You’ve been saving for awhile, weighing your options, looking around casually.  Now you’ve finally decided to do it—you’re ready to buy a house!  The process of buying a new home can be incredibly exciting, yet stressful, all at once.  Where do you start?

 

It is essential you do your homework before you begin.  Learn from the experiences of others, do some research.  Of course, with so many details involved, slip-ups are inevitable.  But be careful:  learning from your mistakes may prove costly.  Use the following list of pitfalls as a guide to help you avoid the most common mistakes.

 

  1. Searching for houses without getting pre-approved by a lender:

 

Do not mistake pre-approval by a lender with pre-qualification.  Pre-qualification, the first step toward being pre-approved, will point you in the right direction, giving you an idea of the price range of houses you can comfortably afford.  Pre-approval,...

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The Federal Government has announced action to restrict mortgage credit. Beginning July 9, 2012 the new mortgage rules will take affect.  The new measures include:

  • The maximum amortization on a prime mortgage will be reduced from 30 to 25 years.
  • Mortgage insurance will not be provided for properties valued over $1 million.
  • Refinancing has been lowered from a maximum of 85% loan-to-value to a maximum of 80% loan-to-value.
  • The maximum gross debt service (GDS) and total debt service (TDS) will be limited to a maximum of 39% and 44% respectively. Currently, GDS does not apply to qualified borrowers with credit scores over 680.

 

How does this affect you?

This affects purchasers with less than 20% down payment

You will now qualify for significantly less

A family with $65,000 in income and no debt with 5% down could previously buy a home for about $525,000.  Now they can only spend about $410,000

*Using today’s 3.09%.

This qualification would be significantly less if you choose a VRM (variable rate mortgage) or term of less than 5 years

For more information, here’s the government’s Q and A document:www.fin.gc.ca/n12/data/12-070_2-eng.asp

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