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We’ve been on the fence about Buying a home and now the lending rules are changing, how will this affect us?

Now is a fantastic time to buy a home with lending rates so incredibly low.  Home market values have been consistently on the rise and demand from home buyers remains incredibly strong.  With the recent changes announced at the Federal level Buyers will be well informed to really carefully consider their personal budget before making an offer to purchase a home.

Your REALTOR® is there to support you and work within your personal preferred budget which often times may be less than what your lender qualifies you for.  A question you may consider is how will life change for you if interest rates were hiked by 2 per cent or greater?
If as a Buyer you have less than 20 per cent downpayment on the home you are pre-qualified for by your lender to purchase, in other words if you have greater than an 80/20 loan to value ratio; insurance by providers such as CMHC or Genworth will be needed.
The Insurers may disagree with the lending institutions pre-qualification amount, what they will be doing is examining Buyer’s budget tolerance more closely. No matter if the lender has qualified you for a current low mortgage rate; the Insurers will examine your case with a higher interest rate scenario like the five year posted Bank of Canada’s 4.64 per cent rate to basically see if your household can tolerate this scenario requirement before granting insurance.   If the Insuring company rejects your mortgage, a lower amount of tolerable spending would be advised.

Risk analysis with similar guidelines will extend to Buyers with greater than 20% downpayment as well if the individual case still presents risk in the eyes of the lender that could indicate a likelihood of “failure to pay”.
Work with your REALTOR® to build your individual Buyer plan of action; while keeping open communication with your preferred mortgage Broker or Mortgage Specialist about budget scenarios as they apply to you on your way to Buying your next home.

-written by Connie POWER

Connie Power is a Real Estate Sales Representative SRS® ABR® SRES® with RE/MAX Hallmark York Group Realty Ltd., Brokerage serving York region and beyond.  EmPOWERing YOU in Real ESTATE!

**Not intended to solicit those currently under a real estate contract