Tag Archive for: mortgages

Closing on a Home Avoid Doing These 4 Things

Closing on a Comox Home? Avoid Doing These 4 Things

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You may breathe a sigh of relief once your offer to purchase a home has been accepted, but you’re not quite done yet. There are still a lot of things to do between the time you come to terms with the sellers and the moment you finally put your key in the front door.

You still have to navigate the closing process; costs are associated with this next step. There are multiple steps involved in the transfer of a home from seller to buyer. Closing times between the time you have an accepted offer and when you move in can vary from a couple of weeks to a few months. This includes time for processing the deposit, conducting a title search, getting a home inspection organized, finalizing the purchase agreement, the lender’s property appraisal, and getting final mortgage approval.

Buyers should budget about 3% of the purchase price towards closing costs, over and above the deposit.

What a lot of people don’t understand is that lenders don’t only evaluate the buyer’s ability to make the mortgage payments. They also look at their ability to pay for all other credit obligations, such as student loans, cars, and lines of credit. And they evaluate the property to make sure their investment is protected and that the value is there.

Below are four things you should not do during the closing process:

Go on a shopping spree

We get it; it’s exciting to start imagining yourself in your new home, and many buyers want to rush out and buy new furniture. Those buy-now-pay-later programs are calculated into the debt servicing ratios. If the lender revisits the buyer’s credit report before completion, which they very often do, and it has changed at all, they actually have the right to withhold financing. It’s important for buyers to maintain the same credit position as at the time of the financing application with their lender.

The same goes for buying a new vehicle. You might be purchasing a home farther from work, but now is not the time to add a car loan to your list of debts. It’s different when you have a car payment before applying for a mortgage—the lender has already taken that into account. But after you’ve been approved for a mortgage, a new car payment will change your credit position. This could cause consequences. You could be scrambling for a different lender at the time of completion, which is stressful for both sellers and buyers. In fact, any new big-ticket item purchases can raise red flags and delay your financing approval—or even ruin it.

    Quitting your job

    Sure, it would be great to have a higher salary now that you’ll be tackling monthly mortgage payments, property taxes, and home insurance. However, wait until the closing process is finalized before you blitz the internet job boards with your resume. Taking a higher-paying job between getting an unconditional accepted offer and completing on the deal could cause issues with the lender. Some of these new jobs, even though the buyer thinks they’re in a better position, come with a probation period. If it’s a temporary or casual position, that could cause a problem.

    Start booking renovation projects

    It’s so tempting to make plans for opening up all the walls in your new home. You may want to rip up the old carpet or gut the kitchen. Although wait times to book contractors can be long, don’t get ahead of yourself. Putting down deposits and signing remodeling contracts is a bad idea until you officially own the home. It’s a good idea to live in the house for 12 months, or some period of time, before doing renovations. This way you can get to know the property and figure out where it’s best to spend your dollars. Of course, if the home you’re buying needs a massive overhaul before it’s even livable, you can get started as soon as all the final paperwork is signed and completed.

    Getting overwhelmed

    Being patient makes sense during the closing process. Your REALTOR will be able to help guide you through it. There are many moving parts to the closing process, and getting overwhelmed can ultimately make it an unenjoyable experience for you. It can become complicated and stressful. It’s important to slow down, take the proper steps, and have a successful completion. Your REALTOR is there to help along the way.

    Reach out to me to learn more!

    financial factors for first time buyers in comox valley

    Financial factors first-time buyers should consider on their path to homeownership

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    Buying your first home is a major milestone . It can be an exciting time, but also can be an anxious one. From mortgages and down payments, to government programs and house hunting, there’s a lot to take in. With the right tools and expertise, it is easy to understand the buying journey. The first step is to make sure you’re financially ready to purchase your first home.

    When buying a home, everything comes down to your wallet. Your monthly income, debts, and credit score will determine the size of the mortgage you qualify for. This will determine what kind of home you can buy and in which location.

    Here are some financial factors to consider on your path to home ownership:

    Assess your fixed and variable expenses

    To get a clear picture of the type of home you can afford, you need to understand your finances. Finances include net income, expenses, debts, and your credit score. First, determine your monthly income and expenses, both fixed and variable.

    • Monthly net income: include your after-tax, take-home income. This should include other income sources like commissions, bonuses and dividend profits.
    • Fixed expenses: regular, monthly expenses like rent, car loans, insurance fees, utilities, etc.
    • Variable expenses: these can change from month to month. They are things like groceries, gas, pet care, and discretionary spending such as dining out, concert tickets, personal care, and other lifestyle expenditures.

    Calculate your debt-to-income ratio

    When assessing your finances for a mortgage, a lender will consider your debt-to-income (DTI) ratio to determine your borrowing risk. The lower the percentage of your DTI, the better.

    To calculate this ratio, divide your total monthly debt payments by your gross monthly income. This includes debt such as car payments, student loans, rent and utilities. If your DTI ratio is above 50%, you may need to take steps to lower your debts and expenses to improve your ratio.

    Conduct a credit score check

    A solid credit score is vital for first-time homebuyers. Usually, a score above 660 is good. It will improve your odds of accessing your preferred mortgage products. A score above 760 is ideal, giving you the best offers and credits available.

    By checking your credit score before pursuing a mortgage loan, you can assess what areas may be helping or hurting your score. A missed payment or outstanding balance could make a difference.

    Understand a pre-qualification vs. pre-approval

    Before you get your heart set on a home, it’s important to differentiate between a mortgage pre-qualification and a pre-approval. Essentially, pre-qualification is a general estimate of your finances. It will show the ballpark range of a mortgage and interest rate you would qualify for today. This can help you to narrow down your home search to property within your price range. A pre-approval is an official assessment by a lender. It will show you the actual mortgage size and rates available to you.

    Determine your down payment and closing costs

    Sale price and mortgage payments are the obvious costs. There are other visible and hidden expenses that you need to consider when it comes to buying a home. Down payments and closing costs are the main two.

    • Minimum down payment requirements: Your down payment can range from as little as 5% to more than 20%. It will depend on how much you have available to put down. Any homes purchased over $1 million in Canada require a minimum 20% down payment. Homes purchased with less than 20% down will require mortgage insurance.
    • Closing costs and fees: You should estimate that closing costs will equal approximately 3-4% of the purchase price. Legal fees and land transfer tax are included in this percentage. Additional costs such as those related to moving, inspection, etc. you should prepare for in advance.
    gen z home buyers in comox valley

    Relocating or lifestyle changes are worth it if Generation Z adults can get into the home ownership market.

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    According to a survey conducted this year by Royal LePage, 83% of 18 to 38-year-olds in British Columbia believe that home ownership is a worthwhile investment. Of those who are not yet homeowners, 77% say they plan to purchase a primary residence in their lifetime. Even though they realize it is expensive to own a home, it is a priority for them.

    The positive association with owning real estate amongst the younger generation was not altogether unexpected. What is surprising and promising is the practical and purposeful way they are tackling the affordability barriers.

    They are focused on saving for a down payment which is often the most difficult hurdle buyers face.

    Purchasing in larger urban markets like Vancouver might not be attainable. However, smaller markets such as the Comox Valley may reap the benefits. The overall sentiment from this demographic is that owning their home, regardless of the property type, is a valuable and worthwhile long-term investment.

    To achieve this, they are willing to make lifestyle adjustments or find alternative ways to enter the market. This may include purchasing with friends or family. It may mean buying a property with the intention of renting part of it to a tenant. It can even mean relocating to more affordable areas.

    For many of these young buyer hopefuls, current higher lending rates are a major barrier. Keeping potential buyers in the rental market longer.

    Now that rates are edging lower, we may begin to see more of these potential homeowners move away from renting and into purchasing.

    Among respondents in British Columbia who do not currently own a primary residence, 75% say that owning a home is a priority. Approximately half of all who responded (51%) really believe this is an achievable goal. The other 49% are split between being unsure whether they will be able to buy and those who are convinced they will not be able to own a home.

    When asked why the goal of home ownership is important to them, the vast majority say they would like their own permanent place to live. Other factors they consider are the stability of owning and the restrictive landlord-tenant policies when renting.

    Homeownership is a highly valued milestone for many in the Generation Z and young millennial demographic. This makes it a key priority for their future.

    While some young buyers expect to receive financial assistance from their families, others are assessing their finances and making the necessary adjustments to reach their goals. They are doing a thorough analysis of their income and spending habits, and are cutting back on expenses where possible.

    Remember that opportunities exist in every market. Don’t feel pressured to act immediately. Take the time to ask questions, understand, and become comfortable with the opportunities available to you.

    I am here to help you with that goal and explain some of the options and possible solutions. Get in touch today!

    Summary

    ● The Royal LePage® 2024 Demographic Survey on the Next Generation of Buyers revealed
    that 84% of respondents nationally believe in home ownership as a worthwhile investment,
    with variations across provinces. 1
    ● 51% of respondents nationally currently own their primary residence, while 35% are renting
    and 13% are living rent-free.
    ● 74% of non-homeowners consider owning a home a lifetime priority, citing reasons such as
    seeking stability and financial benefits. 2
    ● 54% of those prioritizing home ownership believe it is achievable, with 20% thinking it is not
    achievable.
    ● 75% of those prioritizing home ownership plan to purchase a home in their lifetime, with
    varying timelines for purchase, including 40% aiming to buy within the next 5 to 10 years. 3
    ● The Home Purchase Survey by Hill & Knowlton highlighted various steps taken towards
    home ownership, such as saving for a down payment and reducing discretionary spending.
    ● Respondents reported delaying or eliminating major life decisions to save for a home, with
    some receiving financial assistance from family. 4
    ● Canadians showed openness to alternative options for affording a home, including rental
    income and co-owning programs.
    Little Impact to Comox Real Estate Market From Lower Interest Rates

    Little Impact to Comox Real Estate Market From Lower Interest Rates

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    So far, the Bank of Canada’s interest rate cuts are having little impact on housing markets in the Comox Valley. Activity in real estate markets has remained relatively weak with home sales below historical averages in July and August. New listings are edging upward, prices seem to have leveled and residential mortgages are lukewarm at best.


    In the second quarter of the year mortgage balances grew by just 3% annually. This is the second slowest quarterly pace since 2000.


    A lower debt-to-income ratio reduces the vulnerability of people who are trying to purchase and there may be more good news to come.


    If the current trend to reduce interest rates continues, it should lead to a gradual increase in housing activity. Welcome news for sellers and buyers alike, it is expected rates are on the road to more decreases which should spark further interest later this year.

    New Construction remains strong in Comox Real Estate Market

    While the resale market has been sluggish, new construction is strong. The surge of residential starts is dominated by multi-unit construction. Apartment and condominium construction is healthy at just below recent all time highs experienced in 2021. Single family new builds have been weaker, but are still ongoing.


    A shortage of construction workers, zoning restrictions and supply bottlenecks, along with slow municipality response, is not helping. This has led to delayed completions and brought the number of dwellings under construction to record highs.


    Recent provincial government legislation is designed to alleviate some of these situations, but it remains to be seen whether it will. Courtenay, Comox, Cumberland, and other locales have reset some of their bylaws to allow increased capacity. It is much too soon to see whether this will improve timelines for permits and other approvals. Economic growth has slowed to about 1% this year and isn’t expected to do much better next year. The costs of running a household don’t seem to be coming down. Easing of interest rates and other measures introduced by provincial and federal governments should allow housing markets to recover this year and next.

    Check with me to find out what the real estate trends are in the Comox Valley. I am always available to provide you with more and better information so you can make informed decisions and realize your housing dreams.