I won’t pretend that the answer is a resounding yes across the board. I know that the circumstances everyone faces are different. The sacrifices needed will vary and the drive to see your dreams through may waver. But I adamantly insist that it is possible to buy a house on minimum wage. While the world has been coping with the Covid-19 pandemic for most of the last year, I have gone from being $22,000 in debt to owning my first home! I will go into much greater detail in future posts (this post here!) but I’ll start with the basics that got me where I am today.
I’ve always been good at paying my bills on time, and although I had some hiccups in the past, they’ve since dropped off my credit report. I use Credit Karma and Borrowell to see weekly updates on my Transunion and Equifax credit scores, respectively.
I knew that I had to deal with my debt before a bank would give me a mortgage. Debt ratios are crucial in qualifying for a mortgage, but the gist is get that debt as low as possible! My family and I made some big sacrifices in order to funnel every extra penny towards my credit cards.
Basically, a mortgage lender wants to know that your income is likely to continue at or above the current level for the long term. I waited until I had been in the same full-time position for over a year before applying for a mortgage. I was lucky enough to remain employed during pandemic shutdowns. Only certain types of income count in the eyes of a lender, employment income being the most common.
While my mortgage lender did not require my tax info, I had two reasons to take care of them. First, a refund would have helped even more in my debt repayment quest. And second, my recent Notice of Assessment was one of the many requirements for my down payment loan.
Nova Scotia Housing offers a first-time home buyers Down Payment Assistance Program, which is a 0% interest loan of 5% for a down payment. I could have saved for a down payment and tried to find a lender who who could work with my high debt load. Instead I made my financial situation more appealing by reducing my debt and used this program. There were a lot of hoops for this one, but I diligently checked all the boxes before submitting my application. I was approved with no trouble. Learn more about it here.
Even if your down payment is covered, there are still costs you will have to pay throughout the process. There was the home inspection and the deposit ($1000 that later was applied to the closing costs) that came up within the first few weeks. On closing day there were legal fees, tax adjustment, and oil adjustment paid to the lawyer. My moving expenses were pretty reasonable. ($100 in Chinese food – thanks family!). Other costs you could face are land transfer tax (between 0.5% and 1.5% of the purchase price depending on county) and deposits for utilities. Of course some homes may need work before you can move in as well. I was not prepared to shell out nearly $3000. It was a stretch but having a long closing period helped me earn what I needed in time.
Knowing the market
I put this so far down the list because this is just due diligence. When my home came on the market I believed it was a great deal, because I had been looking in my area for 3 years and there was nothing like it at this price point in the hot pandemic market. I was looking for a 3+ bedroom, move in ready home in a central location for under $150,000, but only because I was familiar with every house that had hit the market did I know what a gem this place was when I saw it. I checked viewpoint.ca regularly and mentally weighed price and features of every house that was remotely feasible to be knowledgeable when it came time to get serious.
Building a team
There are a number of professionals you will need to work with in order to complete a home purchase. The most important I believe is your mortgage lender. This could be a bank or a broker, and I encourage you explore multiple options, but look specifically for someone who is familiar with mortgage products that meet your needs. Next would be a real estate agent. I chose someone who has been doing it for a long time in my area, and who again understood my specific needs.
Next you will also need a lawyer. As a first-time homebuyer I appreciated my lawyer’s patience in explaining things I didn’t understand, but also how efficiently his paralegal worked, and the fact that they stayed after hours to close my house on time. Also, if you chose to use the housing program, you will work with a case worker in their local office. All of these people coordinate with each other and play their own part in the transaction.
There is a lot more to say about the process of buying a home on a low income, and in time I hope to break down each of these steps in greater detail. I’d love to hear from you with any questions, topics for future posts, or success stories you’d like to share. In the interest of keeping this blog a productive space, I will not address “I can’ts” because no one will ever accomplish anything if they don’t believe they can.