Mortgage Broker

Summer 2018

Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.

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CMB MAGAZINE cmba-achc.ca summer 2018 | 33 first-timebuyers T he 2006 comedy Failure to Launch starred Matthew McConaughey as a 35-year-old man still happily living with his parents, even though they felt it was time for him to be out on his own. Nowadays, it's not that unusual to find 35-year-old Canadians still living with mom and dad, many of them in B.C.'s Lower Mainland – but this is a reality show, and it's definitely no comedy. Increasingly, young people are being forced to live with family or keep renting for much longer than they had planned, due to a perfect storm of rising housing costs and recent changes to mortgage regulations which have effectively reduced the buying power of the first-time homebuyer. "We're seeing people on the sidelines, taking longer to save because of the high values of homes in B.C.," says Troy Resvick, president of the Canadian Mortgage Brokers Association – British Columbia (CMBA – BC) and managing partner at Invis Resvick & Associates Mortgage Advisors in Langley. "We are seeing people who are older and have opted to rent longer. We're also seeing the other side of that, where family is assisting them to get into the market." Resvick says first-time buyers account for about 20 per cent of his business, with the majority of them buying condominiums or townhomes. With most detached houses in Langley priced above $750,000, those properties are pretty much out of reach for young buyers who are just starting out. "For first-time buyers, [finding a home] is a daunting task, to say the least: Either adjust your expectations significantly, or let's talk to the Bank of Mom and Dad." Resvick is referring to the increasing trend of parents digging into their savings or securing reverse mortgages in order to gi a down payment to their children. Amidst the backdrop of a hot real estate market in the Lower Mainland, the country's Office of the Superintendent of Financial Institutions (OSFI) applied new regulations effective Jan. 1, 2018, which now require both insured and uninsured borrowers to be "stress tested" before a mortgage can be approved. e idea is to make sure those borrowers can continue to make their mortgage payments even if interest rates rise. So applicants must now qualify at either the five-year average posted rate, or at two per cent higher than their actual mortgage rate – whichever happens to be greater. e new rules come at a time when the Bank of Canada has hiked its key interest rate three times since July 2017, and governor Stephen Poloz said on April 25 that future increases are likely, although they will be implemented gradually. e result? Some buyers who would have qualified in 2017 may be in for a nasty surprise in today's market. "Some clients are finding they've been re-priced," says Resvick. "ey can get less money now, so that means shopping for a less expensive home. It's significantly reduced British Columbians' homebuying power." For others, it means they're out of the running at B.C. prices, unless a relative is able to chip in with a monetary gi. Some buyers are even moonlighting at part- time jobs to save for a down payment, while others pool funds with family members or even friends to buy a home. "It's getting harder and harder to get into the market these days," confirms Reza Sabour, a CMBA – BC director and a mortgage advisor with DLC - City Wide Mortgage Services in Vancouver. "A combination of factors is keeping buyers out of the market." According to Sabour, stress tests take can 20 per cent off a buyer's purchasing power. at means people are forced to "drive to qualify," meaning they are looking further afield for housing, even if that means a much longer commute to work. "It seems like every time the first-time buyer steps up to the plate, something else gets thrown at them." CREdIT CLEAn-uP So, what can first-time homebuyers do to increase their chances of qualifying for a mortgage? According to industry experts, it starts with getting your financial house in order—and that means cleaning up your credit. "A lot of people don't pull their free credit reports from both Equifax and TransUnion," says Suzanne Fleur de Lys-Aujla, a director of CMBA – BC and co-founder of Women in the Mortgage Industry. "Lenders look at credit, and paying your bills on time. If you have great credit, then when you go to the lender it helps support the rest of your file. Managing your debt, for example not having a car payment, helps you get more mortgage." Industry experts say this is an area where a qualified mortgage broker can prove their worth. "A mortgage broker can help first-time homebuyers by explaining the five key areas that lenders will look at to fund a mortgage," says Camilo Rodriguez, mortgage broker/ owner at MortgagesLab in Vancouver. "ese are the location and property condition; the buyer's credit history; the buyer's assets and liabilities; equity and down payment of five per cent; and, the income requirement. When people understand these five things, they understand what they must do to qualify." When credit is less than stellar, a broker can help clients improve their score, with results visible in just a few months. Rob Regan-Pollock, senior broker at Invis in "For first-time buyers, [finding a home] is a daunting task, to say the least: Either adjust your expectations significantly, or let's talk to the Bank of Mom and Dad." -Troy Resvick "It seems like every time the first-time buyer steps up to the plate, something else gets thrown at them ." -Reza Sabour "A lot of people don't pull their free credit reports from both Equifax and TransUnion. Lenders look at credit, and paying your bills on time." -Suzanne Fleur-de Lys-Aujla

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