So, you're thinking about buying a house? Before you jump into anything, you need to consider some important factors. One of the most crucial things to think about is how much money you have available for the purchase. This is what's known as your "buying power" or “purchasing power” and it depends on various factors like your income, expenses, and financial obligations.

But don't worry, if you think you may not have that strong of a buying power, there are some things you can do to help you make your dream of owning a house a reality.

Improve your credit score

Your credit score is one of the most critical factors that affect your purchasing power when buying property. A higher credit score can increase the amount of money you're able to borrow and can also help you secure better interest rates. To improve your credit score, make sure you pay your bills on time, keep your credit card balances low, and avoid applying for new credit unless necessary.

Save for a larger down payment

A larger down payment can increase your purchasing power when buying a house. A down payment is the amount of money you put down upfront when purchasing a home, and it can vary depending on the type of mortgage you're applying for. The more money you have saved for a down payment, the less you'll need to borrow, which can lower your monthly mortgage payments and overall interest costs.

Keep your debt ratios low 

When it comes to buying a house, it's not just about how much money you make, but also how much debt you have. That's where the Total Debt Service (TDS) and Gross Debt Service (GDS) ratios come in. These ratios help determine how much of your income is being used to pay off debts, including mortgage payments, property taxes, and other expenses related to homeownership. By keeping your ratios under 44% and 39%, respectively, you’ll have a better chance at getting approved for a mortgage and getting a better rate. 

Shop around for the best mortgage rates

Different lenders offer different mortgage rates, so it's essential to shop around and compare rates to find the best deal. A lower interest rate can help you save money over the life of your mortgage, increasing your purchasing power. You can also consider working with a mortgage agent at Pine who can help you compare rates and find the best loan options for your specific financial situation.

Consider getting a guarantor or co-borrower

Another option to consider is getting a guarantor or co-borrower to support your mortgage application. A guarantor is someone who promises to make the mortgage payments if you are unable to do so, whereas a co-borrower is a joint borrower who shares the financial responsibility with you. Both options can increase your chances of getting approved for a mortgage and help you qualify for a larger loan amount. However, it's essential to choose someone who has a good credit score and stable income, as their financial history will also be taken into consideration by lenders. If you're considering either of these options, it's important to have an open and honest conversation with your potential guarantor or co-borrower and seek legal advice to ensure that everyone understands their obligations and rights.

Look for homes with hidden opportunities

Not every seller makes cosmetic modifications or even cleans the space well before trying to sell a home. Without visual appeal, these homes may not generate the same interest or buyer competition as better-maintained or recently updated homes, and may sell for a lower price. This gives you more leverage to negotiate a lower purchase price and get the best bang for your buck. If you choose to upgrade the home later with key renovations, you could later sell for a much higher return.

Find a motivated seller

Some sellers need to sell quickly for a variety of reasons. They might be closing soon on a new home, relocating, or running out of funds to afford their home. Regardless of the reason, motivated sellers may be more open to negotiating the price to sell the home quickly giving you the upper hand.

Consider multi-family or multi-unit homes

With a multi-family home, you can live in one unit, then rent the additional unit or units, to tenants for income that can be applied to your monthly mortgage payment. Any repairs or new installations you make to your rental unit may also be tax deductible offering you additional income for your mortgage.

At the end of the day, increasing your purchasing power when buying a home is possible if you plan ahead. By improving your credit score, saving for a larger down payment, lowering your debt ratios, shopping around for the best mortgage rates, and looking for optimal buying opportunities you can save thousands of dollars and bolster your purchasing power.

And if you're ready to get started on your home buying journey, connect with one of Pine's mortgage agents and we'll be happy to work with you to secure the best options for your finances and future