Category Archives: home buyers

Hoping to Buy a Home in 2020? The Easiest and Toughest Places to Find One

Hey, home buyers, just how stressed out are you these days?

Maybe you’ve finally come to grips with the crazy, sky’s-the-limit prices still sweeping through most major markets. Perhaps you’ve made peace with the ever-looming threat of another recession. Quite possibly you’ve even dismissed all that stuff about a coronavirus pandemic, and you’re blithely unconcerned about any aftershocks from the upcoming elections.

But when it comes to finding available homes on the market—where and when you want to buy ’em—well, that’s a challenge even the most battle-tested wannabe homeowners are struggling with these days.

And make no mistake: It is a battlefield out there. The problem is, there just aren’t enough homes on the market to satisfy all of the would-be buyers—and that causes prices to spike ever higher in many parts of the country.

Nationally, inventory plunged 13.6% in January compared with a year earlier, representing the biggest drop in more than four years. Few markets have been immune to the plunge. There are now 164,000 fewer homes on the market, the fewest number since 2012, when realtor.com® began collecting the data.

In some of the tightest markets, well-priced homes in the most sought-after locations can sell within a few hours of going up for sale. In others, there are enough properties for sale that buyers don’t need to make a split-second decision and can be choosier.

That’s why our economics team searched for the metropolitan areas where it’s easiest to buy a home—and where it’s not.

“Inventory is falling—even in the easiest markets to buy a home,” says realtor.com Chief Economist Danielle Hale. “For buyers, it means there are fewer options to choose from, they have to make quicker decisions when they’re out there shopping, and they’re probably also dealing with rising prices.”

And while this may sound like a bonanza for sellers, keep in mind that most of them are also in the market to buy a new home. So there’s that.

To come up with our findings, we looked at the number of listings per 1,000 homeowner-occupied households in the 100 largest metros in the fourth quarter of 2019. The analysis was based on the number of homes for sale relative to the local population. And we narrowed our findings to one per state for some geographic variety.

So where can buyers get a home without losing their mind, and where would they want to sign up for meditation and relaxation classes? Let’s dig into the findings—and the trends they’re showing.

Top 10 metros where it's easiest for buyers to purchase a home
Top 10 metros where it’s easiest for buyers to purchase a homeTony Frenzel

At first blush, the metros with the most homes on the market may not seem like they have much in common. But many of the metros in this hodgepodge are in the South, a less expensive part of the U.S. long popular with retirees and second-home seekers. But many of the cities in our rankings have strong economies, drawing younger buyers as well.

You want to buy a home fast? Head to Florida!

Why does the Sunshine State dominate our list of easiest places to buy a house, when nationally the trends are going the other way? After all, on our unfiltered list, Florida takes six of the 20 spots with the highest inventories of homes on the market. (We limited our list to just one metro per state.)

Well, some of it is seasonal: Florida’s busy real estate season kicks off in the fall, when the Northerners and Midwesterners head south. Sunshine State sellers begin planting those “For Sale” signs in the yards and listing their homes in earnest toward the end of the year, unlike the rest of the country, which heats up in the spring and summer.

But it’s also a function of the fact that builders are currently stepping up new construction to meet the greater demands of a tsunami of retiring boomers.

Reasonably priced Cape Coral, a city with about 400 miles of canals on Florida’s southwestern coast making it popular with vacation home buyers and seniors, snagged our top spot. The area has been affected by recent hurricanes and toxic blue-green algae blooms in recent years, which may be why the area has a bit more inventory than other Florida destinations.

Cape Coral, FL
Cape Coral, FLWicki58/iStock

“It has a city-suburb feeling,” says longtime Cape Coral real estate agent Nelson Rua, of Coldwell Banker Residential Real Estate. “We have local mom and pop stores instead of big franchises, and geographically we’re very well-protected by the storms because we have these barrier islands in front of us.”

The metro’s median home list price was $325,050 in January, according to realtor.com data.

While Cape Coral inventory may seem high, at 37.9 properties per 1,000 households, it’s still falling compared with the previous year. And that’s something it has in common with all of the other Florida entries on our larger list (including Miami, Deltona, North Port, and Jacksonville). Lower mortgage interest rates have spurred more buyers to take the plunge, and inventory in Cape Coral actually plunged 22% year over year in January.

Starter and more affordable homes tend to go quick, while the more expensive ones can linger on the market, according to Brad O’Connor, chief economist of the Florida Realtors, the state’s Realtors association.

It’s just easier to find a home in beach and retirement destinations

For many of the same reasons as in Florida, it’s easier to find homes in beach and retirement destinations with strong economies, like Charleston, SC (No. 3), and Virginia Beach, VA (No. 4). South Carolina and Virginia are both tax-friendly states, appealing to those living on fixed incomes, and both have lots of good jobs and are more friendly toward builders.

Charleston has its port, Boeing and Volvo plants, and a thriving tourism industry driving the economy. And its old-world-style cobblestone streets, hanging moss, gorgeous architecture, and renowned food scene may be why buyers are coming up with the metro’s median list price of $422,500. (That’s about 29% more than the national median of $300,000.)

Real estate broker Randy Bazemore, of Century 21 Properties Plus, is seeing lots of 55-and-up buyers moving to the area as well as younger professionals working in the tech industry.

Meanwhile, Virginia Beach has one of the largest military presences in the nation with more than 86,000 active-duty personnel stationed in the area. The median list price there is $310,000.

For well-heeled retirees or second-home buyers, Honolulu (No. 10), with a median list price of $655,050, has plenty of options for sale.

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New construction gives inventory a boost—at least in some places

Lack of new real estate construction in much of the country has been a big problem ever since the housing crash brought everything to a dead stop more than a decade ago. Finally things are picking up again—at least in those markets where permitting is easier, labor is cheaper, and plenty of land is available for builders to put up more homes.

Often, these places also have fewer regulations, which can hold up the process. That’s partly why Las Vegas (No. 5), Des Moines, IA (No, 8), and Houston (No. 9) made the list. Charleston, as well as many of the Florida metros, has also seen a lot of new construction.

In Des Moines, there’s new construction in the suburbs to the north and west of the city, says local associate broker Paul Walter of Re/Max Concepts. But there are also just more folks putting their existing homes up for sale. Those two reasons may be why the metro area saw a 3% bump in inventory, the only one in our top 10 to not be lower in inventory compared with the previous year.

“Homes not being underwater would be the big driver” in the increase in inventory, says Walter.

The other metros that made our top 10 were Bridgeport, CT, at No. 2. The city has more inventory as there’s less demand than in other parts of the country thanks to the state’s shaky economy and high taxes.

Get ready for a shocker: New York City came in at No. 6! That’s because its metro area is so enormous, there are homes for sale in the surrounding suburbs, exurbs, and smaller cities, including on Long Island and in upstate New York, Connecticut, New Jersey, and Pennsylvania.

Plus, while there’s basically no such thing as affordable homes for sale in Manhattan, there is a glut of luxury condos sitting on the market waiting for uber-rich buyers with millions of dollars to come around—$1.7 million studio condo, anyone?

OK, now let’s go to the dark side—the metros where you’ll have to jump on new listings the moment they hit your inbox. Get ready!


The top 10 metros where it’s toughest for buyers to purchase a home

Tony Frenzel

Buyers are having a tough time in tech cities

No surprise here: The tightest U.S. real estate markets are the ones with blazing hot job markets—and these days that usually means tech hubs. And these places often have pricey real estate to match their blazing economies. There’s a constant influx of new workers, all slugging it out for a very limited supply of housing.

Silicon Valley’s San Jose, CA, which had the fewest homes for sale, is also one of the most expensive markets in the country. There are just four, yes four, listings per 1,000 households. That kind of shortage explains why the median list price is just a hair under $1.1 million. If we hadn’t capped our ranking at just one metro per state, fellow astronomically pricey tech metropolis San Francisco would be close behind.

Unfortunately, not all tech workers make seven- or eight-figure salaries, causing them to search for homes farther and farther out from city centers—and their gigs.

But inventory is likely to rise, at least a little, in the coming months, says Patrick Carlisle, the chief market analyst for the San Francisco Bay Area for Compass. “This market takes a while to wake up from the holidays.”

Downtown San Jose, CA
Downtown San Jose, CAAndrei Stanescu/iStock

Part of the problem is homeowners are staying in their properties longer so there isn’t much turnaround, says Carlisle. When they do move out, owners often rent out their properties and pocket the lucrative income instead of putting them on the market. And the lack of new construction is exacerbating the crunch. What is erected often skews luxury, well out of the price ranges of most buyers.

In Seattle, home of the online retailing giant Amazon.com—and No. 3 on our tightest inventory list—a simple equation is responsible for the lack of housing, according to Chris Bajuk, a local real estate agent at HomeStart Real Estate Associates.

“When people have good-paying jobs plus low interest rates, that’s fuel for the fire,” he says.

Plus, there’s not much available land for builders. The city and outlying suburbs are constrained by water, mountains, and zoning rules.

Other tech meccas on our list include Salt Lake City (No. 6), aka Silicon Slopes; Boston (No. 7), a financial, higher education, and tech center; and Washington, DC (No. 9). The real estate market in DC has exploded since Amazon announced it would be installing its second headquarters just outside of the nation’s capital, employing thousands of tech workers.

Inventory is drying up in the Rust Belt’s comeback cities

On the opposite side of the booming, ultraexpensive tech meccas are the Rust Belt cities in the Northeast and Midwest. Some of these urban meccas have been investing in their downtowns and staging comebacks, becoming more appealing to buyers and investors seeking affordable real estate without sacrificing amenities. And many folks want to get in while they still can afford to buy.

The one-time industrial hub of Buffalo, NY, which sits on the Canadian border near Niagara Falls, came in second place. If we didn’t cap our list at just one metro per state, nearby Rochester, NY, would have been next in our rankings.

Buffalo’s revitalization is attracting folks from other parts of the country, says associate real estate broker Ryan Connolly of Re/Max Plus. The Buffalo metro’s median list price was $197,950 in January—about a third less than the national median.

“We are seeing incredibly, incredibly low inventory levels,” says Connolly. The number of homes for sale fell 16% year over year in January, to 6.1 listings per 1,000 households. “It’s really frustrating for buyers.”

That’s leading to multiple offers and folks offering over the asking price on homes in good shape during the busy season. It’s so bad that about a year ago, he saw 23 offers come in on a three-bed, two-bath ranch home in a Buffalo suburb.

“It was a nice home, be we weren’t expecting that,” Connolly says.

Buyers are also clamoring for homes in Columbus, OH, which earned the fifth spot in our ranking. It’s the capital of Ohio and home to Ohio State University and its roughly 45,000 students—buoying it economically. But there simply aren’t enough homes to go around.

“When we had the recession, we didn’t build any new houses. [And] we’re still not building enough homes,” says real estate agent Jeff Cotner of Re/Max One in Pickerington, OH, a Columbus suburb. “The inventory shortage is not going to go anywhere for a while.”

Other Rust Belt and industrialized cities undergoing revivals, such as Milwaukee (No. 4), Harrisburg, PA (No. 8), and Grand Rapids, MI (No. 10), are experiencing similarly hot markets.

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Which Canadian cities are people moving to right now?

Which Canadian cities are people moving to right now?A new report reveals the cities that are seeing the strongest immigration currently; and those that are seeing the most exits.

U-Haul’s migration trends report for 2019 shows that North Vancouver, BC, is the No.1 U-Haul Canadian Growth City, posting the largest net gain of one-way U-Haul trucks entering the city versus leaving it during the past calendar year.

Along with Vancouver, BC has a further three cities on the list: Salmon Arm, Merritt and Victoria.

“Every community in Metro Vancouver feels the pressures associated with regional growth,” stated Michelle Benson, U-Haul Company of Vancouver & Vancouver Island president. “Vancouver is booming, but many people are priced out of the city. That gives North Vancouver the opportunity to attract new residents.”

The number of one-way U-Haul truck rentals arriving in North Vancouver jumped almost 30% from 2018 levels with departures up almost 20%. Arrivals accounted for 55% of all one-way U-Haul traffic through North Vancouver in 2019.

“Vancouver is rated as one of the top cities to live in, so every nearby city is growing,” added Jennifer Anstett, U-Haul Area District Vice President. “North Vancouver is enjoying the trend of people moving toward the West Coast and all it has to offer.”

The rest of the top five are all in Ontario – Trenton, Saint Thomas, Brockville and North Bay – and the province boasts 19 of the top 25 cities.

U-HAUL CANADIAN GROWTH CITIES FOR 2019


* Ranking from Top 25 U-Haul Canadian Growth Cities of 2018 in parentheses, if applicable

Source: Mortgage Broker News – by Steve Randall 09 Jan 2020

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Building wealth through the property market

 

From 1948 to1970, close to half a million people from the Caribbean were invited to what was commonly referred to as the ‘mother country.’  Arriving as British citizens (despite never living in Britain) is a trait rooted in the legacy of the Empire. Whilst there were many reasons for their arrival in Britain, many were seeking superior opportunities for themselves and their offspring. Early settlers spoke about a five-year plan to save money and return back to the Caribbean. Prohibited to find suitable accommodation, many migrants were confronted with signs such as, ‘No Coloureds or Blacks’, which was routinely used alongside the use of ‘No Irish and Dogs.’

Where Caribbean’s were permitted to rent, the standards and conditions of the dwellings were typically unsavoury. Consequently, there was a determination to purchase one’s own properties using a system popularly known as pardner, which involves the collaborating of resources to provide access to funds. This system was particularly useful when banks would not loan to black people. Early settlers from the Caribbean owned houses in what are now some of the wealthiest locations in Europe, such as Notting Hill and Paddington. It was not rare for these residents to own more than two houses that were rented out, characteristically large three or four story Victorian terraced houses. As the decades proceeded, many of these houses were sold due to the owners returning to the Caribbean, or simply moving. Similar trends occurred in Shepherds Bush, Balham and more recently in Dalston, Brixton, Peckham, leaving a decline in property ownership amongst succeeding Caribbean heritage peoples within the UK.

While the cost of properties has been exorbitant in London, where according to the last Office for National Statistics’ (ONS) Census for England and Wales, 58.4% of black people reside, the cost of properties in locations such as the West Midlands (which is said to host the second largest population of black people) at 9.8%, is considerably lower.

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Black Landlords UK (BLUK) in Birmingham aims to revitalise the calibre of not only black home ownership, but also the number of black landlords. Founded in late 2017, one of the committee members Garfield Reece revealed how the organization came into fruition. ‘’It evolved (BLUK) from conversations that Rod Shield (senior investor in Birmingham) had during his networking meetings. People were asking him the same questions wherever he went.’’ Some of the questions that Reece cited were ‘’How we got into property management? How to turn a single let property into a high yielding HMO (House Multiple Occupation)? How to resolve issues and conflicts with tenants.’’

Initially, Rod Shield decided to establish a Whatsapp group to address the myriad of questions he was bombarded with and to mobilize the engagement of black people within the community. The Whatsapp group quickly demonstrated the demand for such an organization and according to Shield, “The Whatsapp group numbers exceeded the allowable quote on Whatsapp; well in the excess of 200 investors in the group. So that’s really where it all started.’’ It was during this time that the committee (who volunteer their expertise for free) decided to galvanise all those that expressed an interest in property to congregate in one room. This lead to BLUK’s quarterly meetings; “The first meeting was held back in January this year,’’ declares Reece.

The first BLUK meeting in January 2019 had approximately 50 people in attendance, and numbers have been growing rapidly. At BLUK’s last quarterly meeting for 2019, the committee expect to have 120 investors. “We are giving service providers and businesses within the community, an opportunity to sell and promote their businesses,’’ Reminiscent of a market stall, there will be six tables with businesses each discussing topics such as finance and how to raise mortgages. Half of the meeting will consist of Keynote Speakers, who will talk about the process one has to go through when acquiring property. The other half of the meeting will be dedicated to roundtable discussions, “It will be like mini workshops,’’ states Reece. “Each roundtable is going to talk about a different investment strategy,’’ Reece adds.

The next BLUK meeting will take place on Saturday, November 23rd, 2019 from 14:00 – 18:00 at the Legacy Centre of Excellence (formerly known as the Drum) 14 Potters Lane Birmingham, B6 4UU.

Source:

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Young Homebuyers Are Vanishing From the U.S.

The median age of first-time home buyers has increased to 33, the oldest in records dating back to 1981, according to a National Association of Realtors report released Friday. The median age of all buyers also hit a fresh record, 47, increasing for a third straight year — and well above the median age of 31 in 1981.

Getting Older

The median age for all U.S. homebuyer profiles is creeping higher

Click link to see graph: https://www.bloomberg.com/news/articles/2019-11-08/young-homebuyers-vanish-from-u-s-as-median-purchasing-age-jumps

Note: Survey conducted almost every other year prior to 2002. No data for 1983 and 1999.

While the median age of first-time home buyers only rose by one year, the increase reflects a variety of factors facing Americans searching for a home.

A nationwide shortage of affordable housing, coupled with lower mortgage rates, has stoked prices in cities from the coasts to the heartland. At the same time, student loans and other debts make it harder for Americans to save tens of thousands of dollars for a down payment, while tight lending standards can make getting a bank loan difficult for borrowers with less-than-stellar credit scores.

“Housing affordability is so difficult today, especially when coupled with rising rents and student loan debt, that they’re finding different ways to enter home ownership,” said Jessica Lautz, vice president of demographics and behavioral insights at the Realtors group in Washington.

The characteristics of home buyers have changed in recent years. The share of married couples has declined as unmarried couples and those purchasing as roommates has risen.

As buyers’ ages have increased, so have their incomes. The typical income of purchasers rose to $93,200 in 2018 as a lack of affordable options squeezed lower-income potential buyers out of the market.

Higher prices of homes have also changed how first-time buyers are entering the market. Nearly a third of first-time home buyers said they used a gift from a relative or friend to fund their down payment.

Builders have cited a shortage of affordable lots and labor as reasons to build fewer or bigger single-family homes, leaving America’s growing population to consider more of the existing housing stock. New homes as a proportion of all purchases fell to a low of 13% in records dating back to 1981.

The report reflects survey responses from 5,870 people who purchased a primary residence in the period between July 2018 and June 2019.

Source: Bloomberg.com – By 

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Here’s Where You Can Buy a Home if You Make Less Than $50,000 a Year

 

The conversation around homeownership in Mississauga and surrounding cities has been a challenging one, especially as prices remain high across all housing types in the city and surrounding municipalities (in fact, the average 905 condo is selling for over $400,000 and has been for sometime now).

But while it’s frustrating for experts—and non-experts who entered the market years ago—to tell prospective homebuyers that they’ll have to move to find an affordable housing, some people might be interested to know that there are indeed still places in Canada that offer affordable homes for single buyers with more modest salaries.

And a recent Zoocasa report reveals where solo homeowners-to-be on a budget might be able to purchase a home.

“While having a dual-income household can greatly improve purchasing power and the ability to qualify for a mortgage, that’s not to say homeownership isn’t in the cards for single-income earning buyers. In fact, according to recent calculations by Zoocasa in celebration of Single Awareness Day (February 15), there are a number of markets where it’s possible to buy a home on one income – and even have money left over,” says Penelope Graham, managing editor, Zoocasa. 

Graham says that, to determine which markets were affordable, the average and benchmark home prices were sourced from regional real estate boards. It was then assumed the buyer would make a 20 per cent down payment and take out financing with a 3.29 per cent interest rate amortized over 30 years, to determine the minimum income required to qualify for a mortgage on the average home.

Those findings were then compared to median income data of “persons living alone who earned employment income” as reported by Statistics Canada.Buying Single - Income Gap - Age 25-64

  • Buying a Home Single - Age 25 to 34
  • Buying a Home Single - Age 35 to 44

Buying a Home Single - Age 45 to 54

So, where can solo buyers most easily afford a home?

Overall, single home buyers will see the best bang for their buck in Eastern Canada and the Prairie provinces, with Regina taking top spot out of 20 cities for greatest affordability.

There, a single buyer earning the median income of $58,823 would enjoy an income surplus of $20,025 on the average priced home of $284,424.

That’s followed by Saint John, where someone earning the median of $42,888 would see a surplus of $18,038 on a $181,576 home, and Edmonton, where earning $64,036 would net a $17,826 surplus on the average home price of $338,760.

MLS listings in Calgary, Lethbridge, Winnipeg, and Halifax also fall within the realm of affordability for single-income purchasers.

So, where are single buyers less likely to purchase a home? As expected, Zoocasa says the Greater Golden Horseshoe (which includes Toronto and the GTA), is out of most people’s budgets.

Graham says a buyer earning the median of $50,721 would fall a whopping $88,361 short on the average $1,019,600 for MLS listings in Vancouver. Toronto real estate listings are the second-least affordable with an average home price of $748,328; a buyer earning $55,221 would face an income gap of $46,858.

Victoria is the third least affordable with an average home price of $633,386, still $39,359 above what the relatively high median income of $86,400 could afford.

Other markets not considered affordable for single buyers include Guelph, Kitchener-Waterloo, London, Montreal, and Ottawa.

Naturally, the housing market is more difficult for single millennials to navigate.

Zoocasa says the research also compared how earnings ranged by age group per location, and which demographic enjoyed the greatest affordability when purchasing a home. Across every market, Gen Xers (35 – 44 and 45 – 54 age brackets) enjoy the greatest earnings and purchasing power, with 11 markets considered within affordable reach (compared to 10 markets across all age groups).

Millennials (aged 25 – 34) had the least earning power in each city, behind Boomers (aged 55 – 64).

Overall, single home buyers aged 35 – 44 purchasing a home in Regina enjoyed the greatest affordability of all, with an income surplus of $24,215. A millennial purchasing in Vancouver had the least, facing a gap of $92,774.

Check out the infographics below to see which Canadian housing markets are most affordable for single buyers, courtesy of Zoocasa.

  • Buying a Home Single - Age 55 to 64

Top 5 Most Affordable Housing Markets for Single Home Buyers


1 – Regina

Average home price: $284,44

Income required: $38,798

Actual median income: $58,823

Income surplus: $20,025


2 – Saint John

Average home price: $181,576

Income required: 24,769

Actual median income: $42,888

Income surplus: $18,038


3 – Edmonton

Average home price: $338,760

Income required: $46,210

Actual median income: $64,036

Income surplus: $17,826


4 – Saskatoon

Average home price: $290,736

Income required: $39,659

Actual median income: $55,758

Income surplus: $16,099


5 – St. John’s

Average home price: $295,211

Income required: $40,270

Actual median income: $51,964

Income surplus: $11,694


5 Least Affordable Housing Markets for Single Buyers

1 – Vancouver

Average home price: $1,019,600

Income required: $139,082

Actual median income: $50,721

Income gap: $88,361


2 – Toronto

Average home price: $748,328

Income required: $102,079

Actual median income: $55,221

Income gap: $46,858


3 – Victoria

Average home price: $633,386

Income required: $86,400

Actual median income: $47,041

Income gap: $39,359


4 – Abbotsford

Average home price: $590,900

Income required: $80,604

Actual median income: $46,714

Income gap: $33,890


5 – Hamilton-Burlington

Average home price: $550,058

Income required: $75,033

Actual median income: $51,253

Income gap: $23,778

Source: Insauga.com – by Ashley Newport on November 1, 2019
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Mortgage Pre-Qualification vs Mortgage Pre-Approval vs Mortgage Approval

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Buying & Selling Tips

Mortgage Pre-Qualification vs Mortgage Pre-Approval vs Mortgage Approval

What are the differences between each stage of the mortgage process?
By Kara Kuryllowicz September 18, 2019

In early 2019, several Canadian banks launched digital apps that offer home buyers easy, hassle-free mortgage pre-qualification in 60 seconds or less. Sounds great, right?  The problem is many consumers believe a mortgage pre-qualification is a lot like a mortgage pre-approval or mortgage approval. As a result, prospective home buyers and sellers are left expecting the financial institution associated with the app to lend them hundreds of thousands of dollars, despite the fact they simply keyed their names, addresses, contact information and gross income into various online fields.

Getting Mortgage Approval

“Every week, as many as 40% of my new clients come to me because they’ve just bought a home and discovered that mortgage pre-qualification is meaningless and that they do not have the financing required for the purchase,” says Tracy Valko, owner and principal broker of Dominion Lending Centres Valko Financial Ltd., and a director at Mortgage Professionals of Canada.

Let’s get real: A mortgage pre-qualification gives the financial institution warm leads (names, contact information, purchasing timeline) and tells consumers how much money a financial institution might loan them. There is no way any financial institution will actually lend consumers hundreds of thousands of dollars just because they spent 45 seconds with the company’s mortgage pre-qualification tool.

Lenders do everything they can to ensure the borrower will repay the loan. A mortgage pre-approval looks at how an individual manages his/her money to determine that person’s creditworthiness. The next step is the mortgage approval which assesses that specific person’s ability to repay a loan of a certain amount at a set interest rate on a particular home.

“Always get a mortgage pre-approval before you start searching for a home and have a mortgage approval in place before you waive your financing condition on the offer – back out of a deal after it’s firm and you could be sued by the seller.” says Valko. “A mortgage pre-approval will tell consumers and their realtors what they can realistically afford to buy.”

Let’s further define the terms consumers need to fully understand before they commit to a real estate agent and start shopping for a home.

What is Mortgage Pre-Qualification?

It takes less than 60 seconds because it requests only the most basic information, whether it’s submitted to an online app or a financial representative. Mortgage pre-qualification never requires supporting documentation that proves the consumer actually has a full-time job, is paid a weekly salary and has earned a good credit score. At best, a mortgage pre-qualification can provide a very loose, broad estimate of a consumer’s home-buying power based on the consumer’s unverified data. Because the consumer typically inputs the information into an online tool, it takes just seconds for the software, not an experienced, professional underwriter, to pre-qualify a consumer for a mortgage.

If consumers notice and bother to read the apps’ fine print or legal disclaimers, they’ll likely see a statement like this one: “This is not a mortgage approval or pre-approval. You must submit a separate application for a mortgage approval or a mortgage pre-approval and a full credit report.”

In other words, they’re not actually promising you a dime, let alone enough the hundreds of thousands of dollars you’ll likely need to buy a home anywhere in Canada.

What is Mortgage Pre-Approval?

In general, it will take two to five business days to investigate an individual’s financial circumstances and the risk that a person might represent to the lender. The underwriter will need the basics, such as name, address and contact information in addition to detailed data on their income, assets (e.g. stocks, RRSPs, property, vehicles, savings), liabilities (e.g. debt, loans, mortgages) and their credit rating and report as well as the available down payment. Supporting documentation may be required to prove any or all of the above.

Unlike a pre-qualifying app, lenders’ underwriters may request a letter of employment, a Notice of Assessment, pay stubs, or T4 for the two most recent years as well as documentation indicating the down payment is available. The lender or mortgage broker will also require the consumers’ permission to pull credit scores and credit reports from organizations such as Equifax.

Your credit score, typically 300 to 800+, is based on feedback from lenders who confirm that you do or don’t pay your bills in full and on time every month. The credit report includes your name, address, social insurance number and date of birth as well as your credit history, for example, your debts and assets and whether you’ve ever been sent to collection or declared bankruptcy.

“Lenders want to know how well or how poorly you manage your money and will be looking for patterns of insufficient, late and missed payments,” says Valko.

A mortgage pre-approval is generally valid for up to 120 days at a specific interest rate unless the consumers’ circumstances change, for example, employment status, down payment, or income. For example, a consumer may not realize it, but their probationary status with a new employer, whether it’s three, six or 12 months, does matter to lenders. Likewise, a move from a salaried to a contract or self-employed position will also be seen as a higher risk.

“I’ve had clients believe they were full time, salaried employees, then discover they’re still on probation when we start underwriting,” says Valko. “An electrician client left his full-time salaried position to work independently and didn’t realize it negated his mortgage pre-approval, which was based on the guaranteed weekly paycheck versus the sporadic earnings associated with self-employment.”

What is Mortgage Approval?

This is the big one. Once consumers have identified the homes they want to purchase, they need mortgage approval to buy that specific home. Lenders assess the age and condition of the homes and consider comparable homes to confirm the price being paid is fair and market value. The mortgage approval is valid until the closing date unless the buyers’ circumstances change.

“Only the mortgage approval accounts for property specifics, such as taxes or condo fees, so give your underwriter/lender time to ensure the numbers previously used are still valid and that the property is acceptable to the lender,” says Valko.

If you’re serious about the home search and purchase process, skip the mortgage pre-qualification apps. Instead, take the time and make the effort to get mortgage pre-approval, then find the home suits you best, then get mortgage approval to close the deal. Then? Enjoy your new keys.

Source: REW.ca –  Kara Kuryllowicz September 18, 2019

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Canada’s First-Time Home Buyer Incentive: Everything You Need to Know

The FTHBI is here. Learn how it can save you money on your first home purchase.
By Kara Kuryllowicz September 5, 2019

For the first time in years, Canada’s first-time buyers have a reason to feel optimistic. September 2, 2019, marked the launch of the Canadian Mortgage and Housing Corporation’s all-new First-Time Home Buyers Incentive (FTHBI), a financial incentive designed to help middle-class Canadians buy their first property.

 

The Perfect Time for the FTHBI

The timing for the FTHBI couldn’t be better. Beyond the First-Time Home Buyer Incentive itself, there are three key real estate factors that actually favour all buyers as we head into 2019, not just first-timers. Fixed mortgage rates remain at an all-time low. Most markets across the country are balanced or even a little soft. And maybe best of all (and as discussed in this recent Fall Trends article) buyers typically don’t buy homes in the lead-up to a federal election, giving first-time buyers some added leverage as markets slow before October 21.
“The First Time Home Buyer Incentive will reduce the monthly mortgage for your first home by up to $286,” says Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for Canada Mortgage and Housing Corporation. “This will help up to 100,000 families across Canada to buy their first home.”

 

How Does the FTHBI Work?

In effect, the FTHBI reduces their monthly mortgage payment without increasing the amount they need to save for the down payment. First-time buyers can finance a portion of their purchase through a form of shared equity mortgage with the Government of Canada. Home buyers will still have to pass the B-20 stress test and have mortgage pre-approval and mortgage approval.

“No doubt, some first-time buyers will benefit, and we’ll have to wait and see just how many families it affects,” says Paul Taylor, President and CEO, Mortgage Professionals Canada, Toronto.

 

Who Qualifies for the FTHBI 

  1. A combined household income of less than $120,000
  2. The insured mortgage and incentive cannot be more than four times the participants’ qualified annual household income
  3. Incentive is 5% on a resale or existing home
  4. Incentive can be either 5% or 10% on a newly constructed home
  5. Interest-free incentive
  6. No payments are due on the incentive until the home is sold or at 25 years
  7. The incentive can be repaid in full at any time without penalties (repayment must be in a lump sum of the current % valuation of the home.)
  8. The incentive must be repaid after 25 years, or when the property is sold, whichever comes first
  9. At 25 years, or resale, the homeowner repays 5 or 10% of the home’s value at that time rather than the amount received from CMHC (if the home lost value, the owner and CMHC share the loss and conversely, both parties benefit if the home increased in value)

 

For years now, unaffordable, astronomical properties have been getting all of the attention. In reality, those homes co-exist with some reasonably-priced, affordable homes in the very same cities, including Toronto, Montreal and Vancouver. Of course, those homes may be smaller apartments, older homes and/or in less desirable neighbourhoods, but they’re out there and may be perfectly suited to first-time buyers and their families.

 

The Financial Impact of the FTHBI

“CMBA is in favor of the FTHBI because by sharing equity with the government, first-time home buyers in specific segments are able to reduce the cash required for their weekly or monthly payments,” says Vancouver-based Rob Regan-Pollock, senior mortgage broker, Invis Inc., and co-chair of the Canadian Mortgage Brokers Association. “It’s another tool in the quiver for mortgage brokers and agents that are helping first-time home buyers earning less than $120,000 annually get into markets where they can purchase a home for under $500,000.”

Let’s look at the financial impact the FTHBI would have on a family buying a $200,000 and a $500,000 home.  With a 5% or $10,000 ($20,000 total with FTHBI) down payment on a $200,000 home, the buyers will save $114 a month or $1,372 a year. If they put $25,000 down ($50,000 with FTHBI) on a $500,000 home, they’ll reduce their monthly payments by $286 a month or $3,430 annually.

Now that you know exactly how the FTHBI could help you achieve your dream of home ownership, you can start planning your future to take advantage of the upcoming federal election, the staggeringly low fixed rate interest and softer markets in various regions of Canada.

Source: REW.ca – By Kara Kuryllowicz September 5, 2019

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