The best time to buy a home

If you’re looking to buy a home, you’re probably wondering what is the best time to purchase. Studies have shown that the best time to buy is during the Winter months. This makes a lot of sense. How many people want to move in December or January? Not many. You won’t find much competition for properties during this time of the year. Listings tend to stay unsold longer, prompting sellers to be more willing to compromise.

The worst time to buy is in the Spring. Most people want to house hunt in the Spring. The weather is better and it is just in time for school opening. With more competition for properties, prices tend to rise during this time of the year.

If you’re in the Metro Vancouver area, there’s one more advantage to purchasing the Winter. It’s probably raining. This may help you determine whether the property you are buying has problems with water ingress.

CMHC’s latest product – Purchase an investment property with as little as zero down

CMHC just announced changes to their small rental programme (1-4 rentals).  CMHC will insure rental property mortgages with zero down.  The programme is available for

purchase or refinance transactions. Since this programme is so new, lenders still have to announce their participation in the programme.   I am certain that within a few

weeks, there will be a few lenders that will start taking applications.

Some of the requirements of the programme include:

1) Good credit –  To qualify for zero down, applicants need a credit score of at least 680

2) Proven income – Standard income qualification rules apply.  Applicant’s Total Gross Debt Service (TDS) ratio should be less than 42%

Please watch out for further announcements on this product on our website, BCmortgage.ca .  Feel free to phone or email me if you have any questions.

Improving your credit score

For most lenders, the credit score on your credit bureau is the single most important determinant of your ability to access credit.  It can also affect the rate of interest you are charged when you borrow.  It is well worth your time to ensure that you maintain a good credit score.

It is easy to check your credit score.  There are two major credit bureaus in Canada – Equifax (www.equifax.ca) and Transunion (www.tuc.ca) .  In Western Canada, Equifax is the more commonly used one.  You should be able to access your credit score online for a  small fee.

If your credit is not good and you plan to obtain a mortgage in the next few months, it is very important that you get a copy of your credit bureau.   I can coach you on how you can improve your credit score so that you can obtain the best rates possible.

Don’t apply for credit when you need it

During the past week, I’ve encountered mortgage applicants telling me that they never applied for credit since they never needed it.  They’ve always had enough cash to meet their day-to-day requirements.  Unfortunately, now that they are applying for a mortgage, they have no credit.  With no credit, it becomes very difficult for lenders to judge whether an applicant is responsible in handling credit.  While it is still possible to obtain a mortgage without a credit history, it will be more expensive for the borrower since lenders will charge a higher interest rate to cover for the risk.

We never know when we will need credit.  Things happen that we don’t anticipate such as a family emergency or medical bills.  Don’t wait until you need credit to apply for it.  You may not get it.  We should always have credit available to us and our spouses/partners.

Once in a while, get a copy of your credit bureau.  Check it’s accuracy.  If your score is low, improve it.  I can suggest ways for you to improve your credit score.  You can obtain a copy of your credit score online at http://www.equifax.ca and http://www.tuc.ca

Credit Score – What determines credit scores?

Most people don’t understand credit scores or haven’t even seen their credit bureau.  If this is you, I recommend that you review your credit score as soon as you can.  Your credit score is a major factor in determining whether you can get a mortgage, how much down payment will be required, how much money the bank will lend you and what rate of interest you will be charged.

Your credit score ranges from 300 to 900.  The higher the score, the better.  The credit score predicts your probability of defaulting on your debts within the next 2 years.

How is the score determined? There are five criteria: (1) Your payment history; (2) Amounts owed; (3) Length of credit history; (4) New credit; (5) Types of credit in use.

Knowing the factors will allow you to improve your score.

It takes time to improve your score.  You should work with a mortgage broker who can guide you with a strategy to improve your score.   At BCMortgage.ca, we provide you with a copy of the FICO booklet.  The booklet prepared by Fair Isaac Corporation, the company responsible for creating FICO scores, is an indispensible tool since it explains how the scores are arrived at.  Once you know how scores are determined, you will be able to determined a strategy to bring your score up.

John

What is an appraisal?

An appraisal provides the lending institution a professional opinion as to the fair market value (FMV) of the property.  Appraisals are performed by specialists certified for this purpose.

Appraisals are required when you have more than 25% of the purchase price to put down.  For mortgages with less than 25% down payment, the mortgage will generally be insured by the Canadian Home Mortgage Corporation (CMHC) or GE Mortgage Insurance Company.  CMHC and GE Mortgage Insurance do not require an appraisal since they have their own system for valuing properties.

Your home purchase strategy

1. The list price is only the beginning. Most markets across Canada are experiencing multiple offers and aggressive bids. Be prepared to sweeten your offer by not only giving the seller the full asking price, but by being prepared to offer a whole lot more!
2. When there are no other offers, a buyer can negotiate the price that is acceptable to both parties. Placing your very first offer, one that the seller cannot refuse, could give you a winning offer immediately.
3. Include a copy of the letter of commitment from the lending institution to show that you are a ready, willing and able buyer.
4. The early bird gets the worm! Be sure to go to first viewings, and agent’s opens whenever possible.
5. Good properties in good locations just don’t last—so in any type of market, place an offer FAST!
6. Be prepared to place your trust in your spouse. If you can decide on placing an offer, even if your spouse or partner has not had a chance to view it, this may be your winning strategy!
7. There are still “bargains” out there, if you can see a property’s potential and can overlook clutter or unstaged properties. You may still get a good price!
8. In any market, remember to hire a professional home inspector as your realtor, or you can’t see everything!
9. First time home buyers have a tough time making that first purchase. Having your realtor on board with you will ensure that your interests are being protected at all times!
10. What is YOUR strategy? Find out beforehand what your strategy is before buying. Make sure that your agent has the experience in multiple offer situations to win you that property of your dreams.

Looking for a down payment on a home? Check your RRSPs

If you’re a first-time homebuyer, with the Home Buyer’s Plan you may be eligible to withdraw funds from your registered retirement savings plan (RRSP) for a down payment when buying or building a qualifying home.  Under the program you can withdraw up to $20,000 (or, up to a maximum of $40,000 per couple) without tax penalties.

Here is a basic overview of some of the rules:

• You must be considered a first time homebuyer, i.e. you cannot have owned an owner occupied home in the previous five years.
• You must be a Canadian resident.
• The property purchased must be for a principal residence.
• The RRSP must be repaid within 15 years, with minimum annual payments of 1/15th of the withdrawn amount.
• Funds must have remained in your RRSPs for a minimum of 90 days before they can be withdrawn under the Home Buyers Plan.
• You will have to complete Form T1036, “Home Buyers Plan (HBP) – Request to Withdraw Funds from an RRSP” available at the Canada Revenue Agency website http://www.cra-arc.gc.ca in the RRSP section.

No RRSPs?  We can show you how to establish an RRSP with borrowed funds, and use the resultant tax refund for a down payment

5 Ways to Make Home Ownership Happen

Getting into the housing market can be a challenge, but savvy home buyers stay on top of ways to stretch their housing dollar.  The following tips offer good financial solutions for a tight mortgage budget:

1. You can break out of the money-down slump
The biggest barrier to home ownership is saving enough for the down payment. Rules have changed and buyers can put down as little as 5 per cent or even zero down in some cases. Because of the stipulations involved in these kinds of mortgages, it is important for buyers to consult their mortgage professional.

2. Your RRSPs are not just for distant dreams
RRSPs can be accessed in order to fund up to $20,000 of a down payment to buy or build a home.

3. Cash back is an option
With a cash back mortgage the lender will pay a percentage of the amount borrowed “back” to you as a lump sum, which can help with a range of expenses that homebuyers encounter – closing costs, furniture, incidentals arising from moving, and so forth.

4. Get a rate hold
A mortgage consultant can get you a mortgage pre-approval that includes an interest rate hold of up to 120 days.  If fixed mortgage rates rise during the period of your rate hold, you’ll be protected; if they fall, you’ll have access to the lower rate.

5. Debt can be reduced gradually
The traditional 25-year mortgage can now be stretched with a 35 or 40 year amortization.  This allows first-time buyers to access more expensive properties, but they will also have to pay more in interest over the life of the mortgage.  Lump sum payments or increasing monthly payments down the road will lessen the total amount of interest paid.

Mortgage Strategies to Control Your Consumer Debt

Consumer debt can come from many sources, such as credit cards, department store cards, car loans or other personal loans – with many Canadians paying much more in interest costs than they need to be.

Increasing equity in homes can offer a possible solution for homeowners burdened by high-interest consumer debt.  While personal debt levels continue to rise, so too does the equity that many have in their homes, which opens a range of options to dramatically reduce one’s interest cost burden.  Here are two common strategies for homeowners:

Home Equity Line of Credit

Another mortgage option for homeowners which offers greater flexibility is a Home Equity Line of Credit – or HELOC – which allows you withdraw funds as needed.

The advantage here is that you can put a HELOC in place and charge up when needed, then pay down the line of credit, never needing to re-qualify, provided payments are kept up-to-date.

Your payments fluctuate depending on current interest rates and the outstanding balance over the month, with interest-only payment options available.  A HELOC can be convenient for paying off higher interest debts, as you withdraw and pay (relatively lower) interest on only what you need.

Mortgage Refinancing

Refinancing a mortgage can give you the opportunity to consolidate higher-cost borrowing with lower-cost mortgage financing – potentially allowing you to save significantly on overall borrowing costs.

With a lower interest rate on a refinanced mortgage, some borrowers decide on a lower monthly payment to improve their cash flow, while others choose to pay off the loan sooner, saving them money over the long term. What’s more, mortgage refinancing offers a plan to reduce your debt – after the elapsed amortization period, your balance is zero.

With Canadians now carrying increasing amounts of high-interest debt such as credit card balances and personal loans, how best to manage one’s borrowing costs is a concern for many.  Talk to us – you may be surprised to learn how much you can save with the right debt management strategy.