With the new rules announced by Finance Minister Jim Flaherty we could have thousands of home buyers, especially, the young, first time home buyer finding it harder to acquire their dream house.
The new rules are expected to go into effect as of April 19th, and mean that borrowers must have higher incomes or larger down payments, or opt for cheaper properties in order to sufficiently purchase a house.
These new rules are a counter measure that took aim at the speculation that the real estate market is/will be in a housing bubble in the near future, and any excessive refinancing being used on your home.
The biggest change that will occur is that lenders will have to use tougher criteria when assessing the borrower’s ability to carry a loan.
This rule only applies to insured loans, extended to borrowers with less than 20% as a down payment.
According to industry data, the majority of first time home buyers fall into this category.
As it stands, lenders rest a borrower’s ability to repay using the three year mortgage rate.
Flaherty has made it clear that lenders must now use the five year fixed rate as their test as of April 19th.
Change is among us, whether it is for the best is entirely up to you. What I can say is that the housing market will definitely become different as of April 19th, and you should be prepared for the time when it becomes harder to qualify for mortgages and even purchase a home.
Glen Chapman
Broker of Record with Club “100″ GMAC Real Estate
www.club100realestate.com
