Owning a home and saying goodbye to your landlords is something many of us dream about often. It can seem straightforward to save a down payment, and after you get a raise you might think you’re finally ready. Take Bob, who thought he was doing everything right. Bob’s story is very common, so read on and learn exactly why Bob was not ready when he thought he was.
At the age of 25 Bob was a hard worker and faithfully saved $250 every paycheque. After 2 years he had saved $12,500 with difficulty as he was only making $15 an hour. This left him with little money to spend on paydays. 6 months ago, Bob got a new full time job making more than $25 an hour. Feeling flush, Bob bought a new car and could easily handle the payments. Bob was excited and couldn’t wait to tell his mortgage broker about his good fortune.
With his 5% down payment and a new full time job, Bob thought he was ready to put in an offer on a $250,000 condo that he’d looked at. Thinking he’d done everything right, Bob decided to share his good news with his Toronto mortgage broker. To his surprise, the mortgage broker informed him it would be at least another 2 years before he would be able to buy a home.
Where Bob went wrong:
Credit History:
Bob’s credit score was too low due to unpaid parking tickets and his short credit history. Read my blog post on 9 ways to improve your credit score.
Closing Costs:
After all his careful planning, Bob had forgotten about the approximate $1000 in closing costs when saving for his new home.
Debt Ratio:
Lenders consider debt ratio when looking for qualifying borrowers. Bob’s car purchase and $450 payment prevented him from qualifying for another $100,000.
Work History:
Bob’s new job was not guaranteed to be 40 hours a week, and because of that he was refused by the lenders. They require a 2 year average income, and as you recall Bob had only started his new job 6 months before.
When you’re like Bob and thinking about a home purchase, contact a mortgage broker in Brampton like myself, so that you can own your dream home.
