I hosted my first home buyer seminar for 2013 on January 23, 2013 educating the attendees about the process of buying a home in lower mainland and the important of having a pre-approved mortgage. My buyers are unaware of the pre-approval process and are under the assumption that they could only apply for a mortgage once they have an accepted offer.
While there are indications that Canadian Housing market is coming in for a soft landing; the pre-approvals are more important today because under the new mortgage lending guidelines, buyers are required to qualify for a moretgage at the posted five-year rate, around 5.24 per cent, even if they opt for a less expensive mortgage term, such as a variable rate or a one year term. This is a stress test built into the system to ensure folks can afford what they're buying because the average canadian consumer debt is at this highest currently.
Downpayment is another important aspect and there are number of different strategies that buyers can use to save for the down payment. With an RRSp, clients can withdraw upto $25,000 for the purchase of a home. For those customers that may not have a history a great tip is to take out an RRSP loan. Obviously pay it back quickly with the tax refund and you have established credit by borrowing but then you can use those funds to make that purchase of a home.
Buyers should avoid the temptation of low-cost variable rate mortgages and lock into longer term rates which currently are at near record lows. Buyers must also take advantage of shorter amortizations and flexible lump-sum payment options to pay off their mortgage faster.
So get a pre-approval before you shop for a home. And if you require more assistance feel free to get in touch with me at 778.240.3119 or register for my next Home Buyer Seminar.
Source: Some Excerpts from REW