3 STEPS TO TAKE YOU FROM PRE-APPROVAL TO GETTING THE KEYS

Picture this: You’ve finally been able to put away enough for a down-payment on your dream home. It’s taken you five years of diligent saving, but you did it! You have also been diligently working on improving your credit score and paying off debts and are at a place of financial stability. So, first of all, KUDOS TO YOU! Second…now what do you do? Here are the three steps that will take you from browsing new homes to getting the keys to your new place.

STEP 1: PRE-APPROVAL
This should actually be the step BEFORE house hunting. Visiting your mortgage broker to get pre-approved is the first step anyone looking to buy a home should do. When you meet with your broker for the first time they will:
• Have you fill out an application (or you might be able to fill out one online)
• Pull your credit
• Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information when you visit your broker to apply, including a letter of employment/pay stub, down payment verification, two years notice of assessment and/or T4’s, a void cheque, and a number of other potential documents.
Once you are pre-approved it’s house hunting time for you! The benefit of having this done BEFORE you start looking is that you can work with your realtor to find properties within that price range.
When you do find just the right home for you, it’s on to step two.

STEP 2: APPROVAL
If you were able to provide the bulk of the paperwork for your pre-approval, then it will be smooth sailing from here. You may have to supply a few pieces of updated information but otherwise, it’s up to the lender to do the hard work at this point.
Your application will be re-assessed, and the lender will take a look at the property you are purchasing. Once they confirm that it aligns with the guidelines they have laid out for your loan, then it is sent off to the mortgage default insurer for approval. At this point, make sure that you do not remove the financing condition until all the lender conditions are met.
Now that you have final sign-off and are waiting for the final conditions to be met, it’s on to step three.

STEP 3: FINAL STEPS
Your broker will notify you once the conditions have all been met, and the lender will send the paperwork over to the Lawyer’s office. The lawyer will take a few days to go through the mortgage and prepare it for your final sign off. When you go, you will be asked to present:
• Void Cheque
• Two forms of identification
• Balance of the down payment in the form of a bank draft

On the day of funding, the lender will send the funds to the lawyer who sends them to the seller’s lawyer who upon receiving the funds will give you the all clear.
All that’s left is to hand you the keys to your new home!
As one final step, keep asking questions at each stage of the mortgage process. You should check in with your Dominion Lending Centres mortgage broker if you have any questions along the way. They are happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

JUNE HOME SALES STOPPED DETERIORATING IN THREE WESTERN PROVINCES

Statistics released late last week by the Canadian Real Estate Association (CREA) show that national home sales were little changed in June following gains in the prior three months. Housing activity remains well below levels recorded over much of 2015-2017–the boom years. As the chart below shows, national sales have moved up to close to their 10-year average and are up nearly 10% from the six-year low touched in February of this year.

Underlying the flat national sales performance, was an even split between the number of local markets that posted sales gains and losses. More considerable monthly increases were generally focused in Quebec and Southern Ontario. They were offset by declines in Greater Vancouver, Calgary, Halifax-Dartmouth and the province of Newfoundland and Labrador.

Year-over-year, sales edged up 0.3%, with gains in Greater Toronto and Montreal offsetting declines in BC. According to Gregory Klump, CREA’s Chief Economist, “There’s a growing divergence in Canadian housing market trends between eastern and western Canada. While sales activity in Canada’s three westernmost provinces appears to have stopped deteriorating, it will be sometime before supply and demand there become better balanced, and the outlook for home prices improves.”

New Listings
The number of newly listed homes edged up 0.8% in June. Stable sales and a slight increase in new listings caused the national sales-to-new listings ratio to ease marginally to 57.1% in June from 57.7% posted in May. This measure remains within close reach of its long-term average of 53.5%. Based on a comparison of the sales-to-new listings ratio with the long-term average, over 80% of all local markets were in balanced market territory in last month, the largest share in more three years.

The number of months of inventory has swollen far beyond long-term averages in the Prairie provinces and Newfoundland & Labrador, giving homebuyers an ample choice in these regions. By contrast, the measure remains well below long-term averages in Ontario and the Maritime provinces, resulting in increased competition among buyers for listings and fertile ground for price gains.

Home Prices
Although the seasonally adjusted Aggregate Composite MLS® Home Price Index rose 0.3% in June from the month before, it was still running 1.1% below the peak reached in December 2018. The overall trend has remained stable since March amid divergent regional trends. Seasonally adjusted MLS® HPI readings in June were up from the previous month in 9 of the 18 markets tracked by the index, with virtually all of the gains recorded in housing markets east of the Prairie region.

Prices were flat on a month-over-month basis on Vancouver Island and in Calgary, Edmonton, Regina, Saskatoon and Moncton. Material declines were limited to the GVA (-1.3%), the Fraser Valley (0.8%) and the Okanagan Valley (-0.5%). (see Table below)

By contrast, monthly gains were posted in Barrie (+1.4%), Hamilton (+1.3%), Niagara (+1.2%), Guelph (+1.1%), Ottawa (+0.7%), Greater Montreal (+0.7%), the GTA (+0.6%) and Oakville (0.3%).

The actual (not seasonally adjusted) Aggregate Composite MLS® Home Price Index edged down by -0.3% y/y in June 2019. For the second month in a row, all benchmark property categories tracked by the index posted y/y declines.

On a national basis, two-storey single-family home prices were little changed from last June, edging back 0.1%. By comparison, one-storey single-family home prices posted the most substantial y/y decline (-0.8%) among benchmark property categories. Meanwhile, townhouse/row prices were down by 0.7% y/y and apartment unit prices edged back by 0.4%.

Year-over-year trends continue to vary widely across the country, with the central theme being a growing divergence in trends between eastern and western Canada.

Results remain mixed in British Columbia, with prices down on a y/y basis in Greater Vancouver (-9.6%), the Fraser Valley (-6.6%) and the Okanagan Valley (-0.8%). Meanwhile, prices edged up 0.5% in Victoria and climbed 4.2% elsewhere on Vancouver Island.

Among Greater Golden Horseshoe housing markets tracked by the index, MLS® HPI benchmark home prices were up from year-ago levels in Guelph (+6.8%), the Niagara Region (+6.7%), Hamilton-Burlington (+5.4%), the GTA (+3.6%) and Oakville-Milton (+3%). By contrast, home prices in Barrie held below year-ago levels (-2.4%).

Across the Prairies, supply remains historically elevated relative to sales and home prices remain below year-ago levels. Benchmark prices were down by 3.9% in Calgary, 3.2% in Edmonton, 4% in Regina and 1.1% in Saskatoon. The home pricing environment will likely remain weak in these cities until demand and supply return to better balance.

Home prices rose 8.3% y/y in Ottawa (led by a 13.2% increase in townhouse/row unit prices), 6.7% in
Greater Montreal (driven by an 8% increase in condo apartment unit prices), and 1.3% in Greater Moncton (led by an 18.4% increase in condo apartment unit prices).

Bottom Line: The Bank of Canada is getting its predicted rebound in economic activity in the current quarter and believes growth will accelerate further in Q4 and 2020. That should keep the Bank on the sidelines for some time. Currently, the markets are expecting the Federal Reserve to cut interest rates later this month and to continue to do so in 2020. Indeed, President Trump is lobbying hard for rate cuts.
It is unlikely that the Bank of Canada will follow the Fed unless the trade war with China worsens. The White House has succumbed to political pressure to reduce trade tensions. Trade uncertainty is the only thing right now that would derail the Canadian recovery.

DO YOU UNDERSTAND THE B-20 GUIDELINES?

A new survey has emerged showing that out of 1,901 owners and would be homeowners, 43% (more than two out of five) Canadians are not confident in their knowledge of the mortgage stress tests—despite them being in place for more than a year now.

We wanted to give you a brief set of notes regarding the guidelines. This is something you can use and reference whether you are a first-time home buyer or looking to refinance underneath these new guidelines. It gives a clear picture of what/how you are impacted as a buyer or someone who is looking to refinance.

Here’s what you need to know about B-20:

The average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power under these guidelines reduced 15-25%. Here is an example of the impact the rules have on buying a home and refinancing a home.

PURCHASING A NEW HOME

When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:

REFINANCING A MORTGAGE

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify to borrow it.

Source (TD Canada Trust)

These guidelines have been in place since January 1, 2018 and we are starting to see the full impact of them for both buyers and those looking to refinance. Stats are showing that there is a slowdown in the real estate market, however there is also a heightened struggle for many buyers to now obtain approval under these new guidelines. It’s a difficult situation as the cry for affordable housing is still ongoing as the new guidelines may slow down the market but appear to further decrease the borrowing/buying power of individuals.
Keep in mind, this is just a brief refresher course on the B-20 guidelines. As always, if you have more questions or are looking for more information, we suggest that you reach out to your Dominion Lending Centres mortgage broker to discuss and get a full and detailed look at how it will impact you personally.

REVERSE MORTGAGES – TRENDING NOW

With approximately 1,000 people retiring every day in Canada, it’s not surprising that there has been an increased demand for Reverse Mortgages.
A Reverse Mortgage can assist people aged 55+ to realize their dreams in retirement. Whether they want to travel, help their kids or grand kids or even just supplement their monthly income, a Reverse Mortgage can be an effective way to have their home assist them to meet those goals.
There is a lot of misinformation out there however, that could make people hesitant to get into a Reverse Mortgage.
Many people think that the Bank will own their home but this is completely untrue. A Reverse Mortgage is just that – a Mortgage registered on the home’s Title, just like any other bank mortgage. The client retains full ownership and control of their home. They have the freedom to decide if and when to move or sell.
Another misconception is that you could end up owing more than your house is worth. In fact, due to the Reverse Mortgage lender’s conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. They will only issue a Reverse Mortgage up to 55% of your home’s value so there is lots of equity remaining to offset accrued interest charges even if you choose to make no payments at all.
In fact, over 99% of Reverse Mortgage clients have equity remaining in the home when the loan is repaid.
Many people view a Reverse Mortgage as a ‘last resort’. In fact financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.
Some people think that you cannot get a reverse mortgage if you have an existing mortgage. But many Reverse Mortgage clients use the funds to pay off their existing mortgage and other debts, freeing up cash flow for to use as they wish – and be free of regular mortgage payments too.
I personally have parents over 70-years that could be looking at the expense of Assisted Living for my Mom in the near future. They own their home outright and once both of them are retired that added cost could be too much for their pensions and could force them to sell their home before they’re ready.
I have advised them of the Reverse Mortgage option and we have decided to look into that possibility when the time comes. It is my belief that nobody should feel forced to sell their home and they will explore any options available to them so they have choices.
If you’d like more information on how a Reverse Mortgage may work for you, I recommend speaking with a Dominion Lending Centres Mortgage Professional to get all the facts.

MAY SHOWS SIGNS OF IMPROVEMENT IN BC AND ALBERTA

Statistics released late last week by the Canadian Real Estate Association (CREA) show that national home sales increased in May. Together with monthly gains in the previous two months, activity in May reached its highest level since early last year when the new B-20 stress testing was introduced. While last month’s home sales stood 8.9% above the six-year low posted in February 2019, this latest uptick has only just returned May’s sales level to its 10-year historical average (see chart below). Nationwide, sales were up 1.9% month-over-month, and relative to a year ago, sales rose 6.7% marking the biggest year-over-year gain since the booming summer of 2016.

Sales were up in only half of all local markets, but that list included almost all large markets, led by gains in both the Greater Vancouver (GVA) and Greater Toronto (GTA) areas. There were encouraging bursts of activity in Victoria, Calgary and, to a lesser degree, Edmonton. Resale activity was up 24% from April in Vancouver, Victoria posted a 10% gain, and Calgary resales rose 6.6% month-over-month.

These are early signs that the cyclical bottom has been reached in that region of the country. Market conditions are still soft, though. Property values remain under downward pressure for now with the MLS Home Price Index down from a year ago in May in Vancouver (-8.9%), Calgary (-4.3%) and Edmonton (-3.7%). That said, the rate of decline moderated in Calgary and Edmonton, which is a further sign that these markets are stabilizing.

New Listings
The number of newly listed homes edged downward by 1.2% in May. With sales up and new listings down, the national sales-to-new listings ratio tightened to 57.4% in May compared to 55.7% in April. Based on a comparison of the sales-to-new listings ratio with the long-term average, almost three-quarters of all local markets were in balanced market territory in May 2019.

There were 5.1 months of inventory on a national basis at the end of May 2019, down from 5.3 in April and 5.6 months back in February. Like the sales-to-new listings ratio, the number of months of inventory is within close reach its long-term average of 5.3 months.

Housing market balance varies significantly by region. The number of months of inventory has swollen far beyond long-term averages in Prairie provinces and Newfoundland & Labrador, giving homebuyers in those parts of the country ample choice. By contrast, the measure remains well below long-term averages for Ontario and Maritime provinces, resulting in increased competition among buyers for listings and fertile ground for price gains.

Home Prices

MLS® HPI data are now available on a seasonally adjusted basis in addition to the actual (not seasonally adjusted) figures. On a seasonally adjusted basis, the Aggregate Composite MLS® HPI edged down 0.2% in May 2019 compared to April and stood 1.4% below the peak reached in December 2018.

Seasonally adjusted MLS® HPI readings in May were up from the previous month in 12 of the 18 markets tracked by the index; however, home price declines in the Lower Mainland of British Columbia contributed to the monthly decline in the overall index. Markets where prices rose in May from the month before include Victoria (0.5%), Edmonton (0.2%), Saskatoon (0.4%), Ottawa (0.7%), Niagara (0.2%), Oakville (0.8%), Guelph (0.5%), Barrie (3.6%), Montreal (0.5%) and Greater Moncton (0.5%), with gains of 0.1% in the GTA and Regina. By contrast, readings were down from the month before in the GVA (-1.0%), Fraser Valley (-1.1%), the Okanagan Valley (-1.3%), Calgary (-0.1%) and Hamilton (-0.7%), while holding steady on Vancouver Island outside Victoria.

Trends continue to vary widely among the 18 housing markets tracked by the MLS® HPI. Results remain mixed in British Columbia, with prices down on a y/y basis in the GVA (-8.9%), the Fraser Valley (-5.9%) and the Okanagan Valley (-0.7%). Meanwhile, prices edged up 1% in Victoria and climbed 4.7% elsewhere on Vancouver Island.

Among Greater Golden Horseshoe housing markets tracked by the index, MLS® HPI benchmark home prices were up from year-ago levels in Guelph (+5.7%), the Niagara Region (+5.4%), Hamilton-Burlington (+3.4%), Oakville-Milton (+3.4%) and the GTA (+3.1%). By contrast, home prices in Barrie and District held below year-ago levels (-6.1%).

Across the Prairies, supply remains historically elevated relative to sales and home prices remain below year-ago levels. Benchmark prices were down by 4.3% in Calgary, 3.6% in Edmonton, 3.9% in Regina and 1.3% in Saskatoon. The home pricing environment will likely remain weak in these cities until demand and supply return to better balance.

Home prices rose 8% y/y in Ottawa (led by a 12.2% increase in townhouse/row unit prices), 6.3% in Greater Montreal (led by a 7.6% increase in condo apartment unit prices), and 2% in Greater Moncton (led by a 15.9% increase in apartment unit prices). (see Table 1 below)

Bottom Line: The Bank of Canada is counting on a rebound in economic activity in the current quarter and believes growth will accelerate further in Q4 and 2020. That should keep the Bank on the sidelines for some time. Currently, the markets are expecting the Federal Reserve to cut interest rates in July and to continue to do so in 2020. Indeed, President Trump is lobbying hard for rate cuts. It is unlikely that the Bank of Canada will follow the Fed unless the trade war with China worsens. Political pressure is mounting on the administration to reduce trade tensions. Trade uncertainty is the only thing right now that would derail the Canadian recovery.

1. Change your job.  You were qualified for your mortgage financing based on your income, years at the job and the understanding that you were there for a while. Changing jobs should be put off until after possession day.

2. Changing your name. Make sure that your identification and your name match. Do not change from John Smith to J. Michael Smith during this critical time.

3. Make any large purchases. Put off buying new furniture for your future home or a new car. The debt ratios were calculated based on your present debt obligations. It can also be bad to pay off any existing accounts. Some lenders want you to have some cash in the bank for a rainy day. They may have given you an approval with this in mind.

4. Switch banks or move money to a different institution. This may not sound like much but a paper trail to show your down payment source and the automatic withdrawal forms for your mortgage payments are all set up. You can change them after the house sale closes.

5 . Don’t miss any payments on credit cards or loans you already have. Lenders often pull another credit report a few days before closing. If you’ve missed a payment on your Visa card, it could mess up your home purchase big time.

Finally, check with your Dominion Lending Centers mortgage professional if you are unclear about anything between the time when you receive your approval and possession day.

WHAT QUESTIONS TO ASK WHEN CONSIDERING A REFINANCE

Many of my clients and friends regularly ask me when or if they should consider a refinance. Here are 4 quick questions that I ask of them. The answer they give me, will very quickly tell me if we should be taking a deeper look at the mortgage refinance options available to them.

What do you believe the current value of your home is and what is the outstanding balance on your mortgage?
Have you ever heard your mortgage broker or banker talk about “loan to value”(LTV)? They are looking to determine what your outstanding balance of your mortgage is as a percentage of your property value. The reason we look at your LTV is because there are limits in Canada with respect to how large your mortgage can be based on the current value of your home. This gives your mortgage broker insight into how much equity or money you have access in the event that you were to refinance your mortgage.

What is the maturity date of your mortgage and your current rate/term length?
Understanding who your current lender is, what your maturity date is, and what your rate/term details are, will help your mortgage broker determine what type of penalty you might have for breaking your current mortgage contract. Knowing your rate will also give them the details they require to calculate the interest savings that you would receive from a refinance. When looking to refinance, your mortgage broker should be factoring these potential costs and overall interest savings into their overall benefits analysis when trying to determine if refinancing is the right option for you.

How is your household monthly cash flow impacting your short and long term financial goals?
Budget, budget, budget… this is one of those tools that we all know we should do, but it often gets very little of our attention each month. By understanding how much net income you have coming in each month and where that cash is going (cash flow) we can look at how a restructured mortgage could help. If you are finding that all of your money is disappearing each month and you’re having trouble getting by, a new mortgage can help restructure your monthly debt payments giving you some added breathing room. It is important to note that sometimes it is not about debt payments and it can be about high household expenses. Taking the time to assess your spending and cutting it back if necessary, might be enough to get you back on track. Check out our blog post on basic budgeting tips and tricks.

Looking at your outstanding debt, what are the current interest rates that you are paying and are you only making the minimum payments each month?
A quick snap shot of your current debt load, respective interest rates and monthly payments can give us some insight into how a refinance can save you interest. By understanding what your financial picture looks like and the amount of interest that you are currently paying to service that current debt, we can very quickly estimate how much interest you could save with a refinance. If you take a number of those high interest rate credit cards and roll them into a new, low interest rate mortgage, the savings can very quickly become quite substantial.

In closing, a refinance is a financial tool that can make a significant difference in your current financial picture. If you have reviewed the questions above and would like to take a closer look at your situation, there is never a better time than the present to make a change that will have a positive impact on your future.

Take the time to have a conversation with a Dominion Lending Centres mortgage broker who can give you some insight into how a new mortgage could help you with a brighter financial future.

5 REASONS WHY REALTORS WANT YOU TO HAVE A PRE-APPROVAL

You’ve decided that you want to buy a home and you call up a realtor to show you a listing and the first question they ask is “ How much are you pre-approved for?” Many realtors will refuse to book home viewings until they can confirm that you are pre-approved. Why?

1- It shows that you are seriously committed to a home purchase. I have been told stories by realtors of people booking a series of homes to see and then being dropped off at McDonald’s to be picked up by another realtor to see some more homes.

2.- People have an idea of how much home they can afford. Sometimes this amount is way off. Lines of credit, installment plans, alimony or child support payments or high condo fees can make the amount of house you can afford a lot less than you would expect.

3- Surprises on your credit report. Many times home buyers haven’t checked their credit report before house hunting. An unpaid bill or a dispute with a contractor may result in a lien or collection showing on your credit. There may even be something from a person with a similar name. It’s important to make sure your credit is clean and that it is yours and not someone else’s.

4 –Income issues. A lot of people run out to get a new home when they receive a promotion at work. If the promotion includes a pay hike, is it salary or are they relying on overtime? Mortgage rules demand a two-year history for commission income, overtime or self-employed income. This also can curtail how much you qualify for.

5A – Credibility of the realtor.  When a realtor makes an offer on a home for you, they are not only investing their time and the listing agent’s time but their reputation. Making offers that will not result in a firm sale hurts their reputation in the industry. Trustworthiness and reputation are very important to realtors as they are guiding you in the largest purchase you make in your lifetime.

5B- Negotiating Strength.  In a situation where there are competing offers on a property, the sellers agent will encourage the sells to take the offer that is backed by a pre-approval over another offer that does not have a pre-approval to support it. Your chances of getting your dream home are greatly increased with it.

My one recommendation is that you take the time to contact your favorite Dominion Lending Centres mortgage broker and get pre-approved. It will save everyone time and help avoid disappointment for everyone.