Buying a home in 2020? How to navigate the Uncertainty
The coronavirus outbreak has challenged every level of our financial system, from our Government, retail stores and the biggest impact has come from changes to interest rates and mortgage lending.
Naturally, with interest rates so low, everyone is wondering if now is a goodtime to buy a home and apply for a mortgage. The simple answer is yes. However, the process of buying a home and acquiring a mortgage has definitely been impacted by the coronavirus.
Credit score requirements are rising amongst lenders. You will want to make sure your credit score is as high as possible. If lenders are going to lend a mortgage and they had to choose between great credit and moderate credit (paying your bills on time vs having sporadic late payments, they will choose the better repayment history)
• Minimum down payments have also been increasing
• Lender turnaround time have increased as more diligence is due at reviewing income and employment
• A growing number of home sellers are taking homes off the market, which means fewer houses to choose from
• Sellers are requesting little to no people through their homes, if they are, strict protocol for gloves and masks or hand sanitizer, some are only allowing viewings via video
• Home inspects and appraisals may take longer as new safeguards and procedures are implemented.
• Legal and mortgage processes, including paperwork, and title searches, may take extra effort and time due to staffing shortages, backlogs and social distancing.
• Remote closings are an option, lawyers have their process and FCT (First Canadian Title) has theirs.
Advice for First Time Home buyers:
If you’ve been looking to get into the market as a first-time homebuyer, now might be one of the best opportunities to get a mortgage. Regardless of movement in the housing market, one of the best things you can do is to get a mortgage pre-approval.
A mortgage pre-approval from a lender allows you to go house shopping knowing your rate is held for 4 months or 120 days. Although pre-approvals guarantee a rate, they do not guarantee a final mortgage approval. This all hinges on the documentation to verify both your employment, income and down payment.
You will also need to consider whether your employment income has been affected by the coronavirus, if it has, you may have trouble getting a mortgage in the first place. If it is stable and your hours have not been affected, it shouldn’t be a problem.
As a mortgage broker, we have taken every effort to make the mortgage process as streamlined as possible for our clients. With our online mortgage applications, electronic signatures for mortgage approvals and multiple methods to send your documents, it should be as stress free as possible.
Mortgage Rate Outlook
The Bank of Canada’s overnight rate is at historic lows of 0.25%. This has meant that the prime rate is about as low as they will ever be. As the prime rate dropped, lenders did not pass on the huge savings to consumers due to the lenders having to offer mortgage deferrals. Both the fixed rates and variable mortgage rates are low, they will only go up from here, however, it’s not necessarily going to happen quickly. Mortgage rates will likely stay where they are at until there are clear signs of a recovery.
While current circumstances present some good opportunities for homeowners, whether now is a good time to get a mortgage really depends on your own financial situation. Whether you are looking to buy a home, renew a mortgage or refinance, your decision has to depend on your current financial situation and needs over coming years. If you’re not ready, you shouldn’t rush. We at Mortgage Tailors are here to help with all your mortgage needs.