Your Guide to Mortgages in 2018
Feb 22nd, 2018
We enlisted Mortgage Advisor Rebecca Awram again to share some insight on how new mortgage rules will change the home-buying landscape in 2018.
2018 will be the year that consumers adapt to the ‘new normal’ of tougher qualification standards. High ratio, insured buyers have faced a stress-test for over a year, while conventional purchasers (those with a 20% or higher down payment) are now met with a new qualifier, which reduces their purchasing power by about 20%. In terms of rates, prime rate has increased three times in the last seven months, and fixed rates have shown a steady rise over the same period. In many markets, housing prices are up and inventory is down.
This year, consumers are responsible for trying to understand why mortgage rates have become so confusing. Just a couple of years ago, you could call your broker or banker and ask for their rates, and the response was a simple reply with their best offer. Now, your question can’t be answered until they pose a few of their own:
- Are you purchasing or refinancing?
- Will your down payment be under 20% or over 20%?
- Is the home owner occupied or an investment property?
- Are your credit scores over 700 or under 700?
- Do you need a 30-year amortization or can you live with a 25-year?
These variables now affect the lenders’ cost of funds, so it is passed on to the consumer. The irony is that a purchaser with a 5% down payment and an insured mortgage has access to a better rate than someone that has saved up 20%.
It’s not all doom and gloom! Various real estate players are shifting gears to still make home-buying a reality. Experienced mortgage brokers know which lenders will look at your income most favourably, while smart bankers can help you re-structure your debts to increase borrowing power. There are also government programs to increase down payment saving. And savvy builders are focusing their strategies on markets in suburbs that offer greater affordability and on property types, such as townhomes and condos, that are more easily within the reach of a first-time buyer’s budget.
Good advice and planning has always been sound advice. But now, more than ever, advance planning goes a long way. Do your homework before you head out to shop for your new home, and proceed with the confidence of someone who knows all their options.
Get in touch with Rebecca if you’d like to know more!