First time home buyer takes a blow to the gut!

[pike_king780]

Originally Posted by pesky672

Welcome to the real world... the more you have... the better the deal they will offer you.

Sort of how sociaety works in general... if you have money... you get more free stuff.

Otherwise consider yourself lucky... maybe.... 5% down is or was on the block because too many folks are over-extended.It used to be a 10% down minimum nand it could go back to that and hell you are 21 and buying a home.
Do you know how rare that is?

Takes most folks a lot longer than that to save up even 5%.

That said... I do feel your pain... banks can be a pita.

when my wife and i purchased our home we put down 5% only, which equated into rougly 22,000. it took us roughly a year to come up with that, all the time renting, so really it wasnt all that bad. but i can definitely relate to the o.p on this one because we went through similar b.s with the bank (atb) until we decided to shop around and found out that cibc had way better rates and was much easier to work with as a whole. (maybe check them out if you havent?) best decision we have made yet. regardless, dont get down, it will all work out eventually,and liek someone mentioned, because were young we get sterotyped that we think were "entitled" or spoiled or irresponsible, even though weve earned everything we have and are more responsible than alot of our "elders". and remember theres lots of 40 year olds taht dont have what we got and they get jealous and defensive when they realize how far behind they are in life. that being said, this sort of thing does take time and alot of "red tape" so to speak. good luck to you.

[Rustydog]

Well I can only share my experinaces with ya. First paying stuff out right doesn't help with banks and credit. Second I'll never deal with a broker again, so many things were left out when I bought my acreage and I had no idea as I have never done it before either. I put 20% down on mine and my interest was 3&3/4 5 years ago this summer. Talk to banks ask lots of questions, even if ya thinks its a dum question ask it. Better to find out first until your all ready committed.

And last off bud don't worry about all the old boys hatin on ya, life ain't like it was 20 + yrs ago for them, we can all make great money with a little motivation and it looks like your on the right path my man!

[bosshog]

First off, good for you for trying to build your own equity at a young age. I would shop around and see what the other banks/brokers will offer. Yes, being 21 you may not have the credit history she is looking for. Ask around, I am sure there is a friend of a friend or family member who is a broker or works in a bank and can help you out and recommend a agent or broker to talk to. Either way, good for you and hopefull yit all works out.

[omega50]

No crystal ball, but with a giant bubble of baby boomers getting ready to retire we could see unprecedented asset liquidation as they struggle to fund their retirement- does not bode well for longterm housing prices in Alberta.

Wait till 2026 and scoop up a few properties for a great cash price as the market is flooded by large homes!

[MuleyMonster]

Originally Posted by brettk.

Trying to catch up here, another problem with large acreage is the fact that banks and lenders will typically only value the buildings plus 5 acres and nothing more. Can complicate acreages.

brettk almost nailed it. Since I was in the mortgage broker business for over 8 years and still with a bank and in the industry for over 15 years I think I might know the problem.

Since you are buying an acreage most lenders will limit you to 10 acres of land with only the house as value. There are some companies that like a Credit Union that will look at the whole package of land but no shop. In this case I would suggest going to your bank. I usually say that brokers are the way to go but when it comes to more than 10 acres and shops they are not the best. Brokers deal with banks that want quick approvals and nothing complicated.

I work for one of the big banks and your bank should have a product for the additional shop and acres that the personal side cannot work with. Basically the personal side will do the house and 10 acres with 5% down and the small business side can do the shop and additional acres. Hope that makes sense and let me know if you need any help.

[Skybuster]

I am astounded at the increase from 3 to 7 %. That sounds criminal. I have never worked with a broker so I don’t know what complications that throws into the equation. I don’t know you, your work history or your credit history so I can’t anticipate how they will impact the banks decision. However as stated by many on here the advertised rate for mortgages is down around 3%, depending on variable vs. fixed and length of term. Unless your credit sucks, or perhaps you just started in your job you should be able to get those rates. Fight for them.
As for the down payment, I highly recommend going with the 20% down. If you go with 5% then CMHC has to be included to insure the loan and after you cut through the BS you will see that having them involved is costing you around $8000. If you have the 20% use it now. You may have to live with bare walls for a bit, but if you get your mortgage rate around 3% and are making $120k per year, (and don’t have a ton of other debts) then you will have the money to buy the furniture in no time. That mortgage rate is going to be there for a long time.
I know a young guy with little credit history is going to have a more difficult time than an older more established guy, but if you have $60k to put down, that should sway most banks to give the low rate. As long as your history shows you to be stable.
And good for you for wanting to direct your funds into a venture like this so early in your life. Like others have stated, I didn’t get my first house until I was 30. Of course I didn’t have the salary you have either.
Stick to your guns and whether you end up with this house or some other, there is no way you should accept a 7% rate. One word of warning, if you have signed an offer that has been accepted and all contingencies are removed, you have legal obligations to follow through. If you walk away and the owner sells the house for less than your offer, I believe he can sue you for the difference. I always have a finance and a home inspection clause on any offer I make. The home inspection clause is the best because it has to meet my (undefined) criteria.

[Skybuster]

Originally Posted by omega50

No crystal ball, but with a giant bubble of baby boomers getting ready to retire we could see unprecedented asset liquidation as they struggle to fund their retirement- does not bode well for longterm housing prices in Alberta.

Wait till 2026 and scoop up a few properties for a great cash price as the market is flooded by large homes!

I don't understand your logic. How will these retirees cause a downturn in the housing market? I ask because I am one of those - retiring in the next 5-7 years. I will be selling my house, but I still have to buy another, and trust me it will be nicer. But I will still be consuming a house, but now living off my savings, and my job has now opened up for another person who will need to buy a house so actually the economy will benefit.

What am I missing?

[sprinklerdog]

We just helped my BIL buy a condo and we got 2.99% for 5 years through a broker. Condo was 275k with 5% down and it's in Calgary. PM me if you want to talk to the broker I used.

Geo

[Jamie]

Originally Posted by HunterDave

Is it not a contract or can the financial institution not honour what is written on it? I'd be ticked as well if I got the comfort letter, made the deal based on what was on it and then the financial institution changed the agreed upon terms that the comfort letter contained after I made a deal on a house.

Mine was with BMO and IIRC I had a guaranteed approval up to a certain amount at a certain rate for a period of 60 days.

You'd know more than me on this so I'd like to know if I'm out to lunch on that?

Nothing is wrote in stone until the bank comits to the deal. Never seen one back track yet.
Though some times the house doesn't appraise out.
Just because you are approved doesn't mean the house is.

Sorry, I don't know your individual deal, so it's impossible to comment on.

Jamie

[BuckCuller]

Originally Posted by Calgary Dave

The OP is in Red Deer. There are TONS of houses that are decent in the low 200's. That's $100,000 LESS of a mortgage!!!
Most first time buyers start off with something even smaller...condo/apt..and there are many of nice, decent units for under $200,000.

Just like your housing estimates the Park Hotel has been gone for some time. Unless you are just looking in mustang acres and lower fairview. I sense a little jealousy that a 21 year old is doing so well for himself. You
Buy the way your young and a lot of people either do not take your first home purchase seriously or they try to scam you and this sounds like a scam. Walk!

[Sledhead71]

Originally Posted by Pixel Shooter

started reading thru the messages, some good advice, some not so, yet it is all free lol.

First off, your broker isnt helping you here, secondly the realtor should be protecting your interest, usually there are conditions on offer to purchase to get financing in place by a specified date, let alone appraisal, water portability test which every banker would want on an acreage, surveyors certificate with compliance stamp yada yada. Secondly if your broker is offering best rate of 7%, it is not thru a bank, it is a private lender. Thirdly no chartered bank will do above 10 acres, plus 2100 sq ft house and garage, most wont value shop.

My recommendation is go back to your broker once you have your emotions in check, and get the full story, instead of us trying to fill in the blanks, they need to provide this to you so you can make educated decisions. Listen to what they are saying. Many questions not answered that you need to know. Secondly ensure your offer to purchase is conditional to financing, I cant see any reputable realtor not but not to say it hasnt happened, that is just so wrong on many levels.
If this is infact the case, dont mess around, consult a lawyer

The only bank I know that will value all your buildings and up to 160 acres is ATB on an acreage. 80% LTV for conventional financing. some benefits of being truly albertan. 5 yr mtgs at 2.99% can readily be had by all banks.

Unfortunate when you hear of things like this happen, sure you can work thru it.
If credit is clean and have credit history, job stable and income is wages and not made up of OT/bonuses unless 2yr plus avg, confirmation of down payment is good, debt servicing works and 20% down, deal works.

As far as what you can afford, what you should be buying, thats for you and the bank, no one else. Good luck

I think Pixel nailed just about everything in his comments. Acreages are not as easy as a home purchase and ATB is the only bank I know that will lend on the parcel size you indicated with your current situation.

Due to you not making your primary income from the land, it is not considered in this transaction, more of a liability than an asset in your situation.

I commend you at your age for where your heading in life, best of luck to you on your purchase !

[toomanyhobbies]

Try Servus Credit Union in Red Deer. My broker got an awesome rate from them on an acreage - plus I'm self-employed which the banks hate.

Originally Posted by Sledhead71

I think Pixel nailed just about everything in his comments. Acreages are not as easy as a home purchase and ATB is the only bank I know that will lend on the parcel size you indicated with your current situation.

Due to you not making your primary income from the land, it is not considered in this transaction, more of a liability than an asset in your situation.

I commend you at your age for where your heading in life, best of luck to you on your purchase !

[ali#1]

Put down the 20% if you have it. It will save a lot of money in cmhc fees.

[ren008]

What's your line of work?? Few years ago I was in the same position and age myself and found I was getting the same kind of runaround until the banks and brokers realized that I had an indeterminate full-time government type job. Seems after that was entered into their equations things become a lot better for me. Not sure how a persons type of employment factors into the whole thing but I'm sure it has some impact....

[omega50]

Originally Posted by Skybuster

I don't understand your logic. How will these retirees cause a downturn in the housing market? I ask because I am one of those - retiring in the next 5-7 years. I will be selling my house, but I still have to buy another, and trust me it will be nicer. But I will still be consuming a house, but now living off my savings, and my job has now opened up for another person who will need to buy a house so actually the economy will benefit.

What am I missing?

You are one of the exceptional few that I have heard of that are upgrading to a nicer house for retirement. For many their existing real estate is their last defense to fund any shortfalls in their retirement planning.

Maintenance free living and assisted living scenarios will be more desireable to an aging population.Because we live longer and retire earlier we need a larger income replacement rate and Alberta's is the lowest in the country. Having 80% of your pre-retirement income would let you retire very nicely- Most Albertans are averaging about 45%. Houses will be sold-cheap- and savvy younger guys who are ambitious like the OP will benefit.imho

Couple this scenario in Canada with nearly 80 million Americans on the verge of retirement and I believe that we will feel the repercussions of the collapse of Social Security in the US.Many in the US have already lost their most liquid asset- What will they do?

And soon they WILL all be dead.

[brettk.]

jhass, I realize this is very frustrating for you, but another word of caution so you can ask the right questions. Alot of people on here are telling you to put 20% down and avoid CMHC. It is not always that simple. The acerage again can complicate that. Depending on location and other factors, resale potential and so on, CMHC and insurers like Genworth may still require the mortgage to be insured because of the properties risk level. This just recentley happened to me. I purchased a property just outside of Terrace B.C. and the insurer even at 20% down required me to insure the mortgage because of the location and resale potential. It is a small acerage, no where near the size of your scenerio. With that said, I put down the minimum 5% because of that. Keeping the rest of my money in my pocket. Food for though.

[brettk.]

Of course it is the lender that would decide that even at 20% down you need insurance not the insurers as my post makes it sound. Sorry, I don't know how to edit my posts.

[camping4life]

Originally Posted by omega50

No crystal ball, but with a giant bubble of baby boomers getting ready to retire we could see unprecedented asset liquidation as they struggle to fund their retirement- does not bode well for longterm housing prices in Alberta.

Wait till 2026 and scoop up a few properties for a great cash price as the market is flooded by large homes!

I agree 100%, retirees (boomers) will downgrade and flood the market. Creating excellent opportunities for the next gen.

[calgarychef]

Yup, folks think that because the housing market has gone nuts that it will continue to increase. When the boomers move into retirement homes and then die off what will happen to all of those houses. You think we have lots of immigration. Ow? Wait and see how many people they bring into the country to try and make up the shortfall. Everybody should read Boom Bust and Echo it's a good book that will open your eyes.

[CanuckShooter]

Originally Posted by brettk.

jhass, I realize this is very frustrating for you, but another word of caution so you can ask the right questions. Alot of people on here are telling you to put 20% down and avoid CMHC. It is not always that simple. The acerage again can complicate that. Depending on location and other factors, resale potential and so on, CMHC and insurers like Genworth may still require the mortgage to be insured because of the properties risk level. This just recentley happened to me. I purchased a property just outside of Terrace B.C. and the insurer even at 20% down required me to insure the mortgage because of the location and resale potential. It is a small acerage, no where near the size of your scenerio. With that said, I put down the minimum 5% because of that. Keeping the rest of my money in my pocket. Food for though.

If you invest the down payment that you didn't put down into your rrsp or tfsa or good stocks you won't have to worry about a crash in the value of our real estate. You were forced to carry the insurance you may as well make them carry the risk of your real estate investment.

If we ever see a crash like the last couple of years in the usa you won't loose your shirt by watching falling values eat up your equity. That is what happened to us in the early 80s...20K down, 50K mortgage.....two years later we couldn't find a buyer at 50K and interest rates were hitting 20%. if we had gone with minimum down there would have been the option of renting it out until the market improved or walking away from it. It took 8 years to sell that property...we got 49K less realtor fees.

[brettk.]

Originally Posted by CanuckShooter

If you invest the down payment that you didn't put down into your rrsp or tfsa or good stocks you won't have to worry about a crash in the value of our real estate. You were forced to carry the insurance you may as well make them carry the risk of your real estate investment.

If we ever see a crash like the last couple of years in the usa you won't loose your shirt by watching falling values eat up your equity. That is what happened to us in the early 80s...20K down, 50K mortgage.....two years later we couldn't find a buyer at 50K and interest rates were hitting 20%. if we had gone with minimum down there would have been the option of renting it out until the market improved or walking away from it. It took 8 years to sell that property...we got 49K less realtor fees.

100% good advise, my extra money is sitting in a tfsa right now. My RRSP's suck, so I didn't dream of putting it there. I'm lucky to have bought here in Red Deer early enough to have gained lots of equity in my house over the last 8 years. This is what really has allowed us to relocate to Terrace, I'm on my way soon. Renting the house in Red Deer as long as it is not becoming a pain in the butt. Buy Property, it's the only thing they are not making any more of.

[Don K]

Keep your head up and keep looking. Bought my first house at 19 and have had over 20 since... Never to early
Another option that is often easier to qualify with than CMHC is Genworth. Ask your mortgage broker about them. CMHC is government based and very near their cap so they are quite selective on deals. Genworth is private insurance and much easier to get as they are trying to increase their portfolio. Atb, TD and credit unions are your best bets. Bmo is tougher and RBC is tough too as they have really began cherry picking their deals. Usually with the latter two you need strong and established credit for lending...

Good Luck!!!

[brettk.]

Originally Posted by Don K

Keep your head up and keep looking. Bought my first house at 19 and have had over 20 since... Never to early
Another option that is often easier to qualify with than CMHC is Genworth. Ask your mortgage broker about them. CMHC is government based and very near their cap so they are quite selective on deals. Genworth is private insurance and much easier to get as they are trying to increase their portfolio. Atb, TD and credit unions are your best bets. Bmo is tougher and RBC is tough too as they have really began cherry picking their deals. Usually with the latter two you need strong and established credit for lending...

Good Luck!!!

I agree with Don K, the mortgages I do have are all insured through Genworth. Even the Brokers and Lenders I am familiar with perfer Genworth over CMHC for their deals.

[gitrdun]

All's I can say is that I feel real bad for you young people and first time home buyers that want to buy a house these days. No wonder mom can't stay home to raise the brood properly and make a home cooked meal for the main income earner. Both parents have to work to the bone to make ends meet and the kids get flogged off to day care. Sad indeed, that wasn't how the Canadian way was supposed to be.

[Elkhunt]

Originally Posted by MuleyMonster

brettk almost nailed it. Since I was in the mortgage broker business for over 8 years and still with a bank and in the industry for over 15 years I think I might know the problem.

Since you are buying an acreage most lenders will limit you to 10 acres of land with only the house as value. There are some companies that like a Credit Union that will look at the whole package of land but no shop. In this case I would suggest going to your bank. I usually say that brokers are the way to go but when it comes to more than 10 acres and shops they are not the best. Brokers deal with banks that want quick approvals and nothing complicated.

I work for one of the big banks and your bank should have a product for the additional shop and acres that the personal side cannot work with. Basically the personal side will do the house and 10 acres with 5% down and the small business side can do the shop and additional acres. Hope that makes sense and let me know if you need any help.

I think the muleymonster has hit the nail on the head. I pulled some other details for you.

The following is for general information only and is not to be considered as 100% accurate. Buying your first house is always a learning experience. Relax, you don't want to buy a problem you will have to live with for several months or yrs before you can change it. And getting out quickly is always costly.

First ask your mortgage broker to give you your credit report & history. They pulled it on you when pre-approving you for the mortgage. If the mortgage broker refuses, which shouldn't happen, ask to speak to the manager, it is your information. If you don't want the hassle, you can access your credit score by contacting www.transunion.ca or www.equifax.ca & paying about $25 for a one time check. This is not all the data used by lenders to make a decision but it will give your scores & history.

If your credit score is above 620 you should be able to get a mortgage for somewhere between 3 to 4 % interest. If it is above 650 to 700 it is a slam dunk. I also know mortgages are going for 2.69 to 2.95% from some mortgage brokers for people with higher credit scores.

However given your youth, you may have paid cash for most everything or only used credit for a very short period of time (less than a yr) & you may have no credit score. Then you would need to spend 12 to 18 months establishing a score by getting a couple of credit cards, using them & paying them off monthly.

If on the other hand, you have a lot of debt then you will have debt servicing ratios that you will need to meet in order to qualify for the lower priced mortgage interest rates.

Here is your approximate situation from the info you provided:

Home price $320,000 $320,000
Down payment 15% $48,000 20% $64,000
Total Mortgage $272,000 $256,000

Payment 25 yrs amortize PI 3% $1288 $1212
Property Taxes approx $230 $230
Total monthly PIT payment $1518 $1442

Payment 30 yrs amortize PI 3% $1144 $1077
Property Taxes approx $230 $230
Total monthly PIT payment $1374 $1307

Payment 25 yrs amortize PI 7% $1905 $1793
Property Taxes approx $230 $230
Total monthly PIT payment $2135 $2023

Payment 30 yrs amortize PI 7% $1792 $1686
Property Taxes approx $230 $230
Total monthly PIT payment $2022 $1916

Good luck & enjoy the process. You'll get a house soon enough.

[hal53]

Originally Posted by gitrdun

All's I can say is that I feel real bad for you young people and first time home buyers that want to buy a house these days. No wonder mom can't stay home to raise the brood properly and make a home cooked meal for the main income earner. Both parents have to work to the bone to make ends meet and the kids get flogged off to day care. Sad indeed, that wasn't how the Canadian way was supposed to be.

exactly!!! and there in a nutshell is the problem....

[Vingiu]

Originally Posted by gitrdun

All's I can say is that I feel real bad for you young people and first time home buyers that want to buy a house these days. No wonder mom can't stay home to raise the brood properly and make a home cooked meal for the main income earner. Both parents have to work to the bone to make ends meet and the kids get flogged off to day care. Sad indeed, that wasn't how the Canadian way was supposed to be.

You must be some kind of genius I'm 18, just getting ready to get involved in the real estate game myself, hoping to buy a home in about 3 years with my future wife. It's a seriously tough thing -- the banks and the government seem to want a ridiculous amount of money for various add-ons and protection policies and crap like that. I want to buy land, but the hoops I have to jump through are looking to be excruciating. I'm glad to say that I'm going to school to be an accountant... they ain't gonna take advantage of me if I can help it. I'll work three jobs so the wife can stay at home with the little ones. This society isn't shaping up to be what I'd hoped...

[dantonsen]

age might be a factor but keep on looking.... Check out TD Bank, they practically sit on your face to give out a loan. I barely make 85k year on average and they will lend me 500k on a home with 25 year mortgauge.

[midgetwaiter]

There is one thing you have to remember about mortgage brokers:

You are not the customer, you are the product! You aren't paying them, the lender is. Usually this works to mutual advantage but that's not always the case.

Find a broker that specializes in rural or farm deals, as others have pointed out this is your problem. If it means that you have to go to a commercial broker that you pay then so be it. At least you will know who they are working for.

[rwm1273]

Originally Posted by Jhass

So basically your stating again since i'm only 21 that the banks find me somewhat not mature enough to lend to? Credit checks were done and came back excellent. I bought my first truck brand new paid out in full when i was 18. Do banks not notice these things?

no. Banks want to see you take a large loan and pay it out over the full term. This to them proves you are a good credit risk. People who do not hold debt on their credit cards, pay out loans early and don't over extend themselves are not the clients the banks want. And then given your age, they have this belief that you are some fly by night punk living on mom and dads coat tails.

I would shop around for a different broker. You should not be forced to take a 7% mortgage when even people who have terrible credit and have declared bankruptcy don't get stuck with this. You got from the sounds of it $60K saved up. Money talks, and you will get a bank or mortgage company to back you.