A first home or a new home is a great place to gain independence, raise a family or make new memories. A home is also a smart way to build your wealth by growing home equity. As most of us require a mortgage to buy a home, applying for a mortgage is one of the first and most important steps in the home buying process. When considering how to afford a house in Ottawa, there are many steps and measures you can take to not only make the home buying process easier, but to also get approved for the most you can at the best interest rate for you.
Tidy up credit card debt
The concept of having little to no credit card debt when you’re ready to purchase a home is not completely realistic. It is, however, important to know the implications of carrying credit card debt on your home purchasing process. Though you can certainly get approved for a mortgage with credit card debt, it may make the process more challenging, therefore paying off some or all of your credit card debt before you apply for a mortgage has its benefits.
The maximum mortgage you can afford will be determined by the lender using several factors. Some of the factors taken into account by lenders include the size of your down payment, your income and how much debt you may have. It’s your TDS (total debt service) which takes into account the debt you have to ensure you’re able to afford your mortgage payments at the same time as your monthly payments on your debt. Having little or no credit card debt shows the lender you can afford higher monthly housing costs.
Credit card debt will also impact your credit score. A lender will use your credit score to determine how viable you are as a borrower. Your credit card utilization is the percentage of your credit limit which you have used up and the lower you keep this percentage, the better you are situated in front of a lender. Before seeing a lender for your new home mortgage, adopt better discipline with your credit cards and after some time of lowering your high-interest debt, you’ll benefit from these choices during your upcoming home purchasing process.
Rent out some space
Subsidizing your mortgage by renting out a section of your house is a smart and disciplined way to afford your first home or afford a home at a time that such a large purchase doesn’t seem possible. Taking it a step further, some people set themselves up for financial success by renting out the main floor of their home and living in the finished basement apartment. A basement apartment isn’t for everyone but if your lifestyle is a good fit, this arrangement can be a perfect solution for those who don’t think they can carry a mortgage on their own or wish to have the comfort of a hefty contribution to their mortgage each month.
If living in a basement apartment isn’t right for you or your family, finding a new home with a basement apartment you can rent out to a tenant will be a good contribution to your mortgage and will create some peace of mind each month. Prior to jumping into a home purchase with a plan to rent out your basement, do your research to ensure the neighbourhood you’re interested in is welcome of legal basement suites.
Buy in the outskirts
Not only does buying outside of the city give you clean air and a great community feel, purchasing a house further outside of the city can be a great way to afford a house in Ottawa. Within the National Capital Region, which includes Ottawa and its surrounding rural communities, there are ample affordable home buying opportunities for buyers if they’re willing to exchange a few luxuries such as short commutes into downtown Ottawa. Properties in the surrounding rural areas of Ottawa tend to have lower property values but will often give you more space and perks for your money and can be your ticket to first time home ownership or buying that home you didn’t think you can afford.
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If you are seeking advice on buying a home in the Ottawa area, or have more questions for us, we are happy to provide you with helpful guidance and support. Email us at info@buyandsellottawa.ca or call us at 613-590-3036.