Posts Tagged ‘financing’

                                                                                                                      Home buying 101

 

What eager first-timers need to know before the house hunt

 

You’ve saved for your down payment, you’ve crunched the numbers and you’ve decided on the neighbourhood where you want to live – but are you really ready to start shopping around?

 

“Buying your first home is one of life’s most exciting milestones, but there are lots of steps on the way to crossing the threshold as an owner for the first time,” says Brad Gavin, mortgage consultant with Mortgage Intelligence in Calgary. “To make sure this process goes smoothly, you’ll need to get financing advice right from the get-go and do some work in advance.”

 

Brad breaks the process down with the following tips: 

 

Get your down payment and deposit ready. A down payment must come from your own resources, and in most cases must have been held in your account for at least 90 days. Using a gift from your parents or other family member for a down payment?  You’ll need a letter stating that it is actually a gift and does not need to be re-paid. These funds will likely need to be deposited in your account two weeks before your purchase closing date.

 

The Home Buyers’ Plan is another financing option for first-time buyers. It allows you to withdraw up to $25,000 ($50,000 per couple) from your RRSP to buy or build a home. 

 

Keep in mind that when placing an offer, a deposit is usually required. It can be all, or part, of a down payment.

 

Figure out what you can afford. The best way to do this is by talking to a mortgage expert and getting pre-approved for a mortgage. A mortgage consultant can provide examples of what monthly payments and home buying costs will be, to eliminate surprises.

 

“A major benefit of a pre-approval is that most financial institutions will lock-in a rate for up to 120 days,” advises Brad.  “This is very helpful if you’re buying in a rising rate environment.” 

 

Get in touch with the professionals. Think of home buying as a team sport – a mortgage consultant can help you find a good real estate agent, real estate lawyer, home inspector and home insurance agent. Be sure to get in touch with these professionals early in the buying process to avoid last-minute scrambles.

 

Come up with an offer strategy. In competitive real estate markets, it is common for vendors to put off accepting offers until a particular date. This means buyers may be bidding for a home along with several other parties. It’s easy to get caught up in the emotion, so it is important to decide on a maximum price before bidding and to stick to it.

 

Choose your mortgage strategy. Ask yourself: Do I want the stability of a fixed-rate mortgage or am I comfortable with the potential rewards and risks of a variable-rate loan? A mortgage expert can help you decide which one makes the most sense for your financial situation, as well as help you understand your payment options and the other features of various types of mortgages.

 

Get ready to close. When buying a home, it pays to learn about closing costs, which can represent up to 3 per cent of the purchase price, including land transfer tax, lawyer’s fees, appraisal fees, title insurance and home inspection fees.  A mortgage professional can help estimate how much these will cost and offer ideas for how you can cover these costs.

 

”A lot of first-time buyers can’t wait to get out there and house hunt, but they need to understand that this is not a decision to enter into lightly,” says Brad. “But with careful planning and expert advice, you can make your first home – and your first mortgage – work well for you in the long term.”

 

 

 

 

____________________________________________________

Brad Gavin – VP, MBN Group of Companies

Mortgage Broker – MBN Mortgage Ltd (Associated with Mortgage Intelligence)

111 5809 Macleod Tr SW

Calgary, AB T2H0J9

(403) 685-7025 wk

(866) 955-9662 toll free

(403) 968-5337 cell

(866) 269-3499 fax

bgavin@mbnltd.com  

www.mbnmortgage.com

Credit Scoring

The credit score, also referred to as a “FICO score,” is a mathematical formulae created by Fair, Issac and Company.

The credit score is used by most companies to decide if the applicant is a good credit risk or not. Equifax and Trans Union will calculate the numbers from the credit report and generate a number between 300 and 900.

A low score indicates a bad risk. A score of 700 or more puts the applicant in the lenders’ good books.

 How scores are calculated:

Factor Weight Points Payment History Bankruptcies, late payments, past due accounts and wage attachments, collections, judgements 35% 315 Amounts Owed Amount owed on accounts, proportion of balance to total credit limit 30% 270 Length of Credit History Time since accounts opened, time since account activity 15% 135 New Credit Number of recent credit inquiries, number of recently opened accounts 10% 90 Types of Credit Number of various types of accounts (credit cards, retail cards, mortgage) 10% 90 Potential Totals 100% 900

How Clients Can Improve Their Credit Score

1. Order a copy of the credit report, review it carefully and correct any significant errors.
2. Pay bills on time.
3. If there is a questionable credit history, they could open a few new accounts and use them responsibly, paying them off on time.
4. Avoid opening accounts without intention of using them. Having five or six of the same credit card type (e.g., Visa), is not favourable.
5. Having a credit card or instalment loan can help boost a credit score, as long as the balance is not too high.
6. Keep balance low in relation to available credit. If the credit limit is $10,000, keeping the balance below $2,500 (or 25 per cent of the limit) will improve the score. Balances of more than $7,500 (or 75 per cent of the limit) will decrease the score. Going over the limit has an even more negative effect.
7. Pay off credit card debt instead of moving it around to lower rate cards. Moving balances to other credit cards (i.e., “balance transfer”) and closing an old account can hurt the score.

 

The Canadian Real Estate Association Records show that the number of listings across Canada has increased since the beginning of the year, and peaked at 80,000 in July.  This has set a brand new record for the number of new listings in one month.

While sellers are maintaining their share in the marketplace there is a definite power-shift towards buyers.  Calvin Lindberg, Association President, commented saying “the more listings there are on the market, the bigger the impact on the average price”, suggesting that prices will have to decrease due to the abundance of houses on the market.

Buyers are presented with increased options and are able to scrutinize their selection and sellers will have to react accordingly; their pricing expectations are required to change, as well, they must realize that their leniency with buyer’s conditions must also shift.

Prices across Canada are having varied reactions to the current US market and Alberta is no exception.  With prices softening out west the national average is declining and as a result, the average price decreased by approximately 2.4% from last year.  The resale housing market is much more balanced this year than last but while we are currently seeing a National Average decrease, house prices in Calgary will continue to increase in the latter half of 2008, but at a more modest pace than we saw in the previous year.  The Calgary decline has been a reflection of the entire Canadian market:

five of the major markets saw price declines. In Vancouver, prices dropped 5.2% in August from a year ago to an average of $557,114. Calgary prices were down 8% during the same period to $390,091.

In Toronto, home prices are no longer keeping pace with inflation with the average price of a home up 0.8% in August from a year ago.

The statistics show activity slowing rapidly with 22 out of the 25 markets down from a year ago. Sales declines were off more than 15% in almost half the markets with Vancouver activity off 53.9% from a year ago

The abundance of Financing Options available to consumers paired with the more modest home prices, has turned the Calgary Real Estate Market into a Buyer’s Market.  Those individuals who thought they “missed the boat” by not purchasing property before the boom hit a year and a half ago, are now seeing their second chance.

MBN Mortgage

 

 

 

 

Statistics pulled from CBCNews.ca