Buying your first home is a big deal!  Here are 10 Tips for First Time Buyer success, and to make your home purchase a positive and enjoyable experience. There will be a whirlwind of feelings involved from the excitement of getting your house keys to the stress of trying to figure out what exactly is it going to cost. First time home buyers have a lot of questions along the way, and your home buying team should be able to answer each and every one, but reading this list of 10 tips will place you on the road to home ownership, feeling comfortable and confident.

First Time Home Buyer Success

 

Get Pre-Approved (or better, pre-underwritten)

What is the difference? Recently one of the large banks in Canada ran a marketing campaign of getting pre-approved in 60 seconds. Basically the onus falls on you to fill out the little boxes on their website and voila, you are pre-approved. Not wanting to be too hard on this bank, but the pre-approval is meaningless, because there are many factors missing, such as your credit score, confirmed list of liabilities and indebtedness, and specific personal details, such as how long you have been with your employer and if you are still on probation.

To get yourself pre-underwritten means that you submit all of your personal documents to your lender, who will vet the details and get you a commitment based on the information given to them (pending the quality of the property and passing the scrutiny of the insurer (CMHC, Genworth, or Canadian Guarantee), if at all required by law or  lender.

The worst feeling in the world is finding your dream home, saying “YES! Let’s put in an offer!”, and then swiftly losing the house to someone else, while you are getting a pre-approval or a vetted pre-underwritten commitment. Getting a pre-underwritten commitment long before looking at homes will help you in several ways.  Your mortgage broker can help you figure out how much you qualify for and how much house leaves you with a comfortable payment.  She can also review your credit and offer tips on improving your score (a better credit score equals more lending options, better rates, and lower costs).

Even better, many lenders will get a fully underwriting approval for you before you even find a home!  This gives you a huge advantage over other buyers who only have a pre-approval, especially in a sellers’ market.  You could put in an offer with no financing contingency, and have the same power of a cash buyer!  To learn more about pre-underwriting, give me a phone call and we can discuss the difference between a worthless 60 second mortgage pre-approval and a pre-qualified, pre-underwritten commitment from a lender.

 

Build Your Credit

As we mentioned above, if you start your pre-approval process early, you’ll have time to maximize your credit score.  This gives you the most loan options along with better rates and terms when compared to lower credit score borrowers.  This can save you money up front, and even more money in the long run, as even small differences in interest rates add up over time.

 

Organize Your Funds

Lenders will usually require a 90 day history of the assets you’ll be using to buy your home (down payment and closing costs).  This means 90 days of complete statements for things like checking and savings accounts.  If you have many large deposits, money transfers, and cash moving around a lot, this could create a headache in documenting your assets for the lender.

Get your cash together in an account you will be using for the down-payment, and keep it there until the big day. This way, your lender can simply review your statements and call it a day without asking you for additional documentation. Remember the easier you make it for the lender, the faster your mortgage will fund, and the less additional questions and documentation requests you will receive from your mortgage broker and the lender.

 

Manage Your Credit

Since you were smart and went over your credit together with your mortgage broker before looking for homes, you have had time to get it maximized and to the best possible score.  Now don’t move!  Opening new accounts and applying for credit cards, having people look at your credit, and increasing balances on credit cards can all damage your credit scores, and financing large ticket items like furniture or a new car could sabotage your home buying dreams altogether. You will not believe how many of our clients buy the proverbial large, shiny red truck, before they visit us to apply for a mortgage.

If you must make a financed purchase or open a new account, talk with your mortgage broker first to make sure it won’t have any negative impact on your home buying plans. Remember we are business professionals and have seen just about anything, which eventually hampered or outright cancelled an application, because clients simply did not know on how to manage their credit. If in doubt, call us.

 

Find a Great Real Estate Agent

Why is this so low on the list?  It is not because it is not one of the most important moves you will make in buying your first home.  A real estate agent’s job is to help you find the right home and guide you through the contract process. But they cannot or will not assist you if you have not done your financial homework first or if you are not in a position to buy a home or are not even close to be prepared.  So we recommend getting well prepared first, but…

We strongly recommended that you use a great real estate agent (emphasis on great).  Sure, your 3rd cousin Eddie may have his real estate license, but if he is not a good agent and is not going to give you a professional level of experience and guidance, it is best to take a hard pass. We are working with realtors, who have firmly established themselves in the market place, have experience and knowledge, and take the time to help you. This will minimize any unpleasant surprises down the road and losing your dream home, because of a technicality. And, we have those realtors work for us on our own personal transactions.

Your real estate agent will help you search, negotiate, and get your offer accepted, but that is only the start – a home buying experience is a paperwork-abundant tornado with multiple people (and their personalities) involved.  When you have a good real estate agent, you have an advocate in your corner, and you will not notice the craziness behind the scenes (well, at least not as much).  Without a good agent, that craziness is guaranteed to keep you awake at night and turn what should be an exciting time into a miserable one.  Trust us on this one – a good real estate agent is worth their weight in gold, especially when buying your first home. 

 

Consider More Than the House

You may come to hate even the most perfect house if the commute to work is killing you every day.  You may love the space in your master bedroom, but never sleep there because of street or train traffic right outside your window. Do you love the house enough to live there 24/7 because you have no local recreation or entertainment near by?

When buying a home, you need to consider the house, the yard, the neighborhood, and the surrounding areas.  For the best buy, make sure you’re buying a home you love in an area you will enjoy living.

 

Get Inspections (and a Survey)


When buying your first home, you’ll want to know what kind of shape the house is in, even the parts of the house not shown in listing photos.  A professional inspector will be able to give you the good, the bad, and the ugly on the investment you are about to make.  There is nothing worse than spending a ton of money on a new home, then getting hit with even bigger bills when the home repairs start piling up.  A home inspector can help you avoid that pitfall, and offer up great advice on maintaining your new home. Your realtor or we can recommend bona fide inspectors.

If you’ve got land or property boundaries you will want to have a survey as well. Knowing what land belongs to you is incredibly important when it comes to using your yard, and putting on additions (and knowing what land is yours when your neighbors do additions to “their” property).

 

Don’t Stretch

 

If your budget has been set by mortgage broker and lender for up to $300,000, don’t buy a $350,000 house.  A beautiful house means nothing if you cannot enjoy your home.  A mortgage payment that leaves you strapped for cash each and every month is a major mistake, if it means that will not have any room for savings, financial planning, or simply, fun.  Sure, you are going to love your home, but make sure you are buying with enough financial room to enjoy getting away from it from time to time, too.

 

Keep Reserves and Savings

Though there are positives to putting down a larger down payment, spending too much up front is not always a wise move.  Life happens, so you want to make sure you are leaving room for emergencies.  Having money to address things like a leaky roof or water heater replacement, along with life’s other curve balls, is a smarter move than using up all of your cash reserves into your new home, even if it means putting less than 20% down.

We can guide you through the options, and work with you to determine how you can get the most financially savvy mortgage, while making sure the other areas of your financial life remain in great shape, too. Remember we are consumers as well, and have gone through many of our own real-estate transactions ourselves.

 

Think Today and Tomorrow

When you are buying a home, how long will you be calling it ‘home’?  You may need to consider short and long term goals in determining your perfect home. Do you plan on having a family within a few years?  Maybe that extra bedroom isn’t a bad idea.  Do you regularly have guests and entertain?  Additional bathrooms and an outdoor entertaining area can make the post-party clean up much more pleasant. Keeping in mind your short term and long term plans and goals will ensure that you enjoy your house today, tomorrow, and however long you call it home.

Buying a home is a big deal, but it does not have to be a stressful process.  If you use our tips and hire good professionals for help with your home search and mortgage, the process can be streamlined, and the road to home ownership can be an easy one to travel.  For questions on the home buying process and help with getting prepared, call us for advice and guidance. We are mortgage professionals and have been in your shoes – although a long time ago.

 

 

Content loosely based on a post originally posted at https://www.masonmacblog.com

 

 

 

What are your options?

When you apply for a mortgage, lenders may offer you options with either fixed or variable interest rates.

Note:   The type of interest rate (fixed or variable) is decided separately from the type (open or closed).

 

Fixed Interest Rate Mortgages

With a fixed interest rate mortgage, the interest rate is determined when you apply for a mortgage. This interest rate is set for the entire term. The amount of your regular mortgage payments is also fixed.

Because the interest rate does not change throughout the term, you know in advance the amount of interest you will have to pay (assuming you do not make any pre-payments), and therefore how much of the original loan amount will be paid off during the term.

 

Variable Interest Rate Mortgages

A variable interest rate mortgage is a mortgage loan with an interest rate that can change during the term. The interest rate varies with changes in market interest rates. Because mortgage payments and interest rates can change, it is impossible to know in advance how much of your original loan will be paid off during your term. However, your mortgage lender will give you an estimate based on the variable rate at the beginning of your mortgage term.

With a variable interest rate mortgage, the amount of the payments can be either

  • fixed, or
  • variable such that the amount of the payment would change when interest rates change

Note:   In this context the fixed and variable comments refer to the amount of payments NOT the interest rate. Because the finance industry is using fixed and variable for both the payment amount and interest rate, this can be very confusing.

It depends on the lender and the terms of the mortgage agreement.

The interest rates on variable rate mortgages are often lower than on fixed interest rate mortgages with the same term length when you sign your mortgage agreement, so variable interest rate mortgages may be attractive in the short term.

However, whether you are better off with a variable interest rate mortgage as compared to a fixed interest rate mortgage depends on whether the market interest rates go up or down during your term. This movement is difficult or at all to predict.

 

Variable interest rate mortgages: impact of interest rate changes

Before signing a variable interest rate mortgage agreement, it is important to understand how interest rate changes can affect you. There are some differences between variable payments and fixed payments.

 

Payment Type

Rising Interest Rates

Declining Interest Rates

Variable Payments

o your payments would increase

o you may have higher payments than if you had chosen a fixed interest rate mortgage

Consider how much of an increase in mortgage payment amounts you could handle. If you do not think you can handle an increase in your mortgage payment due to rising interest rates, or do not have enough future cash flow, you may be better off with a fixed interest rate mortgage

o your payment amount may go down

Check with your lender to see if you can pay down your mortgage faster by maintaining or increasing your payments, or making a lump sum pre-payment.

Fixed Payments

o you would pay less toward your principle than expected and more toward interest, which would lengthen the time needed to pay off the mortgage

o at the end of the term, the mortgage lender may require you to increase your payments so that your mortgage will be paid off within the amortization period that you originally agreed to

o you may pay more in interest than if you had chosen a fixed interest rate mortgage

o you would pay more toward your principal than expected and less towards interest, which would shorten the time needed to pay off your mortgage

o you would pay less in interest with a variable rate mortgage than with a fixed rate mortgage

 

Variable interest rate: how to protect yourself

Some lenders offer interest rate caps or convertibility features on their mortgages. These features can offer some protection if interest rates go up. You can get these features only when you sign a new mortgage agreement.

An interest rate cap is the maximum interest rate than can be charged on a mortgage, regardless of the rise in interest rates.

If your mortgage has a convertibility feature, you can “convert” or change it to a fixed interest rate mortgage during the term. Although the lender will usually not charge a penalty for the mortgage conversion, certain conditions apply.

Note:   The fixed interest rate could be higher when you convert the mortgage than the variable interest rate you had been paying.

 

Making a decision between fixed and variable interest rate mortgages

There are a few factors to consider when choosing between a fixed and variable interest rate mortgage.

Take the time to go through the list in the table and tick off the statements that are congruent to your comfort level, knowledge, and personal financial situation.

 

Fixed interest rate mortgage may be better if:

Variable interest rate mortgage may be better if:

o you want to know your interest rate or the amount of your regular payments is not going to change over the term of your mortgage

o you prefer knowing in advance how much of your mortgage will be paid off at the end of your term

o you think there is a good chance that market interest rates will rise over the term of your mortgage

 

o you can handle an increase in your mortgage payment if interest rates increase

o you are comfortable with the possibility that

o   your mortgage interest rate and payments could increase

o   you could pay more in interest over the term of your mortgage than you would have paid with a fixed interest rate

o you follow interest rates closely

o you think there is a good chance of interest rates staying the same or dropping over the term

 

Please call me for more information and an informal discussion on fixed and variable interest rates.

Real estate Market update Burnaby

The housing market in the Greater Vancouver area is going through an interesting time and, as a mortgage broker in Burnaby, I am seeing it all first-hand.

Home sales in Burnaby dropped significantly in August 2016 compared to August 2015.

Last month there were 272 total home sales compared to 414 in the same month last year. Sales dropped in every category; detached went from 124 to 44, attached dipped from 75 to 45 and apartments fell to 183 units sold after selling 215 in August 2015.

The biggest drop here is the detached homes and one of the biggest factors is likely because of the steep price jump year-over-year. In August 2015 the median sale price on a detached home was $1,261,090, whereas last month this number leaped to $1,520,000. Only Vancouver and Richmond posted greater median sale prices for August 2016 in areas covered by the Real Estate Board of Greater Vancouver.

This is a trend that residents of the area are all too familiar with. From August 2016 to August 2015 alone the benchmark price for a single detached home in Burnaby has increased by an average of 35.5%.

Over the past six months alone it has jumped by an average of 21.5% and behind only Vancouver and Richmond has experienced the great increase over the past 10 years.

Both median sale prices for attached homes and apartments have increased as well year-over-year. Attached homes jumped to a median price of $705,000 last month after coming in at $520,000 in August of last year. Apartments didn’t experienced as steep of a rise, going from $407,000 in August 2015 to $431,200 in August 2016.

In the first eight months of this year there have been fewer sales compared to the same period last year. Only apartments saw more sales as they jumped to 1,998 from January through August 2016 after selling 1,560 in the same time frame last year.

Listings are also up across the board in Burnaby. Although no single housing type saw more than a 32-unit increase in listings this past August, it’s still something to take note of. This is related to the fact that prices have increased so significantly and inventory is so low that people are not as willing to purchase as they once were.

How these numbers will continue to perform is yet to be determined, however with the price of homes rising at an alarming rate, the market must be watched closely.

The Canadian government has taken note of this risk and has brought in a new set of mortgage rules to help reduce the possibility of a housing crash.

If you’re looking to buy or sell a home in Burnaby it’s important that you consult someone who can help guide you through the process.

In a market as competitive and fast-paced as ours, talking to a Burnaby mortgage broker like myself can ensure that you put yourself in a safe position when it comes to your mortgage.

Contact me today for more information!

Source: http://www.rebgv.org/sites/default/files/8.%20REBGV%20Stats%20Pkg%20August%202016_0.pdf