What does Housing Affordability Mean to Someone with Bad Credit?

What does Housing Affordability Mean to Someone with Bad Credit?
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Across Canada, each year many Canadian residents take steps toward becoming homeowners. This can be both an exciting and a somewhat stressful process. As a result there are many important issues that every potential homeowner should be know before preparing to make a huge financial commitment such as this.

One of the main deciding factors that is key to this process is understanding how affordable homes are in certain areas across the country. This goes alongside understanding if your debts are manageable. The reason this piece of information is so significant is because homeowners will be able to get a sense for whether their home will present a good future investment as well as being aware of what they can realistically afford. For individuals who have lower credit – finding a home that is within their price range as well as one that will help them improve their financial situation as appose to accumulating even more debt is crucial.

While some areas will offer different levels of affordability, it can certainly be said that some urban centers are ranked much lower on what is known as the Housing Affordability Index. For example, the bustling cities of Toronto and Vancouver are both lower on the affordability scale and present a high cost of living for many homeowners.

This affordability index can be used as an effective tool for informing buyers about the specific details they need to know to determine what size of home as well as what location might be the most suitable for them. Financially-speaking, it can help them approach this search from a more realistic mindset. For example, if the desired area they are focusing on turns out to be too expensive, then the index provides them with details about finding a less expensive area that will still meet all of their many personal lifestyle needs.

The Housing Affordability Index itself, functions as a quarterly report that measures and the ability of a family earning the median or average income and relates this to their ability to purchase a median or average-priced home. Specifically, looking at the most recent report, which was released in February 2014, there are some key developments that were reported at the end of 2013. These figures provide Canadians, who wish to become homeowners with the information they require moving forward with future home purchases.

How Does the Picture Look Across Canada?

Taking a look at these specific figures across many of the Canadian provinces will shed light on the affordability of housing across the country. Starting with the province of British Columbia, the recent report informs us that overall, this west coast province has began to see a rise in terms of affordability in certain areas. With that said, it is important to also note that the city of Vancouver still remains the most expensive Canadian city to own a home. If we shift our focus to condominium residences, we can see that Toronto follows in close second to Vancouver on the affordability scale and other home is Toronto are also very expensive.

Spanning across the provinces, house prices tend to be more reasonable across the Prairies as well as in the Atlantic provinces. However, these trends do appear to fluctuate and provide a somewhat conflicting image of the housing market, as each quarterly report is issued. It can also be noted that most markets are on the rise, however these prices still continue to respond with a certain degree of inconsistency.

What this information could suggest is that seasonal patterns are playing a role in these exact figures. For example, the slowing of the Canadian housing markets, is likely in response to the harsh winter season, particularly seen throughout the east coast. Generally-speaking, Canadian homeowners can certainly benefit by continuing to pay close attention to these changing factors as reflected on the index.

What Does This Mean to Me if I Have Bad Credit?

As a homeowner, if you are falling further in debt, it is likely that you feel the need to take steps to improve your financial stability. In this case, the housing affordability index will certainly be your friend and can help you make appropriate decisions for your current situation and for any future moves you want to make. If, for instance, you are currently residing in Toronto or Vancouver or another area of the country where house prices are high, you might want to consider downsizing to a smaller home or even moving outside of the city limits.

With a move like this, not only do you have the potential to make a profit on the sale of your home, you will also be able to find a more affordable home and/or location that can help to improve your finances. Of course, each individual will want to look at the nature of their situation and decide what will be the most appropriate course of action – however with the extra income you can make from the sale of your home and the expenses you will save from your downsizing efforts, you are likely to be in a better position to pay off a lot of your outstanding debts. Ultimately, these choice may allow you to move passed a bad credit situation and increase your overall credit rating.

Alternatively, if you are not currently a homeowner, but are looking to take this step, you are also just as likely to benefit from using the housing affordability index. Again, the index can help you identify which areas would be more affordable to you in the future. With bad credit also following you, you will want to look at paying down some debts prior to buying a home. The next step could then be to save as much money as you can for a downpayment which can help decrease your mortgage payments and the overall size of the loan.

The index report also highlights important details surrounding the mortgage process, itself and what you will need to do to qualify and obtain loan approval. Another important measure will be to start developing a plan, in terms of the timeline for when you want make this purchase. Not only is being financially prepared important, but considering various housing price trends will help influence this decision.

Overall, these indices can be extremely valuable tools that can guide us across a range of relevant situations. Whether you are buying a home or continuing to live in the same home for the time being, they can provide necessary insights with regards to the area where we are living or where we want to live. In the case of ongoing debts, it may be that your current home is contributing to these financial difficulties. Perhaps, looking to make a housing change to an area with a lower cost of living, would be a good idea.

The goal here of course, is to help make you aware of the usefulness of the Housing Affordability Index and how it can relate to various financial situations. Ultimately, based on this information, individuals will make decisions that are in the best interest of themselves and their families.

Whether downsizing, relocating or even staying in your current home is the most suitable option for you – knowledge is power and can help with many future housing and financial decisions. Overall it is valuable to know what options exist and what information is available to help make these decisions a little bit easier.



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