Interesting and concerning report below this week, regarding mortgage fraud in Canada.
In high-priced markets like the Vancouver and Fraser Valley areas, people have been willing to do some extreme things to secure a mortgage and buy a home. The fear of missing out (FOMO) during the pandemic era housing boom, was an emotional time period for home buyers. Some choices were made that might now be haunting some home buyers. That is because mortage rates have risen rapidly and have hit those with variable rate mortgages the hardest. Those renewing are also being impacted. Moreover, price increases reversed into price decreases in most housing segments and markets.
Stretching a personal or family budget to purchase rapidly escalating homes was seemingly quite common. However, it is usually not a good idea to over-extend or stretch oneself financially thin to secure high priced property. Living in the Metro Vancouver area is expensive enough, excluding housing.
We have relatively high prices for things like fuel (gasoline), vehicles, food, insurance, etc. When you layer on high mortgage payments, against the relatively low wages in B.C. compared to other places, this can cause financial fragility. Unexpected illness, a family emergency, job loss, divorce etc. are examples of unexpected life events that can upend peoples' financial lives. This is particularly true for people living on the financial edge, that have little wiggle room.
When working with buyer clients, I suggest they take a holistic view of their financial picture, including realistic earning projections and normalized monthly expenses. Although the article shared above discusses some home buyers that inflate or falsify their incomes, this is problematic. Although these people might be able to fool a lender, at the end of the day, they are simply fooling themselves. The math of a homeowners income statement and balance sheet is what it is. Money doesn't magically appear after buying a home, to effectively make the numbers work or bridge a financial gap. Quite the opposite. There are always unexpected maintenance and repair costs that arise and that you need an emergency fund for.
Stress related to debt payments is a real threat to one's mental and physical health, as well as household relationships. Peace of mind and the ability to sleep easy is priceless. The way to achieve those things is to maintain financial balance and buffers. Committing fraud or lying to obtain financing is full of risk. An honest assessment is the best approach instead.
Purchasing a home within your means, where you can comfortably afford it, is a more sustainable path. Living within one's means isn't always popular, but it increases the chances of you being able to comfortably carry and maintain your home. The alternative could be a homebuyer inevitably having to sell in distressed circumstances.
If you are a home buyer looking to buy an affordable home, that fits your budget, there are options in Metro Vancouver and especially the Fraser Valley. Connect with me today to discuss listings that might fit your criteria. I can help connect you with a mortgage professional that can help you understand and stay within traditional debt-service affordability ratios, that will help minimize risk to your financial health.
It is one thing to buy a home. It is quite another to be able to financially carry it for the long-term in a sustainable way.