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What if I can't afford a down payment on a house? (and realistic options to help you buy a home)

“Always pick your yard based on your Summer lifetstyle.”

~ KARL

April 2, 2018 - Karl Yeh

So you want to buy a home but don't think you can afford the down payment? In this episode, we discuss your options such as gifting, flex down payment and other down payment assistance opportunities.

 

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Transcription:

Karl Yeh:

Hi everyone and welcome to an edition of Homebuyer's School.

Today I'm joined by Troy Champ, a Mortgage Advisor with Mortgage Tree.

And today the question we're gonna answer is,

What happens if I can't afford the down payment?

So Troy, what if I [00:00:30] don't have enough money for a down payment yet I really wanna buy a house? Besides the answer, "Then don't buy a house."

Troy Champ:     Well, yeah for sure. So there is a few options out there.

Karl Yeh:           Yeah.

Troy Champ:     If you're building something brand new, it usually takes about nine months for the property to be built.

Karl Yeh:           Okay.

Troy Champ:     So often times the builders will allow you to save up that portion of the down payment during the course of construction.

Karl Yeh:           Mm-hmm (affirmative).

Troy Champ:     That's the nicest way because the builder doesn't charge you an interest, whereas, if you go and get a loan? You're paying interest to the bank.

Karl Yeh:           Yeah.

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Family gifting

Troy Champ:    

Another very common way is to get a gift from a family member.

So [00:01:00] if you have a family member, and you're lucky that way, to be able to gift you a portion of your down payments, the banks will accept that as well.

Flex down payment program

Another option would be if you qualify under the Flex Down Program, which means that the bank would allow you to use a credit source to fund the down payment.    

So you can go and get a loan, line of credit, credit card, anything facility like that and use that for a portion or all of your down payment.

Karl Yeh:          

So you can actually go apply for a credit card and use the entire amount, which I'm not sure if you'd [00:01:30] ever recommend that?

Troy Champ:     No.

Karl Yeh:           Use the entire amount to pay for your ... ?

Troy Champ:     For sure.

Karl Yeh:           Yeah.

Troy Champ:    

So in some situations, maybe a credit card's not a best option but personal loan, line of credit.

That may be a great option to get you into the housing market. Just if your inability to save up for that money.

Karl Yeh:          

When you say, "Gifting." Does that also mean other people's mortgages?

So let's say as a first time home owner ... Let's say your parents have a mortgage, could you use the equity on your parent's mortgage as a down payment?

Troy Champ:    

Well if your parents wanted to set up a line of credit, that's a common way to do that.

[00:02:00] So your parents would get another credit facility secured by their house.

So they would do a line a credit, which they call it a HELOC [00:02:05] in the industry, Home Equity Line of Credit.

And it's secured against their property and then they could use that line a credit to help you purchase your property.

Down payment assistance

Karl Yeh:          

Okay. Well let's say we don't have ... Our parents aren't able to help in any way, shape or form. Is there anywhere else I can get some down payment assistance?

Troy Champ:    

Yeah, there's a few different options out there. One is ... The most common one is Attainable Homes, where you can apply [00:02:30] through them. 

There's an income requirement that your income's not above a certain level.

Karl Yeh:           Okay.

Troy Champ:    

And they'll help out with your down payment. And they require a percentage of your sale proceeds back when you do sell the house down the road.

Karl Yeh:          

Okay. And is Attainable Homes across Canada?

Troy Champ:     It is.

Karl Yeh:          

Awesome. Anything else in terms of helping someone who can't afford the down payment?

Troy Champ:    

I think those are really the only options. You do have to have that 5%.

At one time, we were able to finance 100% of the purchase price, [00:03:00] but those programs have all been removed in Canada.

So you do have to come up with that 5% somehow.

Karl Yeh:           Awesome. Well thank you very much Troy.

Troy Champ:     You're welcome.

Karl Yeh:           Thank you very much everyone for joining us and we'll catch you next time.

Recommended watch:

So of our other videos that you may be interested in watching related to this topic are:

How much do I need for a down payment when buying a house?

How does a down payment affect your mortgage payments?

How do you calculate the down payment on a house?

 

Your turn:

Let us know if you have additional down payment or home buying questions that we can answer by submitting them in the comments section below. 

Homebuyer's School publishes new content weekly so subscribe or check back regularly for the latest information, strategies and tips from homebuying experts. 

About Troy Champ: 

Troy is one of those uniquely capable mortgage experts who has refined his craft over 17 years of experience with two of Canada’s major financial institutions and then one of the largest mortgage brokerage firms in Western Canada. He is amongst a rare group of professionals who have funded over $500 million in mortgages over his career and received many top level awards for excellence.

A hallmark of Troy’s service pledge is unparalleled availability. While many will say they provide great service, Troy proves it day in day out without question. His clients are never left waiting for answers to their enquiries. Quite simply, his clients are thrilled to work with someone who says what they do and does what they say.

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