With housing prices holding steady at a fairly high rate, it can be especially intimidating for someone new to the real estate market to consider buying their first home. Luckily there are a few options for those with no credit or history in the real estate world, and they extend beyond the bank of mom and dad!
Top options for buying your first home
At ALLinREALTY, we’re real estate experts that view every property we have on offer from an investment perspective. That means whether you’re buying to rent, re-sell, or live in your home purchase is always going to be one of your life’s larges investments. For preconstruction opportunities in Burlington and Greater Toronto through Niagara, contact us!
Although everyone wants to be able to enter the housing market in a position to put 20% down with a mortgage that would get them their dreamhouse, that’s often not a realistic starting point. People who are new to the country or just haven’t had the chance to build credit and equity are often at a disadvantage when it comes to buying their first house.
Make it a family affair
If you don’t have the funds for a down payment on your own, consider asking your family to jump in and help you out. In Canada there is a significant tax savings if you can put down a 20% down payment, so it’s worth trying to borrow some money from your family in order to have enough.
Get a co-signer
Someone new to the real estate market likely doesn’t have the credit score to get them a decent mortgage. Seeking out a trusted co-signer or guarantor can help you secure a higher mortgage and get into a home faster. When looking for a co-signer you’ll want to ensure that you choose someone that you can trust, and who can trust you since this is a very significant legal commitment.
Buy what is affordable
Some tips suggest you can’t afford a home if you’re seeking out family help. “Affordable” here further means that you should buy what you can comfortably carry in monthly costs. Being house poor is not fun, and the shine and pride of living in a home you can’t afford to maintain makes for anxiety that can be avoided. With interest rates at all time lows, however, carrying a home can be advantageous versus renting.
Apply for a high-interest loan
High interest loans are often easier to get with little to no collateral or credit history, making them a good option for those looking to buy their first home. By providing proof of your employment history, bank account and driver’s license you may be able to secure one of these loans that would allow you to access it within 48 hours. The drawback to a high interest loan is that, true to the name, the interest rate is often extremely high and can be a significant barrier to many borrowers. For someone with high income and who is on their way to restoring a stronger credit profile, and high interest loan may be what bridges you to better financing options in future.
Seek out seller financing
Some real estate companies offer their own financing at competitive rates to the bank and with flexible payment options. If you’re not able to secure a bank mortgage, seller financing might be an option to help you get started in the real estate market.
The benefit to seller financing is that it can help you improve or build credit, but it also comes with the option to apply for a traditional bank mortgage down the line.
Although you may be looking for a 3- or 4-bedroom house, applying for a mortgage to buy a 2-bedroom condo might give you an opportunity to get into the housing market at a level that you can get approval for. From there you’ll be able to work your way up into a home that suits your needs better. What’s more, “over buying” a property with more room than you need makes for extra work – from everyday cleaning to property maintenance.
Time to build your credit history
If none of these options will work for your situation, you might just have to focus on building your credit history for some time before you try to buy a home. When you sign up for a credit card or take out a loan, use them consistently and pay your bills on time they can help you to establish good credit.
Breaking into the real estate market can be tough with little to no credit history, and while there are some ways to buy a home, it may come down to waiting until the time is right.