Financing for new homes!

For those who are buying a brand new home

Financing for new homes! 

 

 

CMHC has upped its forecast for new-home construction for 2010 to 164,900 from 150,300 though that’s still off the 211,000 starts of 2008.  Will there complete craziness scheduled for end of 2009 and for 2010?  Time will tell but one thing to be very careful about is getting mortgage financing.  Lenders are still very cautious about foreclosures and are still very tight on their lending guidelines.  Even CMHC and most lenders will be more restrictive then their advertised guidelines which can leave Alberta home buyers in a pickle if they go in with short or no financing terms.  Another caution is don’t get sucked into the word pre-approval!  Many banks and lenders will go for a pre-approval thinking that it means something when most mortgage lenders will not underwrite the paperwork until it is a live deal.  You may be thinking then what is the point of a pre-approval? – it is a rate hold and generally not much better.  Make sure you deal with a Mortgage specialist or a Alberta Mortgage Broker who will go through the documentation up front which will limit your risk on getting the approval. 

 

I also should mention that most Brokers and Lenders have a max of a 120 day rate hold on mortgages for new construction.  I have access to a major lender that will do it for a 6 month hold rate hold.  I just had one client that went through the builders “mortgage specialist”  oh they did a rate hold but they did it at 6.4% on a 5 year fixed.  That is over 2 full percent where all the other banks are at.  Some service that is. 

 

Other quick warnings

 

- If your house takes 6 months – 12 months to build you can only get financing of the lesser of the two purchase price or appraised value.  (a lot can happen in a year)

 

- Make sure you are reviewing your credit at the beginning and during the process.  Make sure that you are very careful with your credit because even if it is a mistake, if you credit doesn’t show well you could lose your deposit.

 

- Make sure your income is as secure as can be.  If you think there is a chance of job less or going from a double income to a single income talk to your broker.  I don’t suggest those just barely fitting under the wire to wait 6 months to actually move in. 

 

- Be aware pre-approvals mean nothing!  What guidelines the banks have now can change at any time.  If you are basing your qualifying on a 35 year amortization and it gets restricted again to 30 or 25 years you could be in trouble.

 

- Make sure that the property fits the bank – Square footage, location, type of home, ext can all change at any time so make sure you aren’t on the line. 

 

- Home builder sales agents are just sales people they are not licensed and so might not follow the same guidelines.  Note that you can bring a realtor to protect you even if it is through a builder. 

 

 

Tips to Avoid Mortgage Foreclosure in Alberta

 

The video has a few tips but here are what the major banks and CMHC is suggesting to do if you find yourself hit by the current economic situation. 

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