5 Recommendations for Navigating Today’s Mortgage and Housing Markets
Easily the most consistent question I get is “should I buy a home now”. I understand that in uncertain times like we have had it can be unsettling to consider buying a home right now. If you are going to, what do you need to know before you get started.
- Carefully interview your mortgage professional. This one is really important but often overlooked. Understand that today all mortgage originators including the banks branches ultimately have the same rates available to them. Certainly one challenge is that they don’t all offer you their best rate. This does unfortunately shift the focus often to you thinking the most important thing is to negotiate the rate. Honestly it is not. The most important thing is to interview the mortgage originator that you will plan to work with. With something as important as your largest debt and monthly financial commitment you should buy the mortgage from a PERSON not an institution. Sadly, if you buy a mortgage from a bank you will not have a relationship with that person. Your subsequent inquiries and requests for information and/or advice will be handled by a call centre or the person who did your mortgage will have been moved to another branch. If you buy from a trusted and PROVEN mortgage broker, then you will have someone who will know you and advise you through various market turns for the life of your mortgage. This is incredibly valuable.
- Allow your Mortgage Broker to advise you on who the other players of your Real Estate team should be. I have seen that when buying real estate the transaction goes much smoother when all players involved have experience working together. It makes sense when problems arise and they often do, the players can work together to resolve it, most often without stressing you along the way.
- Allow your mortgage broker to advise you on your strategy. You may buy/sell a home four or five times in your lifetime. Today’s top Mortgage Brokers will do it over 500 times per year, and some, like me, have been at it for over 15 years or more. Mortgage brokers have a vested interest in making sure their advice is more then; “you should take a five year, because at our morning meeting my branch manager told me that we were having a rate sale on five year”. Many Mortgage originators don’t have a strategy and could not explain to you articulately why you should take a certain mortgage product or term. If they can’t, why would you gamble a $400,000 plus debt in their hands?
- Get pre-approved. This is a no brainer I know, but be careful. many pre-approvals today are nothing more then a rate hold. If your mortgage originator does not ask you for paperwork to support your claims on your application at the pre-approval stage you should really be careful, unless you are absolutely certain you will qualify. If you are any of these; (self-employed, recently changed jobs, have a relatively high debt load, missed or had any late payments in the last year, in a sector that has some risk of job losses or has already had many job losses, your down payment is not coming from you) then you need to have a full analysis of all your supporting paperwork BEFORE you buy. The mortgage market is incredibly tight right now and we have wound the clock back 7 years or more in terms of the paperwork required and the due dilegence performed on loans. Don’t assume anything.
- Understand we are in EMERGENCY interest rate times. The interest rates we see today are as a result of monetary response from our central bank to battle the nasty recession we have been in since mid 2008. These rates will go away, and maybe forever. Take advantage now. Recently I did a real world analysis on an average priced home in Calgary that was bought and sold within one year, from March 2008 to March 2009. The price dropped 15% but when you combine how much the interest rates had dropped, mortgage payments had decreased 48% in one year. Everyone is focused on how much prices have dropped and are waiting for more drops (in Calgary, Median prices have been stable since January) but are missing the real opportunity to capture these unbelievably low interest rates.
