There’s nothing quite like stepping into your dream home for the very first time.

You have achieved your goal of homeownership! However, the journey from home seeker to home buyer can be challenging – unless you have a well-defined plan and guidance from the right professionals. As a mortgage broker, here’s how I will help you reach your objective:

STEP 1 GETTING TO KNOW YOU
In the discovery phase, we will discuss your situation, the essentials and “nice to haves” you’d like in your new home, and how long you plan to live there. Based on your desired move-in date, we’ll work out a timetable for your home-buying process.

STEP 2 BUILDING A BUDGET
I’ll help you create a monthly budget and then calculate a down payment and mortgage payments that fit into it. Together, we’ll also work through a financial check-up that considers how changes in income and expenses could affect your plan.

STEP 3 CUSTOMIZING THE SOLUTION
There are many different types of mortgages, and it’s important to select one that matches your current needs and preferences. I will ask you a series of questions that should help to reveal your priorities.

STEP 4 TESTING SCENARIOS
Together, we’ll try out different mortgage scenarios, and I’ll show you how changes in income, property taxes, condo fees, loans and other variables affect your maximum mortgage amount and mortgage payments. My goal is to make sure you can comfortably afford your mortgage.

STEP 5 ARRANGING PRE-APPROVAL
It’s a good idea to get pre-approval for a mortgage before you find your dream home and make an offer — that way, you can be confident that financing is available. I’ll walk you through the paperwork and guide
you towards the most suitable lender.

STEP 6 ANSWERING YOUR QUESTIONS
Now it’s time to get serious with a Realtor and view properties that fit your price range. If you have any questions along the way, be sure to give me a call.

STEP 7 SEALING THE DEAL
I’ll work closely with your Realtor & Notary to make sure everything is in place for the closing. That’s the day you pay your down payment and get the keys to your new home.

STEP 8 IT’S TIME TO MOVE IN!
From start to finish, the plan we develop together will see you through the home-buying process. Even after you’ve settled into your dream home, we’ll periodically review your current situation to determine if we need to make any alterations to your original mortgage plan

5 THINGS NOT TO DO BEFORE CLOSING ON YOUR NEW HOME

1. Change your job.  You were qualified for your mortgage financing based on your income, years at the job and the understanding that you were there for a while. Changing jobs should be put off until after possession day.
2 – Changing your name. Make sure that your identification and your name match. Do not change from John Smith to J. Michael Smith during this critical time.
3- Make any large purchases. Put off buying new furniture for your future home or a new car. The debt ratios were calculated based on your present debt obligations. It can also be bad to pay off any existing accounts. Some lenders want you to have some cash in the bank for a rainy day. They may have given you an approval with this in mind.

4- Switch banks or move money to a different institution. This may not sound like much but a paper trail to show your down payment source and the automatic withdrawal forms for your mortgage payments are all set up. You can change them after the house sale closes.
5 – Don’t miss any payments on credit cards or loans you already have. Lenders often pull another credit report a few days before closing. If you’ve missed a payment on your Visa card, it could mess up your home purchase big time.
Finally, check with your Dominion Lending Centres mortgage professional if you are unclear about anything between the time when you receive your approval and possession day.

CMHC CHANGES WILL HARM, NOT HELP, THE REAL ESTATE MARKET

A new program the federal government has announced to subsidize first-time homebuyers isn’t likely to help the market but more likely to harm it.

And not only is it not going to help out the market, but it’s not going to help out new homeowners.

In its recently announced budget, the government is essentially putting the weight of turning around the market on the backs of people just entering the housing market.

Part of the problem with the plan is that we only know what’s happening on the front end. People buying their first home will be eligible for a 5% top up from the from the Canada Mortgage and Housing Corporation (CMHC) to the total cost of a home. That amount increases to 10% for new constructions. To qualify, a household must have a combined income of less than $120,000, and the CMHC will only pick up a maximum of $480,000.

In exchange for this, the housing corporation gets an equity share in your home.

While we know what the government will give new homebuyers, we don’t know what it’s going to cost them down the road. Believe it or not, there’s been no announcement on what interest rates will be offered on the loans, nor what the terms of repayment would be. Complete costing isn’t expected until at least the fall, likely after the federal election.

But the real problem at the heart of this is the measures won’t do anything to help the affordability of homes. It’s not going to decrease the price of housing, and it’s just going to put the burden of propping up the market on the backs of new entrants.

In RBC’s most recent housing affordability report, released in March, the bank said a softer housing market was making houses slightly more affordable, as their national affordability index dropped 0.7 percentage points to 51.9%. (The lower the score, the more affordable homes are.)

“The fourth-quarter relief barely made a dent in Vancouver and Toronto where affordability remains at crisis levels. Owning a home in both of these markets, as well as in Victoria and increasingly Montreal, is a huge stretch for ordinary buyers,” RBC said in a press release.

In Montreal, the bank’s score is 44.5%, and RBC said the situation is not critical just yet.

“Housing affordability is eroding gradually to levels that could potentially pinch buyers—though so far they haven’t shown any sign of balking,” they said.

But with this new CMHC policy, that gradual erosion is likely to turn critical when this new wave of homebuyers crashes into the market.

One of the potential risks with this scenario is called overhang. Essentially, because a new policy has been announced, but hasn’t come into force yet, many Canadians who are likely to qualify are going to decide to put off their purchases. For now, un-bought supply will build up. But as soon as this policy goes into effect, these first-time buyers are going to suck up huge swathes of the housing market, and prices are going to skyrocket.

The new federal program is designed to lower the monthly mortgage payments of new homeowners by what amounts to a few hundred dollars a month. That can make a huge difference in the budget of a young family, but to do this, the government is putting their hands in the pockets of new homeowners for an unspecified amount, while at the same time risking further unaffordability in the housing market.

They could have had the same effect—lowering monthly payments—by re-introducing 30-year amortizations. Instead, they’ve kept the limit for CMHC-insured mortgages set to 25 years.

The shorter amortizations coupled with the continuation of the strict stress-testing rules, covered extensively in recent North East Mortgages blog posts, puts pressure on people on the lower end of the market. The stress test makes sure you can’t just handle the rate you’re signing on for, but makes sure you can handle an additional 2 percentage on top of it.

The rules the government has passed in the last few years have made it more difficult for new buyers and established buyers alike. They’ve also made it hard for people to refinance their more toxic debt, putting them into situations far riskier than the relative rarity of mortgage default.

Adjusting those rules would have a wider effect and give more people the step up they need to enter the housing market.

If the government really wanted to help with the affordability of homes, they have plenty of better options. This narrow measure is going to end up causing more harm than good.

For self employed clients, incorporation is a popular business structure we tend to encounter. Having a corporate structure to your business allows for effective separation between the individual and the business.

If you own your business and have it set up as a corporation, that corporation is essentially its own person. They have their own income through business revenue and have their own expenses required to carry out that business- marketing costs, material costs, office space, things of that nature.

When a corporation files taxes, they pay a lower tax rate than the personal income tax rate and only pay taxes on the net business income. The reason an individual might do this is because they do not need every dollar they earn to maintain their lifestyle. For example, if a corporation earns $150,000 and has expenses of $50,000 they pay taxes on $100,000 at the small business tax rate. If they only need to pay themselves $50,000 to maintain their lifestyle, they only pay personal income tax on the $50,000, the other $50,000 remains inside the corporation as retained earnings. If a sole proprietor earns $150,000 and has expenses of $50,000, they pay the personal income tax rate on $100,000, regardless of how much of that $100,000 they actually need.

When it comes to qualifying for a mortgage, a lender can look at the business income or the personal income they pay themselves. Adding the net business income or the personal income from year 1 and year 2 and dividing it by two is the income a lender will associate with that borrower. Keep in mind though this will also be affected if there is more than one shareholder. To find out how your income would be viewed by a lender if you have your business set up as a corporation, contact a Dominion Lending Centres mortgage professional near you.