What Challenges do Home Buyers Face Today?
The question was posed to Betty Talbot; mortgage broker for Centum Omni Mortgage Corp.
Betty gave 6 informative responses.
“We are definitely noticing the affect that a fourth round of mortgage rule changes has had on home buyers.
“1. CMHC and other default insurers have definitely tightened up on their approval process. They have a guideline of no derogatory credit within 12 months of the mortgage loan. Yet they have turned down credit-worthy people who had an unpaid debt prior to the 12-month guideline.
“2. If the mortgage insurer audits a transaction and finds a problem, the insurance on that deal is voided. As a result, mortgage companies are reluctant to lend on some transactions.
“3. Lenders are looking at the overall strength of a mortgage application. As an example, one couple was turned down because they had two older cars that might cause them to obtain a vehicle loan over next couple of years.
“4. According to one insurer, the Niagara region seems to be experiencing high levels of mortgage fraud.
“5. Some people just lack basic budgeting and banking know-how. Others are simply careless.
“6. Until recently, buyers too often purchased a home at their maximum qualifying point or even higher than recommended, and the deal would get done. With the new rules, the onus is now on the lender to ensure the amount and the type of mortgage selected is “suitable” for the individual borrowers. That means a further tightening by lenders because they are now being held accountable if a mortgage goes bad.
“More than two thirds of Canadians are ‘comfortable with their debt’ and are able to pay down their mortgages…one-third of borrowers made additional payments or accelerated payments to their mortgages,
87 per cent of homeowners have at least 25 per cent equity on their homes, and 61 per cent of consumers who renewed their mortgage in the past year saw a reduction in their interest rates.”