4 ways you can still afford your 1st home

Starting to fret you'll never be able to buy a home?

With rising mortgage rates and new rules making it tougher to qualify for a home loan, nobody will blame you.

Understand the impact of the financial choices we make in lifethe good ones and the bad ones.- Ken Beaton, ARCA RealEstate Investments

On top of that, salaries have failed to keep pace with inflation, and more and more of us are working as freelancers or contract employeesared flag for traditional lenders. And welove to spend our disposable cash instead of socking it away.

According to real estate expert Ken Beaton, however, thereare still ways to enter the housing market without jeopardizing either your financial future or your lifestyle.

Here are four of Beaton's tips for first-time real estate buyers.

Dump luxury items, eliminate credit card debt

Before you can clean up in real estate, you'll have to clean up your debt, Beatonsaid. For most of us, that means better discipline with our high-interest credit cards.

"It's the credit card debt that will sink people. And it's the credit card debt that gets people into a world of hurt."

Credit cards are far more likely tobring people to the financial brink than is home ownership, Beatonsaid. He believes the government could better help Canadians spend within their means by focusing on plastic instead of making it so difficult to afford a home.

Going into long-term debt to purchase one of the most bulletproof investments out there is far smarter than chargingbig-ticketitems such as boats and RVs,Beatonsaid.

There's nothing wrong with the toysif you can afford them but they won't get you any closer to your dream of home ownership.

"Understand the impact of the financial choices we make in lifethe good ones and the bad ones," Beatonadvised.

Move to the country

Never mind the clean air, the safer streets and the slower pace: moving away from the big city could benefit your wallet, too,saidBeaton, who's based inAlmonte, Ont.

Property values tend to be lower in the outskirts, butbuyers get more bang for their buck. Also, some rural municipalitiesoffer incentive programs to attract first-time homebuyers.

"They will give you the five per cent down payment for your first purchase,"Beaton said. "Not many realtors know and understand this."

Beatonhas one tip before you pack your bags: be sure to pick a community with easy access to commuter buses or rail.

Bank of Mom and Dad

Most of us know that we can tap into our RRSPs to help with a down payment we just have to pay it back. But if that's not an option,you can always visit the Bank of Mom and Dad, Beaton said.

That's right,your parents can lend you the money fromtheir own RRSPs. It's safe, can securelyearn them interest, and will help you out in the process,Beatonsaid.

"Unlike a conventional mortgage from the bank, [parents]are allowed to lend 90 or 95 per cent of the value of that property," he said.

This is different from a family member "gifting"' you the money to help with yourdownpayment: that's when the loan is truly a gift, and isn't beingrepaidwith interest, Beatonsaid. Hewarns a loanmasquerading as a gift is deemed mortgage fraud, and can get you, mom and dad into hot water with the Canada Revenue Agency.

First-time homebuyer, part-time landlord

Buying a home that's a bit bigger than you need might be more expensive up front, but could literally pay for itself in the long run, Beaton said.

"Buy a single-family house, like a raised bungalow, and suite out the basement. Turn it into a one- or two-bedroom apartment in the basement and it will pay 80 to 100 per cent of the mortgage," he advised.

"Yes, you don't have the entire house to yourselfinitially, but it is a perfect stepping stone to get into the game and build some wealth for yourself."

Just do your homework and make sure the neighbourhood you're looking to purchase in is open to legal basement suites.Some neighbourhoods and newer subdivisions frownupon the practice, so you could just end up with more house that you bargained for, Beaton said.