Real Estate

Looking good advice to buy my first house

  • Last Updated:
  • Jul 14th, 2020 1:35 am
[OP]
Newbie
Jul 11, 2020
2 posts
1 upvote

Looking good advice to buy my first house

Hi everyone,

First of all, I want to apologize for the long post.

I am currently renting, and I would like to buy a house, this is my situation:

1) I have been working as a technician for an IT company for the past 20 months.

2) My yearly wage is 50K + commissions.
I can earn roughly 30k through the commissions but currently due to the pandemic I have been earning my base salary for the past few months.

3) I am currently carrying a debt of 13k on my CC at 0% interest for a few more months.

4) My student loan debt is less than 5k and I have 4 more years to pay it in full.

5) My car broke down. It was a used car, and it was not worth to spend more money on it.
I made a bad choice when I asked for the help of one of my friend, supposedly a car genius, when I bought it.
I lost thousands of dollars while trying to fix the vehicle and in the process I also lost the friend :(
-------------
Now let me introduce the good parts, I hope :)

5) I am very frugal and I have saved 60K in my TFSA account.

6) My credit score is pretty high and was around 720, but is now 815, maybe because I always paid my bill in time and I never missed a payment.


My questions are :

a) How much mortgage do you think I can get from a bank or mortgage institute?

a.1 ) I have been working for my company for less than 2 years and I was reading that usually banks wants at least 2 years,of employment with your current employer.
Will the banks enforce this rule, especially now in this current economic situation?

b) I am looking for a house, not a condo or a townhouse because I want to avoid the maintenance fee, and I am planning to spend between 300k and 350k, and I am looking to buy in Brantford or St. Catherine or the areas around them.

c) I will need a car and I had a terrible experience with a used car and I prefer to buy a new car this time around.
I did some research online and it looks like you need at least to spend $240 bi-weekly at 1% for 60 months, no money down and no payments for the first 3 or 4 months.
How will the decision to buy a car impact a mortgage?
c.1) Otherwise I researched to buy a pre-certified car, such as a 2013 SUV for 9k or 10k.
In this case, I will the choice to either pay it in full or to get financing at $150 a month, and will it impact a mortgage application?

d) As for the CC debt, I am trying to figure out what's best.
It will be best to pay the debt in full but reduce drastically my downpayment or pay only a percentage or keep the debt and once the 0% offer is up tranfer the debt on to another CC for 6 or 12 months with a balance transfer at a good rate.
Will this last decision (balance transfer) be negatively impacting my chance to get a mortgage? What is the weight given to my student loan debt?

Thank you for your time and consideration, and if I can get a professional opinion on what my future financial strategies should be it would be great.
12 replies
Deal Addict
Apr 5, 2017
1357 posts
1212 upvotes
Edmonton, AB
House has a lot of costs. Pay things off to reduce debt load first. That, and taking out a car loan and changing up employment will highly impact approval.

With everything going on, settle the things you have on your plate right now while saving as much as you can, to put you in the best position possible in 6-12 months from now, while keeping an eye on real estate and learning as much as you can over the remainder of 2020, see how things go in a post-COVID world, etc.
Deal Addict
Sep 6, 2017
4490 posts
2976 upvotes
For a car you can get a new 2020 Mitsubishi mirage for cheap if you need to travel.
Deal Addict
Mar 2, 2017
3245 posts
6213 upvotes
Toronto/Markham
My only advice is do not buy a new car in your situation. A used Toyota for 10k or less will serve you just fine for years to come.
RE Broker
Deal Fanatic
Jan 15, 2017
5232 posts
5273 upvotes
Ottawa
In general, mortgage affordability is based on 2 ratios - your total housing costs as a percentage of your income and your total debt as a percentage of your income.

Your total housing costs generally cannot exceed 35% of your total monthly income. This includes your monthly mortgage payment, property tax and heat when buying a freehold house.

Your total debt costs include your housing costs and all other debts and generally cannot exceed 42% of your monthly income.

This means to qualify for the maximum mortgage amount, your personal debt obligations like car payments, credit cards and student loan payments should be less than 7% of your monthly income. If your personal debt obligations are say 15% of your monthly income, your mortgage ratio will be reduced to 27% of your monthly income. If you have no personal debt, the maximum mortgage is still 35% of your total income.
Jr. Member
Nov 23, 2014
172 posts
39 upvotes
East York, ON
Pay off all your credit card debit and use your TSFA.
Just get a used car crappy one for 2-4k$. You can reevaluate once you buy the house.
Go try to pre qualify to see what you can buy and how much deposit you need.

Almost always all interest paying debt should be paid off first before investing in TSFA.

Good luck
Banned
Jun 1, 2017
513 posts
470 upvotes
If the price is keeping rising like now, you would not be able to buy any more or you have to pay much more.
Member
Jun 1, 2019
251 posts
334 upvotes
jconstantine wrote:
b) I am looking for a house, not a condo or a townhouse because I want to avoid the maintenance fee, and I am planning to spend between 300k and 350k, and I am looking to buy in Brantford or St. Catherine or the areas around them.
Under 350K in Niagara, for a house, will only get you a very small fixer-upper, and you will likely be competing in multiple offers.
Full Service Realtor
Niagara / Hamilton-Burlington
Sr. Member
May 31, 2017
550 posts
787 upvotes
Keep renting and figure out how to maximize the returns on your TFSA...pay off other debt. Keep investing 15% towards retirement...maybe 20% if you want to rent in retirement instead of buy. Be wary of any mortgage that goes to 35% of your income...unless you have a bunch of anticipated income growth I think that's a level that could leave you house rich and cash poor even with all other debt paid off. I'd love to see how someone breaks down a 35% of income mortgage budget on a $50K income...hope you enjoy reading at the library for entertainment, have a bus pass and enjoy eating lots of noodles for dinner.
[OP]
Newbie
Jul 11, 2020
2 posts
1 upvote
Hi all,

Thank you very much for your answers, I really appreciate it, this is a great community.

From your answers, I can say:

1) I don't have 60k, but 60k minus the 13k of the CC and minus the car ( so 47k - car)

2) For the car, I have 3 options :

a) buy a really cheap car ( I have done that, I am still regretting it)
b) looking for a good used car 9-10 k (Toyota , Madza etc)
c) waiting until I buy the house

3) for the house:
There are some good houses, around 1,000 Sqft, 3 rooms + 1 bath, and backyard for 310K, and I understand is not a super duper batcave, but much better than renting.
3a) how can I calculate the price of the property tax and heating cost?

-----------

4)And....the 1M dollar question: ( please fetch your crystal ball)

How will be the market between now and , lets say the end of the year? When the CERB and the other federal stimulus will be gone?

Lots of people haven't experienced any issue with the Covid-19, and they just moved from the office to their home and still got their 75K, 120K, 200K + some of them actually, having the money to buy houses and start renting them, and making a good profit.

Meanwhile people lost their jobs, and maybe they can't afford their mortgage, and with a second wave, everything will be uncertain.

In my case, I am lucky to still have a job, even without the commission, hoping things will improve .

What is the silver lining ? I will be consumer debt free before even applying for a mortgage. As for the car I don't know right now. I'm just afraid that if I wait too much, the price of the houses will skyrocket and it will be unaffordable for me to buy a house.
Deal Fanatic
Jan 15, 2017
5232 posts
5273 upvotes
Ottawa
jconstantine wrote:
3a) how can I calculate the price of the property tax and heating cost?
....
Go the web page of the city you are hoping to live in and look under taxes and you will find the property tax rate. For Brantford (https://www.brantford.ca/en/living-here ... -Rates.pdf), the property tax rate for residential is 1.302477%. This means on a $310K house purchase you can expect an annual property tax bill of about $310,000 x 0.01302477 = $4037 or $336 a month. Heat depends on location and size of home - at 1000 sq feet estimate about $100 a month.
Deal Addict
May 13, 2015
1295 posts
1728 upvotes
Dartmouth, NS
I think that housing prices are going to come down across most of Canada, so I would wait to buy... especially in Ontario.

Also, have you considered contributing to your RRSP? Put some money in, get a tax refund, and then pull the money out with the home buyers plan for your down payment.

With everything happening with COVID... you might want to be more mobile and flexible. Who knows what's going to happen next. I wouldn't tie yourself to a house if you don't have to. Rent, save, and re-evaluate in a year or two.
Newbie
Jun 23, 2020
2 posts
4 upvotes
Check your RRSP contribution limit for 2019 tax year on you Notice of Assessment and put in a RRSP account. You can withdraw up to $35,000 tax free under the home buyers plan. You will also get a tax credit for your contributions when filing 2020 tax returns.

Get a good mortgage advisor and go through the pre approval process. They help determine how much mortgage you can get based on your pay and debt history. Constantly check realtor.ca to get better understanding of the area you want to buy in.

Nobody knows how the housing market will fair in the next six months to one year.

Wish you the best.

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