Buying A Home During A Pandemic
DOES BUYING A HOME DURING A PANDEMIC MAKE SENSE?
The current public health crisis caused by the COVID-19 virus has caused drastic effects around the world and in our everyday lives. Is buying your first home something you should even be thinking about right now?
“While there is some uncertainty as to when the world will get back to normal, or back to a new normal, buying a home is a decision made for the long term, and the next 12 months may be the right time to enter the housing market,” says Russ Mendonca, manager of Broker Services at Connect First Credit Union.
If your income is stable, and you’ve been thinking about homeownership, there are things happening in the market you may want to consider.
Historically low interest rates
Current mortgage rates are at historic lows and don’t have much room to go lower. Taking advantage of low interest rates can decrease your borrowing costs and help you focus on paying down your mortgage faster.
Decreasing home prices
While forecasts vary, most industry analysts agree there will be a decrease in home prices in Canada this year. The numbers you see in the headlines are usually based on housing prices across the country and do not reflect a single market. Still, the Alberta market will likely see decreased prices due to significantly lower oil prices in 2020 and the economic slowdown caused by stay-at-home orders due to COVID-19.
First-Time Home Buyers Incentives
Launched last fall, you may not be aware of this new program to help Canadians buy their first home. The government will contribute 5 or 10% of the home’s purchase price to put toward a down payment for first-time homebuyers. This can make home ownership possible and lower the amount you may have to pay for mortgage default insurance.
First-time homebuyers can also borrow funds from their registered retirement savings to put toward a down payment.
?Did You Know
Just a half percentage point less on your mortgage rate could save you a few thousand dollars per year! When you choose Chinook Financial you won’t need to haggle - we always offer you the very best rate you qualify for!
"Buying a home will likely be the largest purchase you make in your life, it’s a process. And the first part is determining whether it’s the right time and choice for you. It’s not all about interest rates. It’s about the lifestyle you want, your long-term goals, and what you want to get out of it."
Russ Mendonca, Manager of Broker Services at Connect First Credit Union
Changes to mortgage underwriting policies
With an expected increase in mortgage defaults and the economic impacts from COVID-19 anticipated to be felt until at least 2022, the Canadian Mortgage and Housing Corporation (CMHC) recently announced they are changing their underwriting policies effective July 1, 2020 to manage risk for CMHC-insured mortgages. The changes include:
Increasing the minimum credit score – at least one borrower must have a score of 680 (it was previously 600)
Lowering debt ratio limits – how much money people could borrow to buy a house relative to their income and other debt load
Additionally, they are implementing stricter rules around sources of funds for down payments (you can’t borrow money to put toward your down payment)
At the time this Knowledge Hub post was published, the country’s other mortgage insurers – Canada Guaranty and Genworth - have indicated they will not be implementing similar changes to their underwriting policies.
Taking the next steps
Although the most appealing option is to start looking at real estate listings online and taking virtual tours of show homes, the most helpful step is figuring out what you want and what you can afford.
“Buying a home will likely be the largest purchase you make in your life,” says Mendonca. “It’s a process. And the first part is determining whether it’s the right time and choice for you. It’s not all about interest rates. It’s about the lifestyle you want, your long-term goals, and what you want to get out of it.”
Homeownership isn’t the right answer for everyone, and it’s not always a sure thing in terms of investment, or your life plans. There are many factors at play, including national and local economies, your income stability and, potentially, your ability to set down long-term roots. Thinking about grad school in another province? Or moving in with your girlfriend at some point in the future? It may make sense for you to keep your options open when it comes to where you live. You want to feel comfortable with your choice and confident your financial situation is stable before making the transition to homeowner.
Chinook Financial has a mortgage calculator, information about different mortgage products, and a checklist of costs you need to keep in mind when buying your first home.
Booking an appointment with your Chinook Financial Specialist to discuss your goals and get answers to your questions will help prepare you as you move forward with the homebuying process, now or in the future.
“Connect First Credit Union has the advantage of being member-focused, not profit-driven, and we understand the local market better than lenders located on the other side of the country,” adds Mendonca. “Having someone that is knowledgeable about you and your situation by your side throughout the process is extremely beneficial. We’re not just trying to sell a mortgage and move on; we want to help you achieve long-term success.”