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I am planning on purchasing my first home, but its going to be for my mother. She lives in a small town with very affordable housing.

The place will be around $68k with 20% down payment ($13,600) which will require a loan of $54,400.

My question is: how does it looks to a lender if you are buying a lower priced home than you can afford relative to income?

Some notes about self...

  • Income past three years $90k to $120K with a 'fair' credit score of 655 range...
  • Affordability calculators online say with that income, $350K+ house price...
  • Note: Previously self-employed, and now a salary... (3rd party verified)

What do you guys think? I assume it matters the size of the loan relative to yearly income? Better chances at a lower rate?

I will have meeting with some lenders in a few weeks, but thought I would get some insights online first. :)

Thank you!!

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Generally the lender doesn't care much if you don't buy the most expensive house you think you can afford, although they would like you to - that's how they earn money.

What they do care about, though, is whether you're buying the home as your residence. Although in your case it is somewhat in the gray area since you're buying the house for your immediate family, generally banks lend under different terms for properties that are not expected to be your own home than those that are.

  • Thank you so much for your feedback. :) Should I tell them that it is for my residency or should I disclose thats not my full time residence? – DJones Sep 26 '14 at 8:25
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    You wrote "Canada/US" in the title. Two different countries, you know. I don't know if you are implying you and mom live in different countries or something else. Either way, I believe disclosure is required. As far as the US is concerned, you'd need to figure out the gift tax implications. – JTP - Apologise to Monica Sep 26 '14 at 11:41
  • @DJones, you absolutely must disclose that this is a home for your mother, not for you. You could get in serious trouble if you lie here. – ChrisInEdmonton Sep 26 '14 at 14:47
  • In the US, home owner's insurance is usually higher if it's not your primary residence because they assume renters (who won't care for the property) or its empty part of the year. Shop around; you may be able to find one who'll discount because a family member is living there full-time. – mkennedy Sep 26 '14 at 17:29

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