What is Purchasing Power? Why is it important?

When it comes to pre-construction homes, there are two common misbeliefs about purchasing power:

  1. I only need to have 10% or less down payment ready.

The deposit structure that differentiates a pre-construction home from a resale misleads some to believe they only need to prepare enough cash for 10% or less of the purchasing price. The rest (another 5% or 10%) can be saved in the following years.

2. I will be able to borrow that amount of money for sure.

Sometimes, based on your situation, banks are not willing to lend you 80% of the purchasing price by the time the completion/closing day comes. Most likely, you will only be able to borrow 70%, the other 10% must be in cash.

If you bought a home based on a budget that came from the misbeliefs above, it’s highly possible you will have to assign your home before closing.

It’s true most of the time you will have a free assignment opportunity before closing, but usually, this would be a chance for you to to profit from your investment! If you assign your home because you cannot close the deal, you will probably not be able to wait for the best offer that comes along.

Please be mindful your purchasing power and do not overload yourself.