Buying a first residence in a major city: can it be done?

April 13, 2009 9:41 AM

Buying a first residence in a major city: can it be done?

I live in Toronto, but I think this question could apply to other major cities. I talked to a banker and found that with my current income ($40 000) the maximum mortgage I could get is around $150-175 000. I couldn't find anywhere even close to downtown or near the subway stations that was less than $300 000.

Toronto MeFites: What are the cheaper but still TTC-accessible neighbourhoods?

Any downtown condo/apartment owners: How did you afford this?

Is it possible for a first-time buyer to make a mortgage work on a single income?

posted by cranberrymonger to home & garden (15 comments total)

MLS lists at least a dozen one bedroom condos in downtown Toronto for $146K - $164K
posted by furtive at 10:05 AM on April 13

You may be able do this in Toronto, but I think you want to wait (and maybe re-evaluate what qualifies as TTC accessible). A year from now the 1-bedroom condo market is going to be swamped with unsold condos and prices will be down from where they are now (in my opinion). Another year will also give you more time to save for down-payment, closing costs, etc.

I'd look at TrueCondos.com for a nice take on what's going on in the condo market.
posted by kate blank at 10:12 AM on April 13

You may have to consider commuting via one of the GO trains with a monthly pass, living near one of its stations. It's been a while since I've lived there, but the system map is fairly extensive. You could probably get a much nicer and larger place with fewer cockroaches in the outskirts.
posted by hungrysquirrels at 10:26 AM on April 13

Any downtown condo/apartment owners: How did you afford this?
Two incomes.
Or one high income.
posted by rabbitrabbit at 10:46 AM on April 13

I just moved into my new condo in Chicago on Saturday, so I've got a fair bit of insight.

I managed to buy a $280k 2/2 on only slightly more than you make (my fiancee is living with me, but to get a better interest rate, she's not on the mortgage) by 1) paying down as much of my debt as possible to free up my monthly income and 2) making a huge, huge downpayment. In the US right now, there's a interest rate penalty for Condos with less than 25% down, and to get the 4.875% interest rate that I got, my bank wanted a 30% downpayment.
posted by Oktober at 10:57 AM on April 13

Two incomes.
Or one high income.

This. Or one medium income with aggressive saving - live frugally for a few years and save a large percentage of what you make, and that can buy a good bit of a modest city home down the line. But there's really no magic system; big urban areas are just more expensive, and therefore are often not buying-options for people with modest incomes. Hopefully things will be less insane with the real-estate bust, but the basic math isn't going to change.
posted by Tomorrowful at 10:59 AM on April 13

I'd hold off right now, too. You can gain an advantage over other people in a city like Toronto by moving in an opposite direction to the general flow. This is a good time to build up your savings.

A year before we shopped (during the early 90s recession), we each made arrangements with the bank to borrow the money for a large, one year, GICs of about about 25k. The bank was happy to oblige, since they were holding the principles. I think the GIC even gave a return that was equal to the interest we were paying for the year's term. We lived like church mice and at the end had a large down payment and a good credit rating.

Also, we shopped around to other banks and got better mortgage offers than at the BoM.
posted by bonobothegreat at 11:39 AM on April 13

Check out Options for Homes. They build condo communities in Toronto specifically targeting people in your income profile. Right now they're only selling the building I've bought into, though, and I think it's mainly sold out, but there might be a few units left.
posted by jacquilynne at 11:52 AM on April 13

1) Buy something that is about to be built or that is still under construction. These are cheaper but beware, they are almost never ready when they say they will be.
2) Pay off your debts, fix your credit rating if it's damaged.
3) Make more money. Seriously, take some night courses or find out from your employer what you need to do to get to the next level. I have a few friends that made $40,000 and either got laid off or quit and after doing some research, found a new job that will eventually lead to a larger income.
posted by jmmpangaea at 11:59 AM on April 13

If you're like me and the limit is not what loan you'll qualify for but how much of your income you're willing to spend on housing, buy a duplex and have your renters help pay the mortgage.
posted by salvia at 12:29 PM on April 13

Oh, sorry. I skimmed the question way too fast. My next best recommendation for you is to consider buying with a friend. Just write a solid contract that takes into account all the options.

Alternatively, you could consider more "up and coming" (but still somewhat shabby) neighborhoods.
posted by salvia at 12:30 PM on April 13

Even up-and-coming neighbourhoods are out of your reach. Are you sure the quote you got was for condos, because of the on-going monthly maintenance fees that usually means a smaller loan amount and the banker is quoting you at 4x your income which is pretty much the upper limit. I live at the end of the GO train line and you can't find a condo for less than 250 here either. The only places I see for under 150 are in Oshawa and Hamilton. Keep in mind that whatever place you buy now you will be stuck with for about five years, do you know what you will be doing in five years? Would you turn down a fabulous job or promotion in another city because you can't sell your house, what about not being able to move in with your SO because neither of your apartments are big enough? The condo market in Toronto is overbuilt with too many investor owners. The tiny studio apartments on Fleet street are pretty much the only thing in your price range and after paying the mortgage and condo fees you will probably still sell it at a loss after five years (which is about the maximum amount of time you can live there without going crazy). I have heard very good things about the building jacquilynne is in, it looks to be one of the few pre-builds in Toronto I would have confidence it will actually get built. Now is a good time to save because house prices are going to be depressed for at least a couple of years and the condo market is going to crash. Unemployment for 18-24 year olds is at 17% - that is a lot of people that can't afford to get a starter condo for the next while.
posted by saucysault at 1:43 PM on April 13

I bought my condo, at Bloor and Lansdowne, for 180,000. I bought 2-3 years ago, from a guy flipping his unit. I had to save up 5% down because I was a first time buyer. They tack on CHMC to the purchase price. As the market implodes on itself, prices might come down. You may want to wait a half year to a year and see. I think you can find stuff in the city for under 200K, but your choices are going to be very limited.

I think Blansdowne, where I live, might be the cheapest neighbourhood on the subway line that's inside Toronto proper. I think it's probably your best bet, but there aren't too many condos there right now, which makes it tricky to find a place. (There is my building, some townhouses, and a few lofts.) You can definitely buy a GIANT condo in Crescent Town for that much, but it'd be at Victoria Park station. East York can be cheap, and the subway ride into the city isn't *that* long. Just East of Yonge used to be cheap, but i'm not so sure if that's the case anymore.

Don't move out to the suburbs and commute via the GO train. That shit is soul destroying.
posted by chunking express at 1:31 PM on April 16

It also depends on how much of a fixer-upper you're comfortable with. Six years ago I was condo shopping with my sister (co-owners) and discovered semi-detached houses that were not in pristine condition (often split into multiple rental units or used as student housing) or stellar neighbourhoods for about the same prices as south of Bloor condos. We bought a semi-detatched, did lots of minor repairs and improvements over the years, and sold it in 2007 for almost 75% more than we paid. I doubt a condo would brought that same level of return, plus we had loads more space and a backyard.

I realze that the prices have gone way up in the last few years, so this may be a long shot now. However, there are pockets of cheaper semis around the Junction and Eglinton West (Oakwood)areas. If you're willing to live in slightly shabby areas in a slightly shabby house, you might squeak in. Otherwise, on a single income of $40K, a condo is it.

Condo fees can be a big drain on the monthly budget, and can easily increase dramatically if the building decides a new pool/roof/parking garage is needed.
posted by Paid In Full at 8:21 AM on April 17

Probably not worth buying a condo or house unless you're sure you'll stay in TO for 5-10 years. It's also unlikely that, when it's time for you to sell, you'll make a profit off the one bedroom once you add in condo fees, etc. Two bedrooms sell better, I hear.
posted by jennyhead at 9:44 AM on April 18