With home buyers continuing to face a competitive real estate market throughout Victoria, it pays to get your finances in order before you find your dream home.
Because buyers are competing for limited properties, having financing approved will allow you to make an offer with confidence that you are on equal footing with other prospective buyers, explain Victoria’s Sophia Briggs and Nancy Stratton, Realtors with Sotheby’s International Realty Canada.
“The last thing we want is to have a client find the exact home they’ve been looking for, only to lose it due to delays with their financing,” Briggs says.
“A lot of people think getting a mortgage is simple, but there can be challenges. It’s really important to sit down with the experts and talk finances.”
The first step is a visit to your mortgage broker or lender.
This is crucial, especially if you’re entering the real estate market for the first time, or upgrading to a new property.
Recent government changes to the lending stress test have reduced the amount homeowners may qualify for, Stratton explains.
Others may have challenges with credit that need to be addressed before they secure mortgage approval – either because they haven’t built up enough of a credit history or due to missed payments, for example. Another recent change has phone companies reporting to the credit bureaus now, so it’s essential to stay up-to-date on those payments to protect your credit.
Both lack of credit and poor credit can be addressed, but awareness and a plan of action begins with your broker or lender.
In applying for a mortgage, your debt load will also be assessed. Together a couple may bring in $100,000 per year, for example, but if they each have car payments and credit card debt, that will impact the amount they will qualify to borrow.
Have your information in order
Call ahead to confirm what information you’ll need to present, but a good rule of thumb is your last two income tax returns and recent pay stubs, in addition to proof of downpayment, Briggs says.
“Many parents today are helping children with their downpayment, which is a wonderful way for first-time buyers to get into the market, but the lender will require proof the money is in either their account or their children’s account.”
First-time buyers are also permitted to withdraw up to $25,000 per person from their RRSPs for a downpayment, meaning up to $50,000 per couple is available, Stratton notes.
Purchasing a home, whether it’s your first or your fifth, is an exciting time. Avoid disappointment by arranging financing before you shop!