With all of the rule changes imposed by the federal and provincial governments around mortgage financing and real estate it may be more difficult to access financing. But don’t take it personally – sometimes it’s not you it’s the property.
When lenders underwrite your application for approval they look at you as a borrower but they also evaluate the property.

Here are some things to consider before you purchase.
The type of property — house, condo, duplex, heritage, etc.
1. Especially for condo properties the lender (and insurer if required) will look at the age of the building, the history of maintenance or lack there of and the location for marketability. Some lenders will limit their exposure with a maximum number of units in a building or avoid lending on buildings after a certain age for the property.
2. Properties with more than 4 units in them such as a 5-plex will be considered commercial real estate and the lender will evaluate on that basis.
3. Heritage homes (registered or designated) require a more detailed review and special consideration for financing.
4. Leasehold and co-op properties also have specific requirements for the maximum loan to value so more down payment may be required. More documentation will be required and interest rates will vary.

The location of the property— lenders always consider their risk in each market.
1. If the location limits the potential resale value for the building in the event of default by the borrower they may not lend on that property. Some lenders will reduce the loan amount for a building located out of major market areas or add a premium to the interest rate.
2. For properties with water access only or with no access to municipal utilities (water, heat, light and sewer) more details are required to assess the lender risk. Insurance coverage, water testing, seasonal access and condition of the property will be strong considerations.

The use for the property— personal or investment, recreational, previous activities.
1. If the owner occupied house has a suite then rental income may be considered.
2. If the house is purchased for investment then rental income is considered and the interest rate for rental rather than owner occupied is assigned. In these cases the rental income can increase the resale value of the property. However, the appraisal of the property will be reviewed to ensure the condition of the property and if any renovations were completed to add value.
3. There are lending options for a previous grow-op that come with higher interest rates and costs
4. In the case of a condo the property may have a commercial component in the building (shops below) or allowable space in the unit for business (live/work designation). In these cases some lenders may not have an appetite for financing. In some cases the lender may allow with approval by the insurer (CMHC, etc).
5. Purchasing a second home for recreational use will require a review if it is seasonal or year-round access.
6. If the property requires renovations the extent and cost to value of the property will be considered.

It is very important before you start looking at any property to talk with a Dominion Lending Centres mortgage broker. This allows you to discuss the specific requirements for any variation in the type of property you may want to purchase and allow ample time for a full financing review before subject removal on a purchase.

For example:
If you shift from a standard condo to a lease-hold property your down payment amount will likely change.
If you want to move to a small rural town or to a small island you may have to pay a higher rate or have less options and more documentation required on the property.
If you buy a home in one province but may be transferred to another province, some lenders such as credit unions are provincially based so you can’t port the mortgage.
If the condo you wish to buy has no deprecation report, a low contingency fund or big special levies pending, these will all be a red flag for the lender and should be a strong consideration for you as a buyer. A more thorough review will be required.

Always consult an experienced independent mortgage broker as your trusted advisor for all of your financing needs. You will appreciate the difference in the level of expertise to help you make an informed decision.

Written by: Pauline Tonkin

Dominion Lending Centres – Accredited Mortgage Professional

The purchase price you negotiate when buying or selling a home is just one part of the total cost for buying a home. In addition to the purchase price there are several other fees – known as closing costs – all of which you need to factor in to your purchase price.

Closing costs tend to be hidden costs when buying a home. It’s not a set number, but a compilation of various administrative, legal fees and other one-time expenses associated with the purchase of a home that are due on the completion date.

These costs can add up, so you’ll need to factor these costs into your cash-on-hand budget.

Many first-time home buyers under estimate the amount of cash they will need for closing costs. Typically, you’ll want to budget between 1.5% and 4% of the purchase price of a resale home to cover closing costs.

Of course, these are estimates — the actual amount you will need could be higher or lower, depending on factors like where you live, the type of home you’re buying, or if it’s a new construction (+5% GST).

To help you plan the purchase of your property, here’s a snapshot of the extra fees you can expect to pay once you’ve settled on the price of your home.
o Legal Fees
o Title Insurance
o Fire Insurance
o Adjustments
o Property Transfer Tax (PTT)
o GST
o and more…

Here’s an overview of what you can expect.

Legal Fees: Legal/Notarial Fees and Disbursements. The lawyer/notary is the person who goes through all the paperwork and makes sure that everything is legitimate and binding. They confirm that all the items that were agreed to by the buyer, seller/builder, and lender are written and worded correctly. Your legal representative should also be able to walk you through each document that you sign so that you understand what you’re agreeing to. Legal fees range from $500 to $2,500. You will also need to reimburse them for their out-of-pocket costs that they incurred while handling the various searches and registrations, including title insurance (see below), property and execution searches, and the registration of the mortgage and deed. These disbursements are repaid to the lawyer on the closing date, as well as incidentals such as couriers, certified cheques, and photocopying, the land transfer tax, the down payment, and any interest adjustments.

Title Insurance: Title refers to the legal ownership of the property. The deed is the physical legal document that transfers the title from one person(s) to another. Both the title and deed of the home must be registered with a land registrar.

Most lenders require title insurance as a condition of granting you a mortgage. Your lawyer or notary helps you purchase this.

Title insurance protects you from title fraud, identity theft and forgery, municipal work orders, zoning violations and other property defects. It can also protect you against fees and costs that were not caught in the searches your lawyer conducted prior to the sale (Yes this can happen!).

Title insurance premiums range from $150-$500 depending on the value of the property.

Fire/Home Insurance: Mortgage lenders require that you have fire/home insurance in place by the time you complete the purchase of your home.

Property insurance protects you in case of fire, windstorms or other disasters. It covers your home’s replacement value. The amount required is at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. Home insurance can vary anywhere from $400 per year for condos to $2,000 for large homes.

Adjustments: An adjustment is a cost to you to pay the seller for the seller prepaying for something related to the house including property taxes, condo fees, heat etc. on your behalf.

Simply put, if you take possession in the middle of a month, the seller has already paid for the whole month and you must pay the seller back for what they’re not using. These adjustments are prorated based on the date you complete your purchase of the home. The most common adjustments are for property taxes, utility bills and condo fees that have been prepaid.

Property transfer tax (PTT) in British Columbia, is a tax charged to you by the province. First-time home buyers are exempt from this fee if they are purchasing a property under $500,000. All home buyers are exempt if they are purchasing a new property under $750,000.
• In British Columbia, the PTT is 1% on the first $200,000 of purchase, 2% over $200,000 & 3% on any value over $2,000,000.

GST is a federal value added tax 5% on the purchase price of a new home. If someone has lived in the home, the home isn’t subject to GST.
• There is a partial GST rebate on new properties under $450,000.

Interest Adjustment Costs: Most lenders expect the first mortgage payment one month after completing the purchase of a home. If you close mid-month, please note some lenders expect the first payment, or at least the interest accrued during that time, on the 1st day of the next month. When arranging your mortgage, ask how interest is collected to the interest adjustment date.

Other closing costs: Will your new home need furniture? Carpets? Lighting? Window coverings? Appliances? Do you have the equipment you need to maintain the lawn and gardens? Are you hiring movers or renting a truck? Will you need boxes, bubble wrap and tape for the move?

While these and other out-of-pocket costs aren’t part of the real estate transaction, you still need to budget for them. Plan your expenses as much as possible. If necessary, decide what you can put off buying until later, after you move in and get settled. If you have any questions, a Dominion Lending Centres mortgage professional can help you out.

Written by: Kelly Hudson

Dominion Lending Centres – Accredited Mortgage Professional

VACANT POSSESSION

DISCLAIMER: This post is written for buyers, in other words people who do not currently own a tenanted property.
This post is not suggesting in any way that the rights of an existing tenant be infringed upon

Purchasing a residential property?

Two words that matter this Spring; Vacant Possession

Your contract had best contain a ‘Vacant Possession’ clause.

Why?

Mortgage lenders will not concern themselves with your best intentions; it is not about what will be – it is purely about what is.

And if the property is tenanted at the time of possession, then you are effectively applying for a rental mortgage. This means a minimum 20% down payment, higher interest rates, and far more stringent qualifying criteria.

‘But wait, we only have 5% down and we plan to give notice and move in 60 days after we take possession’

There is virtually no lender that will approve this under any circumstances, and this has to do with the recent changes made by our federal government. The lenders want to trust you, the lender wants to help you, the lender wants to approve you, but the new government guidelines eliminate lenders’ ability to be flexible. Lenders must answer to Big Brother, and Big Brother is very rigid.

Vacant Possession – demand it.

‘But wait, we’re buying the property as a rental anyways, so it’s a good thing that it already has a tenant… right?’

No, an existing tenant is rarely a good thing.

How is their lease written?
Does it protect you?
Are rents reflective of current market rents?
Is there a provision for annual rent increases?
Your costs will be increasing every year, cover yourself.
What is your duty for notice to evict the tenant?
Why is the seller refusing to give simple notice?

Don’t risk inheriting the seller’s errors and/or headaches.

Whether your new purchase is meant to be owner occupied, or an investment property, demand vacant possession or walk away.

If you have any questions, contact your local Dominion Lending Centres mortgage professional.

Written by: Dustan Woodhouse

Dominion Lending Centres – Accredited Mortgage Professional

While most people know the main things they need to buy a home, such as stable employment and enough money for a down payment, there are a few other factors that may help you realize you’re ready, perhaps even earlier than you thought!

As a mortgage broker, it is my job to ensure that each one of my clients is getting the best service I can provide. Part of this means educating as much as possible when it comes to buying a home, which is why I’ve put together a list of 4 signs that may tell you that you are ready to become a homeowner.

You should have more funds available than the minimum of a down payment
This one may seem obvious, but it’s something that people may not realize until they actually think about it. It’s very difficult to afford a home if you only have enough money for a down payment and then find yourself scrambling for day-to-day living after that.

If you have enough money saved up (more than the minimum needed for a down payment), you may be ready to start house-hunting.

Your credit score is good
This might seem obvious at first glance, however, if you don’t have a good credit score, chances increase that you could be declined altogether or stuck with a higher interest rate and thus end up paying higher mortgage payments. If you have a less-than-optimal credit score, working with a mortgage professional can help you get on the right track in the shortest time possible. Sometimes a few subtle changes can bump a credit score from “meh” to “yahoo” in a few short months.

Breaking the bank isn’t in your future plans
Do you plan on buying two new vehicles in the next two years? Are you thinking of starting a family? Are you considering going back to school?

Although you may think you can afford to purchase a home right now, it’s extremely important to think about one, two, and five years down the road. If you know that you aren’t planning on incurring big expenses that you need to factor into your budget anytime soon, then that’s something that may help you decide to buy a home.

You are disciplined
It’s easy to say, “it’s a home, I’m going to have it for a long time so I may as well go all-in!”. While that would be nice, that’s rarely the case!

You must have a limit that you’re willing to spend. Sitting down with a mortgage broker or real estate agent and analyzing your finances is crucial. It’s important that you know costs associated with buying a home and what the maximum amount is that you can afford without experiencing financial struggles. IMPORTANT: This is not the amount that you are told is your max!

This is the amount that you calculate as your max based on your current monthly budget and savings plan. It’s quite frequent where I have clients tell me that their max budget is, say, $1200 and then when I run the numbers they could actually be approved for much more. Low and behold suddenly these guys are looking at homes that are hundreds of dollars a month higher than their initial perceived budget. It is up to you (with my help or pleading, when necessary) to reel things back in and make sure that you aren’t getting into something that affects the long-term livelihood of a well thought out budget or savings plan.

Conclusion

These are just four signs that you may be ready to purchase a home. If you’re seriously considering buying or selling, talking with a Dominion Lending Centres mortgage broker, such as myself, can help put you on the right path to a successful real estate transaction.

In an active housing market sometimes buyers are urged by their realtors to make an offer with no conditions. As a mortgage broker this always makes my heart skip a beat. I know from experience that financing can go sideways and you need to be sure it’s in place before removing conditions.
Another item that should not be forgotten is a house inspection. You may have a good eye for décor but house inspections are not for amateurs. We have all heard, “Never judge a book by its cover” so why would you make the most important purchase in your life without checking it out? This may be the best $300-$500 you ever spent. Here’s why.

#1 – It provides an out for the home buyer.
Sometimes hidden structural issues like a cracked foundation or saggy beams can mean expensive repairs. If the price can’t be re-negotiated then you have a way to walk away from an expensive mistake.
A few years ago I had a client who I preapproved for a mortgage. He found the perfect house in south east Calgary and made an offer which was accepted. He then ordered a house inspection while I arranged the mortgage. The inspector came back and told my client that there were 10 things he could see in the house that indicated that it had been used as a grow op. My client used this to break the contract and went on to buy another home without any problems.

#2 – Revealing illegal additions or improper renovations
If the DIY seller wired the house improperly or used sub-standard materials your home insurance could be null and void if you had something happen in the future. The home inspector for my first home noticed that the indoor outdoor carpet in the master bedroom had been glued to the hardwood, something that resulted in a multi-day project we were not counting on.

#3 Safety and Structural issues
Inspectors go up into the attic , and down into the farthest reaches of the basement and can spot things like mold, holes in the chimney, improper wiring or improperly vented fans.

#4 – Aiding in the planning for future maintenance expenses
Unless the home is brand new you will need to replace a number of things; water heaters last 6-10 years, roofs about 20 years , furnaces about 25 years. . The report will include an estimate on the remaining life for each of these expensive items which will give you time to save for their eventual replacement.

#5 Bargaining power
If you find something that will cost a considerable amount to replace or repair you can go back to the seller’s agent and ask for a reduction in the price. A leaky roof may cost $3000 to replace. Perhaps the seller would split the cost with you? It’s worth asking.

#6 Peace of Mind
Finally, for your own peace of mind. When you have spent all your hard earned cash on a home and will be paying it off for 20+ years, it’s easier to sleep at night knowing that the house won’t come tumbling down on you or that you paid too much .
While an inspection cuts into your budget at a time when you need all the cash you can get, you will find it is money well spent. NOTE: If you live in an area where housing prices are rising quickly your appraisal may come in low as the property is appraised based on sales in the previous 90 days. Ask your Dominion Lending Centres mortgage broker and your realtor if this is the case for your area.