Watch This Before Buying a Cheap Fixer-Upper

You’re scrolling through listings and finally find a super cheap house. You think, “I can afford this. The down payment isn’t much at all.”

Not so fast.

Yes, the minimum down payment is 5%, but…

In Canada, the minimum down payment on a home under $500,000 is 5%. So on a cheap house, it looks like you only need a small amount to get in the door.

But when a house is priced well below everything around it, there’s usually a reason. What looks like an affordable opportunity could be a money pit.

Banks see risk, and they price it in

Lenders aren’t dumb. If a house needs a ton of work, such as a failing roof, foundation problems or outdated electrical, the bank sees it as a risky property to lend on. When banks see risk, they protect themselves by:

• Asking for a bigger down payment, often 10%, 15% or even 20%
• Requiring repairs or inspections before they lend
• Or refusing to finance the property at all

This catches inexperienced buyers off guard all the time. They plan for 5% down and find out late in the process that the property doesn’t qualify.

Questions to ask before you fall in love

1. Why is this house so cheap compared to others nearby?
2. What major repairs does it need, and what will they cost?
3. Will my lender finance it, and with what down payment?
4. Can I afford the repairs on top of my down payment and closing costs?

Avoid a rookie mistake

Before you make an offer on a bargain-priced home, talk to a REALTOR® and a mortgage broker. A quick conversation can save you a lot of heartache.

Call 289-276-1716 or start your home search.