New Qualification Rules for Mortgages

We met with mobile mortgage specialists from RBC this week to discuss how the recent rule changes are affecting home buyers. Its not overly complex but the changes do have a significant impact on both buyers and the potentially the real estate market.

Lets run through a possible purchase scenario

Buyer Client is a first time home buyer
They saved 5% for the down payment
$100,000 combined income
$800 a month for Loans, Car Payment, VISA Balance etc.

Subject Property they would like to purchase

Purchase Price $475,000
Property Taxes $5,000 / year
Heating and or other Expenses $1,200

2017 Qualification Rates for a 5 year fixed term – 3.19%

Purchase Price $475,000
Purchase 5% Down Payment
25 Year Amortization
Estimated Monthly Payment $2,221

** Total Debt Service Ratio =42% equals mortgage APPROVAL **

2018 Qualification Rates for a 5 year fixed term – 5.14%

Purchase Price $475,000
Purchase 5% Down Payment
25 Year Amortization
Estimated Monthly Payment $2,712

** Total Debt Service Ratio =48% equals mortgage DECLINED **

ADJUSTED QUALIFICATION * 2018 Qualification Rates for a 5 year fixed term – 5.14%**

Purchase Price $400,000
Purchase 5% Down Payment
25 Year Amortization
Estimated Monthly Payment $2,299

** Total Debt Service Ratio =43% equals mortgage APPROVAL **

Now more than ever it is so important to align yourself with and partner with industry professionals to help navigate you through all of your real estate options and the process of searching for and purchasing your new home. You may qualify for more than you think., You may have to adjust your search criteria, either way knowledge is truly a power full tool and a tremendous advantage in this current market place

Would like to thank Marlene Jobb, Ethan Jobb & Alexandra Jobb for presenting and assembling the above numbers and scenarios.