Three of Canada’s leading banks have released reports based on September’s home sales and price data, and they have all indicate the housing market will likely slow next year. What does this mean for buyers who are still thinking about buying? It’s actually good news. The reduced demand should keep prices from increasing.
Calgary Mortgages: Start Planning Now!
There are a number of steps you can take to get started well in advance. Calculate your budget, get debt under control, and research the different types of mortgages available. If you are a first time homebuyer or feel overwhelmed by all the choices on the market, a mortgage broker can help you start planning. With a few common sense steps and the right advice, you can put yourself in the driver’s seat and avoid disappointments along the way.
At Mortgages by Candice, we suggest taking some preliminary steps before you apply for pre-approval. Read our guide, Five Crucial Steps Before Applying For Mortgage Pre-Approval for more information.
Determine your monthly budget. Lenders assess your eligibility for Calgary mortgages by using two calculations: the Gross Debt Service Ratio (GDS) and the Total Debt Service Ratio (TDS). The GDS adds up your mortgage (principal and interest), heating expenses, mortgage insurance (if required), and homeowners’ association fees and determines how it compares with your gross monthly income. The TDS is similar, but it also includes your monthly debt load (housing costs, credit card payments, car loans, etc.). Acceptable numbers vary, depending on the lender, but they prefer to see a GDS around 35 per cent and a TDS of 42 per cent or less.
Remember, these ratios are just guidelines, so if you have a small down payment or a lower credit rating, the amount you qualify for can vary. And, just because you can afford a certain mortgage amount, that doesn’t mean you have to find a house that stretches your budget to its limits. If you are able to take a smaller mortgage, you will be better preferred for life’s little surprises, and you will have more freedom to pursue other financial goals.
Before you start investigating Calgary mortgages, it’s a good idea to do what you can do reduce your debt. You don’t have to have everything paid off, but it is a good idea to pay down your credit cards to 50 per cent or less. This will improve your TDS and show lenders that you know how to use credit wisely.
Talk to a mortgage broker to learn more about different types of mortgages available and determine what best meets your needs. With a fixed rate mortgage, interest charges remain the same for the term of the loan. You will know exactly what your mortgage payment will be each month until it is paid off. With a variable rate mortgage, the rate will adjust along with the lender’s prime rate. Typically, your payment will stay the same, but the amounts going toward principle and interest will fluctuate. If there is a significant change in the prime lending rate, your payment could increase.
Planning to buy a home will help you be better prepared when you apply for pre-approval and begin house hunting. Many less experienced homebuyers make common mistakes that jeopardize their pre-approval. To help you stay on track, Mortgages by Candice offers 10 Ways To Avoid Losing Your Mortgage Pre-Approval and Your Dream Home.
Saving Your Down Payment
With home ownership as your goal, saving your down payment just requires a little planning. We’ve already discussed the need to pay down debts, but you might consider combining them. Mortgages by Candice can assist you with debt consolidation and other services to help you save.
Setting aside a large amount of money can be intimidating, but when you are motivated with a big payoff, like owning a home, it can be done by following a few simple steps:
- Set a time frame.
- Trim your budget. Since you are working toward a goal for a limited time, you might be able to cut down on entertainment expenses, for example, for a few months.
- Open a savings account to keep your down payment separate from your spending money (and earn some interest in the process!)
- Calculate weekly goals. Smaller goals make the big dream more manageable.
- Monitor expenses. If you have a smartphone, there are many apps available that can help. This step is crucial to staying on track.
A slowing real estate market means you have time to plan ahead and get ready without worrying about prices going up before you are even ready to consider Calgary mortgages. With some budgeting, research, saving, and the guidance of an experienced local broker, you can turn your dreams of homeownership into reality. To learn more, contact Mortgages by Candice today!