As the holiday season begins to set in and the year comes to a close, you might not be thinking about moving house right now. Not to mention that rising interest rates and tight supply across the country have you wary of making any bold moves. You’re not alone. Many homebuyers have decided to wait things out and buy a house in 2023 instead.
That can be a smart strategy, depending on your financial situation and life goals. But there’s no guarantee the market will be easier next year either. So while you’re waiting, take steps to improve your finances and better your odds at securing the home you want.
If you’re a serious and active homebuyer then you’ve been keeping tabs on the market, and interest rates in particular, and most likely locked in a pre-approval before the interest rates went up again last month. In which case, keep going with your home search, because the clock is ticking on that mortgage rate. That doesn’t mean you should settle for any old house; I’m a firm believer in finding the right one for you. What I am saying is, don’t let the holidays be an excuse to stop looking at listings or going to open houses.
If you haven’t gone through the pre-approval process then you might want to consider making this a priority. The Bank of Canada will be announcing the next interest rate increase on December 7, 2022 (source).
Remember, you can lock in a lower rate now, purchase the home, and refinance in the future if and when rates go lower.
This decision really depends on your current financial state and how the economy has affected your everyday life. If the combination of higher housing prices and increased rates has pushed your monthly payment beyond your affordability threshold, you should look toward the second half of 2023 and beyond. This is a wise strategy if you’re looking to upgrade your home. But first time homebuyers have the option to redirect your sights on homes that will fit your budget. Any step on the property ladder is better than dead-end rent!
In general, the housing market has shifted to favour homebuyers, in both housing selection and affordability (offsetting the interest rates a little). There’s less competition for the same property allowing you to have more negotiating power in the purchasing process.
If you’ve decided to delay your homebuying dream until 2023, there are action steps you can take now and in the coming months to strengthen and prepare for success.
So many buyers think they know how much they would qualify for, but they don’t. Buying a home is one of the largest transactions you will likely ever make and as such, understanding your mortgage requires more than just your income and credit score. The best thing to do is talk to a mortgage broker who will help you understand the steps you need to qualify for a loan whilst determining how much money you’ll need to save in order to get one.
Specifically for your down payment. The more you save for a down payment the more flexibility your lender has to work with you on the process. Ideally you want to save at least 20% to avoid paying so much on Canadian Mortgage and Housing Corporation (CHMC) fees.
Even small debts can harm your debt-to-income ratio. Your mortgage approval will take this into consideration. This is known as Total Debt Service Ratio (TDSR) – you monthly housing costs* and all credit obligations. These should not exceed 40% of your gross monthly household income.
It might sound counterintuitive, but paying down your smallest balance loans first can be a great way to free up some cash flow (that can then be used toward larger balances or into your savings fund). Paying off debts and reducing credit card balances can also help improve your credit score, which may open up new loan options and earn you a lower mortgage interest rate.
You can often qualify for a better loan or lower your interest rate by improving your credit score:
Importantly, if you’re planning to buy a house, try not to open any new credit accounts or take on additional loans (like a car loan). New payments will increase your debt load and decrease the amount of house you can qualify for.
Overall, if you’re looking to buy a house in 2023 the forecast is set to be a good year to buy real estate. Home prices are expected to continue coming down, while inventory should increase by spring and taper off again by fall.
“The factors that drove unprecedented housing market activity over the past two years, including record low mortgage rates, buyer preference for extra space, and the ability to work remotely, are now unwinding,” said BCREA Chief Economist Brendon Ogmundson. “As a result, there has been a significant shift in the housing market, which we anticipate will continue through 2023.” (source)
But don’t let any of those opinions or predictions influence you. If there’s a home in your desired location that checks all your ‘must haves’ then don’t miss the opportunity to make it yours. This is where your Realtor and financial team can really help you in making your dreams a reality.
From negotiations to paperwork, buying a home can get overwhelming fast. Want some inside knowledge?
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RE/MAX All Points Realty
102-321 Sixth St,
New Westminster, BC, V3L 3A7