On April 18, 2011, the last of the most recent changes to Canadian mortgage regulations came into affect and the near term result has been a drop off in the number of first time home buyers that have been able to qualify for a mortgage under the new rules.
Here is a more in depth report by the Canadian Real Estate Association recently released … http://www.mortgagebrokernews.ca/news/crea-report-echoes-broker-concerns-about-rule-changes/106724
The report identifies a significant drop in home sales since the rule changes.
This is likely at least partly due to the run up prior to April 18th where 1st time home buyers were applying in mass to try and get qualified before the rule changes took place.
But in the longer term, it will be more difficult under the current regs for new home owners to qualify for their mortgage and the rules are not likely to improve in this regard any time soon.
So for those looking to purchase their first home, a different approach is going to have to be taken to get in a position to qualify.
Basically, individuals are going to have to plan further ahead to get their down payment, credit score, collective debt level, and cash management in order to be in a position to qualify.
This is not necessarily a bad thing, but it’s going to require a bit more work on the part of the mortgage applicant and it may take longer before they are in a position to qualify.
The first step in this journey to get a mortgage under the new regime is to become educated as to what it will take to be qualified and how big a new home investment you’re going to be in a position to make.
One of the best ways to develop a plan to get that first mortgage is to select an experienced mortgage broker who can work with you to help you better understand your credit and financial profile and how they directly impact your ability to secure a mortgage.
Then, with a plan in place, its going to take a bit of work to make the adjustments necessary to get qualified.
Remember that the right mortgage broker is also you coach and is available to you to help develop a plan that will allow you to complete your first home purchase as soon as possible.
If you’ve recently been refused mortgage financing as a first time home buyer, then we suggest that you give us a call so we can go over your situation and work with you to determine a strategy for getting financing in place in the future.
There is no real discrimination in the Canadian mortgage market towards first timers and if there was by some, there are plenty of other lenders that will be eager to get a shot at the business.
Providing a 1st time home owner loan is an opportunity to establish a long term relationship with an applicant or applicants for not only future mortgage renewals, but also new mortgages as they go through their own personal life cycle of buying and selling homes to fit the changing needs of their lifestyle and/or family.
Many first time home buyer mortgage placements are done through an insured mortgage that allows for higher loan to value ratios. Its not uncommon for young couples and first timers in general to not have a great deal of money in hand to make their initial home purchase. An insured mortgage can allow them to potentially borrow up to 95% of the purchase price of the property with only a 5% deposit required.
In order to qualify for a high ratio, insured mortgage, a first time home buyer is still going to have to qualify the same as anyone else in terms of their credit rating and debt servicing abilities. There are not specific advantages or disadvantages to being a first time buyer in this regard.
If the applicants cannot qualify for a higher ratio insured mortgage, or choose not to pay the insurance premiums associated with mortgage insurance, the borrowers can apply to a conventional mortgage through any bank or institutional lender up to a loan to value of 80%.
Depending on the area of the country you live in, there may be regionally supported government programs for a first time home buyer mortgage, but you would have to research this out on a location by location basis. For the most part, there are no special mortgage programs for first time home owners that would be materially different than the typical mortgage programs on the market that are available to the general public.
But while there is lots of potential choices for a first time home owner mortgage, it can be hard to figure out what mortgage program is the best fit, especially if you’ve never gone through the process before. This is one of the best examples of how experienced Toronto mortgage brokers can add tremendous value to the residential mortgage financing process and should really be considered for all 1st time home buyer loan applications.