Mortgage Broker

34 | summer 2018 cmba-achc.ca CMB MAGAZINE first-timebuyers Vancouver, says lenders want to see stability, especially when it comes to employment history. And while the basics of credit management may seem like common sense to some first-time buyers, others can use more guidance. "A good broker would be able to convey to those buyers what they should do to improve their credit rating," says Regan-Pollock. "If there is high utilization on one credit card, figure out a way to reduce it to 50 per cent of your limit, for example. Ideally, we don't want to see any credit pressure for first-time buyers. e optics of a file have never been more important than they are now." Sabour adds that lenders are now assessing everyone based on risk models. "Credit has never been on the forefront of the application as it is now. Credit history determines the rate you get, the product, the amortization, etc. So clean it up, and don't go under any large financial obligation or consumer debt before you get your mortgage." He also recommends first-time buyers adopt a frugal lifestyle in the year or two before they purchase a home. As for job hopping – forget it. "Lenders are looking for stability." In an uncertain market, the mortgage broker has an opportunity to shine. According to Troy Resvick, it's not uncommon to meet a client, help them get on track financially and then fund a mortgage years down the road. It's all about the relationship. "We can help them see the payment shock and reality of home ownership: property taxes, home insurance, upgrades, upkeep. I spend a significant amount of time coaching people on how to eliminate debt in a timely way so they can prepare themselves to be approved for a mortgage that works for them. e earlier they get that coaching and mentoring is as significant as the actual purchase. "Home ownership comes with its own costs. It's about controlling consumption and appetites for all the shiny things," adds Resvick. Fleur de Lys-Aujla says working with a broker to get pre-approved is a smart first step, because it helps mitigate risk and positions the buyer for success. "It doesn't cost anything. Not enough people are getting pre-approved and they don't understand what they're getting into," she says. "A mortgage broker can look at their income, make sure it's verifiable. ey can't pre-approve the property, but they can work to verify the client and the documentation." OPTIOnS And ASSISTAnCE In the past, a five-year fixed mortgage was the "go-to" for first-time buyers. "Five years has always been the perfect amount of time to plan your finances around your mortgage payment," says Sabour. "Now, aer January, all mortgages are stress tested. If 3.69 per cent is the current rate, they must now qualify at 5.69 per cent." He says new buyers are now leaning toward shorter terms with longer amortization – up to 25 years with less than 20 per cent down, and up to 30 years with a 20 per cent down payment or greater. "One thing that exposes them to, however, is that when you have a two-year product where rates are projected to keep rising, those mortgages could come up for renewal at the peak of an interest-rate rise. Now people must worry about rates, too," he adds. Experts suggest that buyers investigate credit unions, which are provincially regulated and do not fall under the OSFI regulations. ey say that although some credit unions have implemented a small stress test, most are not doing it until they are told they must. Rodriguez says the RRSP Home Buyers' Plan, which allows first-time buyers to withdraw up to $25,000 tax-free each from their Registered Retirement Savings Plans, is frequently accessed. It remains the most popular and enduring government assistance program for first-time buyers who are trying to scrape together a down payment. B.C. does offer first-time buyers some relief from property transfer taxes. To qualify for a full exemption, purchasers must meet residency requirements and be first-time buyers who have never owned another principal residence anywhere in the world. If all conditions are met, a full exemption can be obtained for properties costing $500,000 or less. CALLIng fOR COLLABORATIOn While these programs may be helpful, B.C. mortgage brokers say what is really needed is a coordinated housing strategy developed by all levels of government in close collaboration with industry. "e federal government has opened the taps on immigration, but at the same time as the population is increasing in B.C., there is tougher access to credit," says Regan-Pollock. Rodriguez, who was born in Colombia and immigrated to Canada 20 years ago, says the situation is further complicated by the lack of rental inventory in Metro Vancouver, which is causing rents to skyrocket. "People have to get creative and live with other people, or live with parents." He |says that if he were immigrating to Canada today, he would never be able to buy a home— even though he came here with an engineering degree. He, too, agrees that government needs to consult with industry before policies are finalized. "ey need to consult with the people who have experience in the trenches, but they make decisions unilaterally. It's like making all the decisions you consider to be best for your children, but not talking with them at all." Sabour also says the pace of change has been rapid and government needs to move more slowly, in order to properly analyze the effects of each policy change. "Most important, they need to understand that affordability is a plague for first-time buyers in the Lower Mainland. Perhaps they could implement a different set of mortgage rules for these buyers, to at least give them a chance." "Five Key Areas that Lenders look at: (1) location and property condition; (2) buyer's credit history; (3) buyer's assets and liabilities; (4) equity and down payment of five per cent; and (5) income." -Camilo Rodriguez "A good broker would be able to convey to first-time buyers what they should do to improve their credit rating." -Rob Regan-Pollock

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