Having one income instead of two can certainly make it more difficult to afford a home and get approved for a mortgage.
Here are several tips you will want to keep in mind if you are looking to purchase a home on a single income.
Determine your budget
Before embarking on your home-buying journey, it’s essential to establish a realistic budget. Evaluate your current financial situation including your income, expenses, and savings to see where you stand.
Consult with a mortgage professional to determine the maximum amount you can afford to borrow based on your income and other financial obligations. You can also use tools like the CMHC Affordability Calculator to get a general idea.
Save for a down payment
Saving for a down payment is crucial when buying a home, especially on a single income. Start saving early and explore ways to accelerate your savings.
Remember, a larger down payment can help reduce your mortgage payments and save on interest costs over the long run. It can also increase your chances of getting approved.
Improve your credit score
Borrowers with higher credit scores are strong candidates for getting a mortgage on a single income. It demonstrates your creditworthiness and can positively impact the interest rate you qualify for.
To improve your credit score, pay bills on time, reduce credit card debt, and avoid new credit applications.
You should also regularly review your credit report for errors and address them promptly.
Consider alternative housing options
Purchasing a single-family home may not always be feasible on a single income, particularly in high-demand areas. Explore alternative housing options like condos or townhouses which can be more affordable. These options often provide a more manageable entry point into the housing market while still offering the benefits of homeownership.
Research affordable neighbourhoods
Research different neighbourhoods in your desired city to find areas that align with your budget. Look for up-and-coming neighbourhoods where prices may be more affordable but still show potential for future value appreciation. Consider factors such as proximity to amenities, schools, transportation, and community development plans.
Partner with a reliable real estate agent
Working with a knowledgeable and trustworthy real estate agent is invaluable, especially when buying a home on a single income. Look for an agent experienced in helping individuals navigate the challenges of the housing market on a limited budget. They can provide expert advice, guide you through the process, and negotiate on your behalf.
Explore additional sources of income
If possible, explore opportunities to increase your income through part-time work, freelance gigs, or rental income from a secondary suite in the home. This extra income can boost your affordability and help you qualify for a larger mortgage as well as handle ongoing homeownership costs.
