Three tips for first-time home buyers

Purchasing your first home is an exciting process, and with research and assistance from the right professionals, it can also be stress-free. As a first-time buyer, you're bound to have questions. Here are some helpful hints for home buyers who are just starting out.

Before starting to search for your dream home, it is extremely important to know what you can realistically afford. It is too easy to get caught in a cycle of disappointment when you're finding properties you love, but that don't fit your budget. Additionally, you need to make the distinction between what you will be approved for versus your budget. Acquiring a mortgage for a lower amount than a lender will allow will not only make budgeting easier, it will also give you the opportunity to pay it off faster.

The recent reduction of the maximum amortization period on insured mortgages from 30 to 25 years has had a dual effect. While it has increased the amount of a monthly mortgage payment on any given mortgage, it has also allowed home owners to reduce their mortgages at a faster pace, which shouldn't break the bank if you have budgeted correctly. Colette Delaney, Executive Vice-President of Mortgage Lending, Insurance and Deposit Products at CIBC says, "Your mortgage payments should fit your life - you shouldn't have to fit your life into a mortgage payment."

Finally, before diving in to your house hunt, talk to a Mortgage Broker and obtain a pre-approval. Securing a pre-approval not only gives you an idea of what your mortgage rate and payments will be, but will make the process much smoother when you finally do find your first home. It gives you time to iron out any potential issues that may come up when securing financing and take care of them before you make an offer.

Click here for the full article from Moneyville.

The costs of buying and selling a home

Saving up for a down payment on your first home can be a long process, and once that goal has been reached, the additional costs to purchase a home are often forgotten. Legal fees, property tax adjustments and interest adjustments are among the most commonly overlooked fees associated with buying or selling a home. In this article from Moneysense, Gail Vaz-Oxlade gives an overview of the costs you should be prepared to pay before signing for your first mortgage.

When buying a home, you will need a lawyer to close the deal. Legal fees will vary depending on the lawyer you choose, so it is a good idea to consult your Mortgage Broker, who will be able to provide recommendations. It also doesn't hurt to shop around a little and compare who charges what. Vaz-Oxlade recommends going to a lawyer who specializes in real estate law, as chances are you will pay less.

For those who are new to the home buying experience, paying a "property tax adjustment" may come as a surprise, but the process is actually quite simple. If the current occupant of the home you are purchasing has paid property taxes for months that you will be living in the house, as the new occupant, you are responsible for paying those back. Your real estate lawyer will take care of the calculations and reimburse the seller.

Follow the link for the full article from Moneysense.

You and your credit score

When going through the mortgage application process, your lender will need to access your credit file. Your credit file contains a history of what you owe, including credit cards with no outstanding balance. This report is one of the ways a lender will assess if you are a favourable candidate to lend to. So what if an application is denied, citing the applicant's credit report as the reason? In this article, Gail Vaz-Oxlade talks about companies who will offer to fix a less than stellar credit score for a fee, and how more often than not, these are fixes you can do yourself.

It is recommended to check your own credit file every six months to ensure the information contained is correct. You can request a copy of your personal file to be mailed to you at no charge by contacting one of the main credit reporting firms in Canada: Equifax Canada Inc. or Trans Union of Canada Inc. If your file contains erroneous information, simply contact the reporting firm, show proof of the error, and your report will be repaired.

In a case that a credit report is damaged because of late or missed payments, higher than normal balances or financial hardships such as bankruptcy, the only thing that will fix it is time. Paying bills promptly and managing credit wisely over time will repair a damaged credit report. For more hints on controlling your credit rating, talk to a qualified Mortgage Broker.

Click here for the full article from Moneysense.

Mark Carney to give ample notice of any interest rate hikes

The Bank of Canada decided once again to hold the benchmark rate at 1%, a decision that didn't come as a surprise to Canadians. The most significant change in this announcement was that the bank's governor, Mark Carney, omitted his usual statement about the necessity to raise rates in the future. Previous to the bank's announcement, Carney gave a speech in Nanaimo, B.C., and pledged to Canadians that going forward,  he will be transparent regarding the central bank's decisions - thus limiting the uncertainty many are feeling.

This piece from CBC news cites the example Carney gave in his speech; that if the decision to raise rates was made, he would make it clear how long the measure would take to work. He added that raising rates remains a "hypothetical question" at this point, yet the bank is not ruling it out. It is the Bank of Canada's intent to supply Canadians with a sense of security when it comes to planning their finances. The hope is that this transparency will give Canadians this confidence. The bank's main concern has been household debt, however recently introduced mortgage regulations have proved to have their desired effect, thus eliminating the immediate need to raise the benchmark 1% rate.

Carney also spoke about the resiliency of the Canadian economy, pointing out that in the wake of the global financial crisis, it has strengthened. "As Canadians, we need to focus on what we can control," stated Carney. "We can improve Canada's low productivity growth and sharpen our focus on emerging markets. And we can continue to invest in our greatest resource - our people."

Click here to read the full article from CBC News.

Canadian home sales in September

The Canadian Real Estate Association (CREA) released their monthly statement this week detailing resale home activity for the previous month. According to this report, Canadian resale housing activity saw its first monthly increase since the spring, up 2.5% from August. The activity is positive news, marking a recovery from the drop the market experienced in the wake of new mortgage legislation initiated earlier this summer.

Markets reporting an increase in activity include Vancouver, Calgary, Edmonton, Toronto and Quebec City. Despite the new mortgage regulations slowing national sales activity, CREA President Wayne Moen advises not to rely heavily on national sales figures. " ... national figures mask diverging trends in different markets, with activity down in some places while sales elsewhere remain strong. As always, all real estate is local, so buyers and sellers should talk to their Realtor to understand how the housing market is shaping up where they live or might like to."

As new mortgage legislation is likely to make many buyers reassess their dreams of home ownership, it is recommended to talk to a qualified Mortgage Broker, who can assist in creating a realistic budget and examine if now is the time to buy.

Click here for the full article from The Canadian Real Estate Association.

Canadian Mortgage Broker Launches a Mobile Mortgage App

Mortgage Brokers City has officially announced the launch of a free mortgage calculator app with access to live up-to-date mortgage rates, information and mortgage advice. Available on all Android, Blackberry and iPhone devices, the app allows users across Canada to have a seamless mortgage experience from start to finish.

One of the most valuable features of the app is the live rate feed, that gives users access to a real-time representation of the lowest mortgage rates available. Unlike other apps, which may post default rates or higher rates, the Mortgage Broker City app gives users a real representation of what their mortgage payments will cost, allowing them to plan accordingly and build a budget. Sheri Creese, Vice President of Sales and Service for Mortgage Brokers City said: "This app gives instant answers to the two questions we get most often from our clients; How much will my payments be, and how much will it cost up front, including my down payment?" In addition, the app provides province specific calculations that incorporate Land Transfer Tax and PST, some of the most commonly overlooked inclusions in the cost of a mortgage.

Users of the app that wish to have additional information or advice can contact Mortgage Brokers City at the touch of a button. Licensed representatives are able to assist clients in Alberta, British Columbia, Saskatchewan, Manitoba, Ontario and Quebec.

To download any version of the free app, visit www.mortgagebrokers.ca or click on the appropriate link below:

Mortgage Brokers City App for Blackberry: http://tinyurl.com/9slmex7

Mortgage Brokers City App for iPhone: http://tinyurl.com/94r2q4t

Mortgage Brokers City App for Android: http://tinyurl.com/8w3orpe

Click here for the full press release from Marketwire.

Mortgages for the self-employed

There are many challenges to being self-employed, but home ownership shouldn't be one of them. For self-employed individuals, the process of applying for a mortgage or refinancing is likely to be more complex than it is for salaried workers. Proof of income is an essential part of the qualification process, and obtaining this proof is not always easy for those who own a business and do not have the same income from week to week. This can be not only challenging when approaching a lender, but frustrating for the applicant. This article from the Globe and Mail provides readers with a helpful basis to better prepare for the application process.

When a lender deals with a client who is self-employed and cannot provide what is referred to as verified income, they instead must rely on stated income. Stated income can be proven to a lender through tax returns, notices of assessment, and financial statements. Although the mortgage is for the individual, the lender is examining the business in addition to the applicant. Simply put, the applicant must show the strength of the business to prove they will continue to have the income to pay the mortgage in the future. The more information an applicant can provide to their lender, the easier it is for the lender to make an objective decision to approve or decline the mortgage. Other information it may be prudent to provide can include: proof that HST or GST payments are up to date, business contracts to show expected revenue, personal and business credit scores, and proof of assets owned by the business.

An easy way to make the somewhat complicated process a little smoother is to consult a qualified Mortgage Broker, an individual who will not only cultivate a relationship with the client, but their business as well. A Mortgage Broker will navigate the process with the client, find out exactly which documents the lender will need, and handle any negotiations.

Click here to read the full article from the Globe and Mail.

Single home buyers face different challenges than couples

Recently released information from Statistics Canada shows that the percentage of Canadians purchasing homes alone is increasing. According to the recent statistics, 27.6% of all homes in Canada are occupied singly. A shift in lifestyles (including people choosing to marry later in life or not at all) combined with low mortgage rates, is believed to be a significant factor influencing this increase. In a recent Globe and Mail article, readers learn that along with the many rewards of home ownership, single home buyers will likely face challenges that differ from those couples face.

Budgeting methods are bound to change slightly when making the transition from renting to owning. Home owners are solely responsible for maintenance, repairs and emergencies that occur within a home, and saving for the unforeseen can be more difficult when there is only one income supporting the household. Mortgage payments will become the number one priority, meaning some will have to sacrifice other expenses. Experts suggest making small changes where possible, such as cutting down on evenings out or forgoing vehicle ownership in favour of public transit. Some home owners take advantage of their new property by renting out parking spots, spare rooms or basements to provide extra income.

Saving for a down payment can be one of the largest hurdles a new home buyer will face. Saving as much as possible will not only cut down on monthly mortgage payments, but will decrease the total amount of interest over the lifetime of the mortgage. One should also be mindful of the extra costs associated with purchasing a home, such as legal fees, closing costs, land transfer tax and moving expenses. When it comes to home ownership, saving as much as possible is key. For those who are still unsure if it's the right time for them to pursue home ownership, experts suggest making a detailed budget to see if they can realistically carry a mortgage. There are multiple resources available, such as online mortgage calculators and professional Mortgage Brokers, to assist in making this important financial decision.

Click here for the full article from the Globe and Mail.

Understanding your mortgage options

For many home buyers, the most important feature of their mortgage is the interest rate. As your mortgage is likely the largest debt you will acquire, paying the least amount of interest possible is important. Aside from a low mortgage rate, there are several other factors to take into account when shopping around for a first mortgage, or renewing for another term. Before settling in for five or ten years, be sure to look into the additional features of your new mortgage and whether they will fit your needs.

When deciding on a mortgage rate, it can be difficult to decide between fixed or variable. A fixed rate offers the security of always knowing what your interest rate is and what your monthly payments will be, while a variable rate offers the ability to take advantage of the lowest rate possible, depending on market conditions. Many will shy away from variable rate mortgages because of the uncertainty of fluctuating mortgage payments. However, many lenders offer the option to make fixed payments on a variable rate mortgage. If the interest rate decreases, a larger percentage of the monthly payment goes towards the principal and vice versa. This option offers the best of both worlds: the stability of the same mortgage payment each month with the benefit of the lowest possible mortgage rate.

An increasing number of Canadians are paying their mortgages off faster by periodically making lump-sum payments, also known as pre-payments. This is a fantastic way to reduce the debt, but it is important to note that lenders will normally set a limit to how much can be pre-paid. For most lenders, the limit is set at 15-20% of the mortgage balance per calendar year, but can differ from one lender to another, so find out for sure before diving in. Consulting a professional Mortgage Broker is an easy way to navigate the sea of mortgage questions. They will seek out lenders on your behalf to find not only the lowest possible mortgage rate, but also the most favourable mortgage terms based on your financial situation.

Click here to read the full article from Moneysense.

Personal Finance 101

For many, the month of September means back to school. Whether starting classes or setting kids up for their first year of college or university, this month is the time to start thinking about hitting the books. In this article from the Globe and Mail, we learn that the majority of students believe that money management should be among the subjects offered to students. On average, when students finish their tenure at a post-secondary institution, they will be in approximately $27,000 in debt, and among those surveyed, very few feel they will be prepared to manage their finances. The survey found that 69% of students polled believe personal finance should be brought to the classroom, an increase of 12% from 2009, when the survey was last conducted.

With tuition fees rising, and the issue of personal debt becoming more prevalent, students are becoming more aware of the importance of being prepared. However, the survey noted that only a quarter of respondents believe that their school supplied them with the necessary financial information. Students are saying their main financial concern is paying for post-secondary education, yet only 3 out of 10 are saving for school. Bigger financial steps like applying for a mortgage or saving for retirement may seem far off, but giving students the tools they need early on will give them a good foundation for financial success later in life. A non-profit financial literacy group, the Investor Education Fund, is assisting in the creation and implementation of a program that will introduce money management into the curriculum for grades 4-12. It is the hope that schools will begin to acknowledge that financial literacy is of significant importance for students.

Click here for the full article from the Globe and Mail.