Bank or Mortgage Broker...

So you think you are ready to buy your first home.  What do you do now?

The first thing I would recommend is that you get pre-approved for a mortgage. Some buyers make an appointment directly to their bank or credit union and others seek out a mortgage broker.  Which ever you choose, when you are pre-approved, you will know exactly how much you will be eligible to borrow and you will get a very clear sense of how much you can afford.  Once, you are pre-approved you will be guaranteed a particular interest rate for a certain period of time and it will be locked in.  A locked in rate protects you if the interest rates happen to go up while you are still searching for your perfect home.   If the rates go down, however, you will still benefit from the lower rate. 

Do I go to the Bank or do I see a Mortgage Broker?

If you have a good relationship with your bank or credit union that may be the best place for you to go.  The biggest difference between a particular bank or mortgage broker is that your bank will give you the rates and terms from what only they offer.  A mortgage broker, on the other hand, will shop around for you.

Can't I just shop around for the best rates myself?

You could, but you need to bear this in mind.  When you visit a bank they will pull your credit report.  When you go to the next bank, they are going to pull your credit report too and so on.  Each time you have your credit report pulled it becomes a further detriment to your credit score.  A broker only has to pull your credit report once and can shop around to many banks and lenders without further detriment to your credit score.

What do I need to provide my lender?

Once you have selected your lender, you should ask what specifically you will need to bring with you to the meeting.  Be prepared to provide all your financial information and documentation.  Your lender will usually require the following:

• Personal information such as number of dependents and marital status
• Details of employment; possibly including a letter from your employer verifying your salary, your T4, and /or your Notice of Assessment.  Taxation mails you your Notice of Assessment each year after your income tax is completed. (For you lucky ones, it's in the same envelope as your refund cheque)
• Banking and other investment information (RRSP's, savings, stocks, etc)
• Details of your assets (a vehicle, other property, etc.)
• Information on loans and other liabilities (balance on credit cards, other debt)
• Permission to do a credit check

Once your application is complete, you will know how much you can borrow.  You are now ready to go house hunting.

I'm here for YOU.

~Ciao

Changes to mortgage rules...

My sole purpose of starting this blog is to help inform my clients on all things real estate.  It's such a big investment.  For many of us, it will be the biggest investments we make.  Yeah...darn straight...that is scary!

Sometimes, when we don't understand something we are a little leery about asking questions because we fear looking stupid.  Remember I told you in my opening blog that one of the things that are important to me is making sure my clients feel comfortable working with me.  So, with that in mind,  this is what I invite you all to do.  If there is something you don't understand or you need clarification on all I ask is that you scroll down to the bottom of the post, click on comment and simply ask me.  And here's the great thing about that...you don't have to leave your name.  Yep, you can remain anonymous but still ask your question and better yet get your question answered.  In fact, if there is anything in the real estate world that you don't understand but would like to, please ask me that too and I can create a post that addresses it. 

Psssst....lean in...I'm going to let you in on a big secret......(in shushed lowered tones)... you're not the only one that doesn't know.

Okay, so over the last few days, you've no doubt heard all about the changes the government has made to the mortgage rules. In a nutshell, mortgage amortization periods will be reduced to 30 years from 35 years and this goes into effect on March 18, 2001.

Why the change? 

The Federal government is taking steps to crack down on runaway consumer borrowing. Our interest rates have been so low that Canadians have increased their debt load significantly.  The government wants to improve the financial situation of Canadian households by lessening their opportunity to increase their debt.   They are concerned that some Canadians are getting stretched and would feel the pinch when interest rate do eventually rise....and they will rise.

What is "amortization"? 

Simply put, it's just how long it will take you to pay off your house in full.  The longer the amortization, the lower your payments will be because they are spread out further. But keep in mind, the shorter your amortization means you pay your house off faster and you save money in the long run.  Most first-time home buyers are not too concerned with that.  Just getting into the real estate market is hurdle enough and the most important numbers to most first-time buyers are "how much is it going to cost me per month." 

What does that mean to all the first-time home buyers out there? 

Well, since most first-time buyers have less than 20% to put down on their first home, they would require a government-backed mortgage (CHMC).  These new mortgage rules affect all CHMC mortgages. Now, take for example that you have a $200,000 mortgage.  At 30 years ammortization (with an interest rate of 4%) your monthly payments would be $70.00 more than if you ammortized over 35 years and for many buyers that diffference could decide if they can or cannot afford a home.

So what are my choices?

If you were ready to buy now, I'd suggest buying before the changes go in effect (not to mention you would also get in front of  the 7%  forecasted increase in property values this year) or you simply stay put and continue saving your money until you can comfortably afford your house...being house-poor shouldn't be taken lightly as it's no way to live your life.

And that folks, is why the government made the changes in the first place.

I'm here for YOU.

~Ciao