Don’t be fooled by all the recent hype in the media lately about housing bubbles, interest rate increases and Canadians carrying too much debt. Canadians are in a good position, financially, and incomes and employment will increase in 2011.

According to economist Benjamin Tal, who recently spoke at a mortgage conference, the ratio of mortgage holders who are 35+ years old and making over $50,000 (adjusted for inflation) has steadily increased in the last 5-10 years and that current rates are probably good until the middle of 2011. The rates are expected to rise slightly then, which is also a good sign that employment is rising.

So, putting off the decision to purchase your first home might not be the best idea – it’s still a good time. And don’t be too concerned if you are a first time buyer and think you don’t have enough down payment.   In Canada, we have mortgage insurance, which allows home buyers to get a mortgage with only a 5% down payment – we call it  high-ratio because it is less than 20% per down, which is needed for a conventional mortgage. It doesn’t mean you pay higher interest rates. There are a number of programs in place for first time buyers.

Here are some of the guidelines to quality for a high-ratio mortgage. The property must be in Canada and your 5% down payment has to come from your own resources or can come from family. The total amount of your principle, interest, taxes, your heating bill and 50% of condo fees, if applicable, cannot exceed 32% of your gross income. This is called Gross Debt Service.  Add on the rest of your household debt, which includes credit cards, loans, etc. and the amount cannot exceed 40% of your gross income, which is called your Total Debt Service. There is also a premium charged for the mortgage insurance, which is tacked on to your closing costs.

For those of you who want to get into a house before the holiday, let’s get you pre –approved. Contact me for more information or if you just want to ask some questions for future reference.

Until next time,

Jessi

Vancouver Mortgage Broker

I am a first time buyer and want to know where do I get my down payment?

So you’re thinking about take the leap into home ownership as a first time buyer? It’s a great time to do it — interest rates are low, home prices are stabilizing, and the economy is turning around.  But you’re new to this and are not quite sure if you qualify or even if you have enough money for a down payment. It’s probably less than you think.

All you need to get into your home is 5% of the purchase price of the home as a down payment. Ideally, you’ve saved the down payment in a savings account or have an RRSP which you can withdraw up to $20,000 with no penalty.  But, if neither of those work for you, don’t worry, there are still a few options.

Consider these:

• Your parents or a close family member gifts you the down payment
• You can borrow the down payment – the payment gets factored into your debt service ratio
• You can sell some personal property
• You can sell any assets, such as stocks or bonds
• Find out if there’s any cash value built up in your life insurance policy
• If you have a large credit limit you can get a cash advance on your credit card. Once again the payment will be factored into your monthly debt service.
• You can ask a friend or a family member to guarantee the mortgage
• If you have some funds saved but not enough, you could qualify for a second mortgage.

There’s one more source for the down payment and that’s the vendor take back. Basically the vendor of the home will lend you the down payment in the form of a second mortgage. The idea here is to get you into a home for the short term – one or two years — so the equity builds and at the end of the term you would be able to refinance and pay out the second mortgage.

Whether you’re ready to take the next step or are still in the thinking stage – let’s talk.

Until next time

Jessi