Soapboxes, Popcorn and Credit Cards. Oh My!
By my count, on a random Thursday night, as I have a glass of wine and some microwave popcorn for supper, there have been about 9 sweeping regulatory changes in the Canadian mortgage market since 2007.
Lets go back to 2007.
At that time, I was in love forever, I wore a size 26 pair of jeans and my Canadian Blue Chips were pulling in a lazy 15% return, all while I was trying to figure out what was going on in Lost. (What exactly was the black smoke monster? Did they ever really ever circle back to that?) Speaking of smoke, all of this went up in it.
That same year, I left my cush bank gig for the rock n roll lifestyle of a mortgage broker because I was promised endless sandwiches and the ability to cuss whenever I wanted. And here I am. Exactly 10 years later. Truly, the sandwiches and profanity are the only constants in this market. Everything else is flipped and reversed.
There are probably a couple of changes in how your mortgage is qualified that we should address. So, let me just lay this out for you:
Firstly....you kind of need a paper trail and reasonable track record of the income that you earn over a legit period of time that would lead someone to the logical conclusion that you can afford a payment on a big thing like a whole entire house.
I knowbanks are assholes. But lets just devils advocate this one.
If you have a salary or guaranteed base hours and that can be confirmed by your employer, we can use that to determine how much of a mortgage payment you can afford by the banks guidelines. If you have any fluctuating income, are self-employed or working on a contract basis, youre going to need to show a two-year track record of how thats been playing out. Or, youre going to need to pony up a more sizable down payment to mitigate the possibility of a dip in your earnings.
Does that really seem so unreasonable? Youre buying a WHOLE ENTIRE HOUSE!
Second...ifyou have credit card debt, or lines of credit which are readvancible*, we are going to assign, on your mortgage application, a completely fictitious, super-high payment that you dont contractually, morally or reasonably ever have to pay and will effect the price of the home the banks determine that you can afford by their guidelines. (And when I say super-high, I mean James Franco super-high.) Oh and by the way, youre completely screwing your credit!
*Readvancible means that its not a loan that you would make set payments on over a predetermined amount of time until its paid. Rather, its a credit limit, like a credit card or line of credit.
And I have a serious beef on this point.
When it comes to your credit card debt and how its required to be appropriated on your mortgage application, the banks blame the feds who regulate the banks. The feds wag their fingers at the consumers who misuse the credit limits. The credit limits are glad-handed by the banks to anyone with a pulse. The banks blame the feds and the feds blame us and the banks blame
You get where this is going, right? To Bullshitsville! Thats where.
Take control. If you are holding credit card debt or balances on lines of credit, you are putting undue pressure on your capacity to carry a mortgage. You may have some interest-only, easy-street, payment arrangement written in blood on your 20% annual interest contract. However, the banks are assigning a very large, made up payment for the purpose of qualifying a mortgage. (The same bank that said Hey! Here! Have this interest-only, easy-street credit card! Youve made it, Cuz! Drinks for everyone!) And then you cant qualify for your mortgage.
This is a thing. Its happening.
And not to kick you while youre down but if you are holding more than 50% balance on your credit card, in relation to the overall credit limit, your credit score is abysmal. This is true. Call your handy dandy mortgage broker. We see credit reports by the dozen, on the daily. And we can help. We have access to the whole puppetshow. We know where all the strings are. And when I say we, I actually mean more specifically me. I can help. Its pretty much my lifes work.
On a side note, its been 10 years for me as a mortgage broker this month. This is a tough industry. So, I think that makes me officially biker-gang badass. And Im celebrating with wine and microwave popcorn.
Like a black smoke baller.
Canadian home sales activity strengthens in July
Statistics released today by The Canadian Real Estate Association (CREA) show national home sales were up from June to July 2018.
National home sales rose 1.9% from June to July.
Actual (not seasonally adjusted) activity was down 1.3% from July 2017.
The number of newly listed homes edged down 1.2% from June to July.
The MLS Home Price Index (HPI) in July was up 2.1% year-over-year (y-o-y).
The national average sale price edged up 1% y-o-y.
National home sales via Canadian MLS Systems rose 1.9% in July 2018, building on increases in each of the two previous months but still running below levels recorded from mid-2013 to the end of last year. Led by the Greater Toronto Area (GTA), more than half of all local housing markets reported an increase sales activity from June to July.
Actual (not seasonally adjusted) activity was down 1.3% y-o-y. The result reflects fewer sales in major urban centres in British Columbia and an offsetting improvement in activity in the GTA.
This years new stress-test on mortgage applicants continues to weigh on home sales but its effect may be starting to fade slightly in Toronto and nearby markets, said CREA President Barb Sukkau. The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type and price range. All real estate is local, and REALTORSremain your best source for information about sales and listings where you live or might like to in the future, said Sukkau.
Improving national home sales activity in recent months obscures significant differences in regional trends for home sales and prices, said Gregory Klump, CREAs Chief Economist. Regardless, rising interest rates and this years stress test on mortgage applicants will likely prove to be difficult hurdles to overcome for many would-be first time and move-up homebuyers, heading into the second half of the year and beyond.
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