Down Payment

Making the Best of the New Approval Rules

calendarDecember 5, 2016

peopleThe Mortgage Advisors

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With the stricter mortgage qualification rules that went into effect in October, many people won’t receive approval for as high of a mortgage as they may have in the past. Although this may dampen the search for your perfect house, there are many ways you can make the most of the new situation. The rules changed to make the mortgage qualifying process slightly more strict by insisting applicants are approved for a higher interest rate than they in fact will be responsible for paying, resulting in lower mortgage amounts being awarded.  With a smaller mortgage preapproval, your shopping list may need to be slightly trimmed down to reflect your budget. Here are two ways on how to work with the new stress test calculations on mortgage preapproval.

Wait until you grow your down payment

Under the new rules you are still eligible to put 5% down on the purchase of your house, but you won’t necessarily receive enough of a mortgage loan to purchase the house you desire. A way around this is to increase your down payment savings over time and wait until you have 20% of a down payment saved. This will remove you from the new stress test calculation eligibility and will increase your amount of mortgage loan approval. There are many ways you can save for your down payment, you just need to be committed to your cause. For instance, instead of going out for an extravagant date night, save the money you had set aside and play cards at home instead. Delay that vacation until after you move. By saving every penny you physically can and eliminating frivolous spending from your daily life, the down payment pot will rapidly grow and you will be able to put 20% down on your future house in no time at all. Patience is the key to this method. Try our Ottawa mortgage calculatorto get a better picture of how much home you can afford.

Change your wish list

If you are searching for your forever home as a first-time home buyer, you may need to trim your wish list down just a bit in order to dip your toes into the Ottawa housing market. If you cut things off your list like a finished high-end chef’s kitchen and new hardwood floors throughout, you will see your options open up for you. Buying a house that has the potential to be great with some hard work and money invested over time is the best way to become homeowners sooner rather than later.  It may be more difficult to envision yourself in a house that requires some renovations, but if you have the ability to see the potential in front of you in a house within your new budget you could be looking at your forever home at a great price. The amazing thing about doing home renovations over time is that you get to choose what colours and material are used. You have creative control over the process and can watch your dream home be slowly built around you! As long as the house has good bones, this is a smart option. Since the new approval rules make it especially difficult for first-time home buyers to buy a house, there may need to be a longer thought process involved in house shopping. But with advice from your mortgage broker you will be able to get rolling on the process when the time is right for you.
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