One of the biggest decisions that we often make in life is buying a home. An added consideration to make under the umbrella of this topic includes whether it is best to build a home or buy a previously owned home. Really, a key component of whether either is a more suitable option often comes down to the affordability factor.
I have known many individuals who have gone either route and have both ended up satisfied with their decision. That being said, it seems to all come down to what is best for your personal financial situation and lifestyle needs. Taking a look at both sides of the story -so to speak, will hopefully give you some more insight into which avenue may be more feasible for your current situation.
Building: Pros and Cons
Pro: First off, building your own home means that you can be involved in all aspects of the design and the specifications. You can also have some say in where you build and choose the proper location and sized lot, etc.
Con: On the downside, you will have to watch for out for the costs associated with this type of ‘project’ as they can certainly add up quickly. So keeping a lid on the financial expenses is key to the success of this option. Sometimes, if construction takes longer than expected you will have added costs that exceed your initial budget.
Overall, building a new home can be more expensive and sometimes this can pose problematic for individuals with poor credit. What is often classified as a more stressful homeownership decision, can also be made more difficult if you have trouble obtaining the proper financing.
Buying: Pros and Cons
Pro: As it would appear the majority of potential home owners opt for buying an existing home versus building a new one. Typically, it would appear that the leading upside to this option is that it can be less stressful, in terms of livability, the appliances and the living spaces are already set up and ready to go. Additionally, the current housing market may mean you can find a house in the location you want as well as one that aligns with your budget and your style.
Con: While you may have less stress because you don’t have to plan out every aspect of the home, as it is already layer out for you -sometimes this can lead to future remodelling or renovation costs. If it is an older home you may find you need to completely replace roofs, plumbing, furnaces, etc. at some point and these costs can certainly add up too.
Overall, there are often hidden costs of both building and buying, however this option is often referred to as the least expenses. While it may often be the case, sometimes bad credit can get in the way of affording your home either way.
The Canadian Mortgage and Housing Corporation (CMHC), offers several ‘affordability rules’ to consider. The first rule to remember is that in order to afford your new home, your monthly housing costs should not be more than 32% of your gross monthly income. Keeping this in mind, should also guide you towards which housing option is best for you and which type of homeowner direction is in your best interests over the long term.
Mortgages with Bad Credit
With bad credit, your loan options may be more limited than if it was better. In Canada, a credit score will fall somewhere between 300 and 900. If your score falls between 600 and 700 or higher, you are more likely to secure a mortgage through the majority of large banks. For those, with a score below 600, these ‘larger’ lenders may deem your credit too low for a mortgage. If your score falls into this latter category, then seeking out a lender who specializes in bad credit loans may be necessary.
Bad credit or not, if you have been approved for a loan yet do not have enough money to make the mortgage payments, then continuing to save may be the better option for the time being. This can also give you the opportunity to improve your credit score, making all of your future cases for securing a loan a lot more straightforward.
Ultimately, it is important to know if you are financially ready for this next step. Assessing how much you can afford is key. Prior to shopping for your home, whether it is a newly-built dwelling or a pre-existing structure, you need to think carefully and plan for the various expenses that await you. If you do, these home ownership options can be a complete dream come true.