Valuable information for home buyers

WinnipegREALTORS® sponsored and participated in a housing conference hosted by the Spence Neighbourhood Association, West Broadway Development Corporation and the Daniel McIntyre/St. Matthews Community Association on Saturday, February 23. 
Kudos to Karen Giesbrecht of New Journey Housing, who did a terrific job organizing the event and bringing all of the speakers together to provide valuable information for potential home buyers.  
“Without trying to dissuade the 60 people in attendance on the exciting possibility of owning their own home, we really tried to give them a reality check on all that is involved in the home buying process,” said Giesbrecht. “The more informed they are, the better off they will be in going forward with confidence and a sense of purpose to meet their ultimate goal.”
The five-hour session was about the things you need to know about buying a home and what programs exist that some buyers may be able to access, depending upon their income. As was pointed out in some of the presentations, specific targeted affordable housing programs exist  for Winnipeg buyers, such as SEED Inc., which assists low-income individuals to improve their social and economic viability.  
Session highlights
You really need to do your homework on what home or type of accommodation you can qualify for based on your income and savings and overall financial position (e.g., credit rating based on paying off debts). 
It is important to understand how buying a house is one of the biggest investments you will ever make, so you should base your choice on some real practical considerations such as the number of bedrooms necessary based on your current or projected family size. 
There are some very capable professionals who are able to impart invaluable advice and helpful suggestions on how you can become a homeowner. For example, the Assiniboine Credit Union representative did a superb job explaining the nuts and bolts of financing a home by showing a few examples of a couple and a single person with certain income streams, debt payments and savings. Based on their current financial set up, it was explained what capacity they have to fall within the total debt service requirements to finance a home. 
Different scenarios were put forward with suggestions on how potential hurdles can be overcome.  
If the single buyer pays off her car loan, the individual’s total debt service would be low enough (under 42 per cent) to purchase a $200,000 home. Another concern raised in this example was that if the buyer had a checkered past on paying off debts, the buyer may not qualify for a mortgage based on a poor credit history.
One real eye opener for the attendees was when they asked ACC’s  branch manager why the closing cost of two per cent of the purchase price was as high as he indicated in his buyer examples. They already knew legal costs cannot be that much, and they were right! 
What stunned those attending was the high cost of Manitoba’s land transfer tax for home buyers. WinnipegREALTORS® certainly could have steered them to which urges Manitobans  to ask their provincial MLA how they can justify such a punitive tax on home buyers. 
A hand-out was provided by the conference organizers on the percentage rate charged by the province on the value of properties, and that there is no first-time home buyer exemption in Manitoba similar to those in B.C. and Ontario.
The Royal Bank mortgage specialist focused on describing all aspects of a mortgage, including length (e.g., amortization period), terms (e.g., fixed or variable) and payment options (e.g., double payments or extra payments). It revealled how quicker you are able to pay off your mortgage principle based on a more aggressive payment regime as well as discipline in managing other expenses. By bringing down your principle at a faster rate, you lower your interest costs. And by maintaining your monthly payments, more of that amount goes toward paying down the principle instead of the interest.
Another interesting piece of information shared with potential buyers was how low interest rates are when compared to the past. In 1981, a five-year fixed mortgage was 20 per cent while today it is just 3.19 per cent. The mortgage specialist pointed out that it’s now a great time to buy a home due to interest rates being at an all-time low.
The mortgage professionals are more than willing to sit down and work with you to get your financial affairs in order, so that you can pre-qualify for a certain home purchase price. 
Karen Giesbrecht covered the property and CMHC insurance premium requirements. The latter is only necessary if you pay less than 20 per cent down on the purchase price of your home. Of course, many first-time buyers are not in a position to put down more than 20 per cent on a home so the CMHC premium is required. 
Depending upon where you fall within the five per cent to 20 per cent down payment range, the premium goes from as low as 1.75 per cent to 2.75 per cent of the purchase price. The premium can be added to your mortgage amount, but this will then cost you more in the long run due to interest charges.
 Another important point made was that the province, as of July 15, 2012, applies the provincial retail tax to the premium amount. It must be paid right away.
As for property insurance, it is mandatory in order for you to get financing for your home. An issue is that insurance companies are not willing to insure a property if it has knob and tube wiring. It is very important to ensure that the home you are purchasing is insurable before committing to the purchase. If not, you risk forfeiting your deposit on the purchase of the home. Mortgage life insurance is optional and covers off the balance of the mortgage should you die.
Next week’s column will cover the second half of the housing conference. It will focus on the critical role of REALTORS® and lawyers as well as a few non-profit affordable homeownership programs in Winnipeg.