You may want to seek a second pre-approval
Today I greeted buyers with a warm hello, got them inside from the chilly Edmonton fall weather and delivered my chilling news. "You may have to get re-approved if we don't find you a house by Oct 12 if you're putting less than 20% down" Silence… "No pressure." By now you have probably heard that the New Department of Finance rules will have the significant impact on the housing market. The biggest two changes are:
1) Effective Oct 17, 2016, the qualification rate will now apply to all insured mortgages.
2) Regulators are banning a wide array of mortgages from being insured.
So what does this mean if you're a buyer looking to break into the market? If you are placing less than 20% down on your purchase, you now must undergo a stress test at the rate of 4.64% rather than 2.35%*. This will change your approval amount dramatically.
Sellers, this news, isn't going to be in your favor. First, this will remove up to 15%-20% of buyers from the market by forcing all insured borrower to prove the can afford their mortgage payment at the rate of 4.64%.
Now for some real talk, IMO housing prices will have to adjust to buyer's affordability. Seller will be waiting a very long time for a buyer to come along with more than 20% down. Now to sell your home quickly and open it up to more buyers, the price will have to decrease. Here come the uncomfortable predictions…. As the houses, prices adjust the government can safely raise interest rates without the worry of killing the economy.
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