you that it’s still possible.

The Ontario housing market is still hot, but it doesn’t mean it’s impossible for you to buy your first home. There are a few things you can do to prepare and to better your chances of getting approved for a mortgage. Specifically, I’ve outlined a few important ones below. If you have questions, I’ve got answers and I’m only a phone call or text away. Don’t hesitate to contact me with your questions as they arise. I’m here to help you navigate the sometimes complicated world of mortgages without the added stress.

Determine if you are ready to buy a house

Before you begin shopping for houses, you first need to decide if now is the right time for you to buy a house. Aside from affording a mortgage, there are many additional costs to owning a house versus renting. There are legal fees, insurance costs, taxes, and much more involved when buying a house. While owning real estate is financially rewarding, it can also be expensive and require more responsibility. So, you need to decide if you are ready to take on those additional expenses and responsibilities.

Evaluate your finances

Buying a house is a big, if not the biggest, financial investment you will make in your life. So, you will need to carefully review your finances before buying your first house. These are the biggest areas of your finances you will need to evaluate before you move forward with submitting an application to get approved for a mortgage loan:

  • Save for a down payment: Depending on the value of the property you are buying; you will need to have anywhere between 5-20% of a down payment saved before you can get approved for a mortgage. Let’s break it down:
    • If you’re looking at houses that are $500,000 or less, you need a down payment of at least 5%
    • If the price range you’re looking in is between $500,000 to $999,999, you will be required to have a down payment of 5% of the first $500,000 of the purchase price as well as 10% for the portion of the purchase price above $500,000
    • If you are looking at houses above one million dollars, you will need to have a down payment that is 20% of the purchase price.

Before you move forward with a mortgage application, be sure that you have enough saved for your down payment.

  • Pay off your debts: Next to your down payment, your debts have a major impact on how much of a mortgage you can get approved for. If your debt-to-income ratio is above 43%, it is unlikely that you will be approved for a mortgage. If possible, it is best to pay down or eliminate your debt to help improve your chances of getting approved for a mortgage.
  • Review your credit score: Lenders review your credit score on a mortgage application to help decide if you are a risk to lend to. The higher your score, the better. But don’t fret if your score isn’t the highest. Increasing your credit score is easier than you may think.
  • Eliminate luxury expenses: Budget, budget, budget! If you need to save for a higher down payment or need to pay off some debts, start budgeting your money. Choose your expenses wisely and find ways to cut costs wherever possible. You would be surprised by how quickly saving just $50 a week adds up and what will do for your finances.

Look in different towns and cities

When you finally begin shopping for houses, think outside the town lines. Certain cities in Ontario are more expensive than others. It can be difficult deciding on an area to live that’s close to family, close to work, and still affordable. In this case, expand your search. Check out surrounding towns or rural communities that are a little further out of the city and compare the prices of houses. Even just an extra 15 minutes to your commute can make a difference in the price of houses.

Seek financial assistance

As a first-time homebuyer, you can qualify for a variety of programs that can help you afford a house. If you are looking for a house in Simcoe County, take a look at the Affordable Homeownership Program. Available to all of Canada, there is also the First-Time Homebuyer Incentive.

Don’t be afraid to ask for help. Many young homebuyers are now seeking financial assistance from their parents or grandparents to be able to afford a house. Whether it be a co-signer, a loan for a down payment, or a lump-sum gift of money, seeking assistance from your family is quite common.

Buy a property with income potential

Become not only a first-time homebuyer but a part-time landlord as well. When shopping for a property, look for something with income potential. As an example, if you’re buying a house, consider transforming the basement into an apartment you can rent out for income.

This might mean paying more for a house upfront but renting a portion of it out could actually pay for itself in the long run. Buying a raised bungalow and turning the basement into a 1–2-bedroom apartment could pay for the majority, if not your entire mortgage. Yes, this does mean sacrificing having your entire house to yourself, but it’s the perfect way to build your equity and get you started.

Work with an experienced mortgage broker

Before you begin shopping for houses, it’s best to meet with a mortgage broker who can walk you through your mortgage application and show you what your best options are. If you’re ready to take the next step and start the homebuying process, I can help. With my experience as a professional mortgage broker, I can help you get approved for a mortgage. With my additional background as a financial advisor, I can also provide feedback on how you can improve your mortgage application to reach your financial goals.

To get started, you can begin your mortgage application online here or you can give me a call at 705-315-0516 to book a virtual meeting. I look forward to working with you soon and helping you to buy your first home! Remember, anything is possible, even in this crazy market!


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