The clock is ticking for buyers and homeowners who want to grab a low mortgage rate in 2014. But if you stay on top of your game, keep your finances in order and act quickly, you can still grab attractive mortgage deals.
These 10 mortgage tips can help you with your mortgage decisions in 2014.
1. Document your finances. Lenders will be extra diligent when underwriting home loans in 2014, as new mortgage regulations went into effect in January. The rules put pressure on lenders to verify that borrowers have the ability to repay their loans.
Keep good records of your finances, including bank statements, tax returns, W-2s, investment accounts and any other assets you own. Be ready to explain any unusual deposits to your accounts. Yes, the $500 that Grandma deposited in your account for Christmas could delay your loan closing if you can't prove where the money came from.
2. Lock a rate as soon as you can. Rates will likely climb in 2014 as the Federal Reserve is expected to reduce the pace of the economic stimulus program that has long helped keep rates low. If you are planning to get a mortgage, lock in a rate as soon as you are comfortable with the numbers.
3. Refinance now - if you still can. Many homeowners lost the opportunity to refinance at a lower rate when rates jumped in 2013. But those who are still paying more than 5 percent interest on their home loans might still have an opportunity.
If you think you may be able to save with a refinance, but you are not sure, it doesn't hurt to try. Speak to a loan officer and take a look at the numbers to see if refinancing still makes financial sense for you after you consider how long it will take to break even with the closing costs.
4. Buyers, use your bargaining power. As mortgage rates climbed, lenders lost a big chunk of their refinance business. In 2014, they will turn their attention to homebuyers and will fiercely compete for their business. Buyers should take advantage of bargaining power they gain with that increased competition. Shop around for the best deal and look beyond the interest rate on the loan.
5. Learn your rights as a borrower. Mortgage borrowers will get many new rights as consumers this year when new mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014. If you run into issues with your mortgage servicer in 2014 or fall behind on your payments, make sure you are aware of your rights and put them to use.
6. Take good care of your credit. It's nearly impossible to get a mortgage without decent credit these days. That will continue to be the case in 2014. If you are planning to get a mortgage, monitor your credit history and score until your loan closes. The best mortgage rates usually go to borrowers with credit scores of 720 or higher. You may still get a mortgage with a score of 680, but lower scores will mean higher rates or higher closing costs.
7. Don't overspend. Lenders don't want to give out loans to borrowers who will have little money left each month after they pay their mortgages and other debt obligations such as credit cards and student loans. If that becomes the case, the lender will tell you that your DTI, or debt-to-income ratio, is too high and you don't qualify for a loan. Try to keep your monthly debt obligations, including your mortgage and property taxes, below 43 percent of your income.
8. Consider alternative mortgage options such as ARMs. Mortgage rates are rising, but there are alternatives to grab a lower rate, depending on your plans.
A homeowner planning to keep a house for seven to 10 years could take advantage of lower mortgage rates by choosing a seven- or 10-year ARM instead of the 30-year traditional fixed-rate mortgage. Rates on adjustable-rate mortgages can be as much as 1 percentage point lower than on fixed-rate loans.
If you are not sure for how long you plan to keep the house, a fixed-rate loan is probably the better choice.
9. Considering an FHA loan? Reconsider. FHA loans have long been popular among first-time homebuyers because they require low down payments and have somewhat less strict underwriting standards than conventional loans. But they come at a price. Mortgage insurance premiums on FHA loans are likely to continue to rise in 2014, and after recent changes, the borrower is now required to pay for mortgage insurance for the life of the loan. Try to qualify for a conventional loan before you apply for an FHA mortgage.
10. Don't panic. Yes, mortgage rates will likely climb in 2014. But don't panic, thinking you have to buy a home now to grab a low rate. If you are shopping for a home, do your best to move quickly, but remember that this is one of the biggest financial decisions of your life. Get your mortgage and buy your home when you feel ready.
Canada’s New Home Prices See Moderate Gains In December
New home prices in Canada climbed 0.1 percent in December from November, as expected, for an average annual increase in 2013 of 1.8 percent, the slowest since 1999, according to Statistics Canada data released on Thursday.
The monthly advance matched the median forecast in a Reuters poll of analysts and reinforces the view that the country’s housing market is stabilizing after a recent boom.
The closely-watched Toronto-Oshawa region was the top contributor to the monthly advance in the new housing price index with a gain of 0.2 percent in December and of 1.4 percent year-on-year.
Vancouver, another hot market for real estate, saw a 0.1 percent monthly decline in prices and a 1.1 percent decline from a year earlier.
Nationwide, prices rose 1.3 percent in the 12 months to December, down from 1.4 percent in November and the fifth straight month of slowing growth.
Overall, prices were unchanged in 11 metropolitan regions, down in five and up in five.
The Canadian government has intervened in the mortgage market several times since 2008 to cool the sector, and most economists expect a gradual softening rather than a U.S.-style crash.
The new housing price index excludes condominiums, which the government says are a particular cause for concern.
The monthly advance matched the median forecast in a Reuters poll of analysts and reinforces the view that the country’s housing market is stabilizing after a recent boom.
The closely-watched Toronto-Oshawa region was the top contributor to the monthly advance in the new housing price index with a gain of 0.2 percent in December and of 1.4 percent year-on-year.
Vancouver, another hot market for real estate, saw a 0.1 percent monthly decline in prices and a 1.1 percent decline from a year earlier.
Nationwide, prices rose 1.3 percent in the 12 months to December, down from 1.4 percent in November and the fifth straight month of slowing growth.
Overall, prices were unchanged in 11 metropolitan regions, down in five and up in five.
The Canadian government has intervened in the mortgage market several times since 2008 to cool the sector, and most economists expect a gradual softening rather than a U.S.-style crash.
The new housing price index excludes condominiums, which the government says are a particular cause for concern.
Toronto home prices among top 3 risks threatening economy: BMO
Forget Vancouver’s high-priced and highly scrutinized housing market, Toronto is the trouble spot that could spark a housing correction, according to a new report.
Bank of Montreal (BMO) has identified soaring house prices in Toronto as one of three risks facing the North American economy, alongside the U.S. debt ceiling and the impact of political uncertainty in emerging markets.
Why is Toronto’s market being singled out? BMO economist Sal Guatieri says home prices in Canada's largest city are rising at a pace that is faster than household income, which threatens to leave more buyers on the sidelines. Rising interest rates, which are expected over the next couple of years, could make it worse. The number of new condos going up across the city adds to the threat.
“In Canada, accelerating home prices in Toronto … risk straining affordability further, causing a correction when interest rates normalize and the market is trying to absorb a record number of newly built condos,” Guatieri wrote.
He cited a 7.1 per cent year-over-year increase in house prices in January. For Canada as a whole, prices rose 4.3 per cent, which he called "in line with income growth."
The Toronto Real Estate Board (TREB) reported last week that house prices in the Greater Toronto Area (GTA) increased by about 9 per cent in January compared to a year earlier. The average selling price for a home in the GTA was $526,528.
Bank of Montreal (BMO) has identified soaring house prices in Toronto as one of three risks facing the North American economy, alongside the U.S. debt ceiling and the impact of political uncertainty in emerging markets.
Why is Toronto’s market being singled out? BMO economist Sal Guatieri says home prices in Canada's largest city are rising at a pace that is faster than household income, which threatens to leave more buyers on the sidelines. Rising interest rates, which are expected over the next couple of years, could make it worse. The number of new condos going up across the city adds to the threat.
“In Canada, accelerating home prices in Toronto … risk straining affordability further, causing a correction when interest rates normalize and the market is trying to absorb a record number of newly built condos,” Guatieri wrote.
He cited a 7.1 per cent year-over-year increase in house prices in January. For Canada as a whole, prices rose 4.3 per cent, which he called "in line with income growth."
The Toronto Real Estate Board (TREB) reported last week that house prices in the Greater Toronto Area (GTA) increased by about 9 per cent in January compared to a year earlier. The average selling price for a home in the GTA was $526,528.
Toronto’s price increase was even higher than Vancouver, the most expensive market, where the average selling price was $606,800 in January, up 3 per cent year-over-year.
The BMO report follows another warning last week from TD Bank suggesting the overall Canadian housing market overall was overvalued by about 10 per cent when measured by affordability. It was written in defence of other measures used to gauge Canada’s housing market, including the home price-to-rent ratio and the price-to-income ratio. By those measurements, Canada's housing market is said to be overvalued by as much as 60 per cent.
“Both these measures fail to take into account the drop in interest rates over the last two decades,” wrote TD economist Diana Petramala. “What really matters is housing affordability.”
A Royal Bank report last week shows residential mortgage debt increased 4.8 per cent in Canada last year, although it was the slowest annual pace of growth since 2000.
The federal government has steadily tightened mortgage rules in recent years to discourage buyers from taking on more household debt than they can handle.
The biggest concern going forward is what happens when interest rates rise further, as noted in the BMO report.
It’s not seen as an imminent issue given that the Bank of Canada is struggling with low inflation. Some economists believe the bank could potentially lower rates if Canada's economy doesn't gain more momentum.
The benchmark interest rate has been at 1 per cent since September 2010.
The BMO report follows another warning last week from TD Bank suggesting the overall Canadian housing market overall was overvalued by about 10 per cent when measured by affordability. It was written in defence of other measures used to gauge Canada’s housing market, including the home price-to-rent ratio and the price-to-income ratio. By those measurements, Canada's housing market is said to be overvalued by as much as 60 per cent.
“Both these measures fail to take into account the drop in interest rates over the last two decades,” wrote TD economist Diana Petramala. “What really matters is housing affordability.”
A Royal Bank report last week shows residential mortgage debt increased 4.8 per cent in Canada last year, although it was the slowest annual pace of growth since 2000.
The federal government has steadily tightened mortgage rules in recent years to discourage buyers from taking on more household debt than they can handle.
The biggest concern going forward is what happens when interest rates rise further, as noted in the BMO report.
It’s not seen as an imminent issue given that the Bank of Canada is struggling with low inflation. Some economists believe the bank could potentially lower rates if Canada's economy doesn't gain more momentum.
The benchmark interest rate has been at 1 per cent since September 2010.
Foreign Worker Program Works Fine, If Properly Done, Unions Say
EDMONTON - While the federal government’s temporary foreign worker program has been criticized for allowing some firms to undercut Canadian wages and lay off staff, two unions support the program in principle.
“Some trades cannot supply the manpower needed during peak periods, and for us that is spring and fall when energy firms do their turnarounds and close for several weeks,” said Joseph Maloney, an international vice-president of the Boilermakers union.
His union trains boilermakers and works closely with “quality contractors” to ensure properly trained staff are available. And when they are short, they use the TFW program.
“We bring in about 400 journeymen in the spring and fall from our pools in the U.S. and Ireland, where they are trained to the same standards as Alberta boilermakers and welders. When they come they are paid the same as Canadians and are treated the same,” he said.
“When properly used, this program is able to assist contractors and unions to get these jobs completed on time and on budget, and safely.”
The Ironworkers union, which saw 65 of its members laid off last week and replaced by Croatian TFWs, still supports the program, says Harry Tostawaryk, business manager of Local 720.
“We assist contractors, we go to trade fairs, and we work with them to ensure workers meet the criteria,” he said.
But the problem with the Pacer-Promec Joint Venture (PPJV) at Imperial’s Kearl oilsands project goes back several months when Tostawaryk said his union “told (PPJV) that the Croatians did not meet the standards, but they brought them anyways.”
The federal government has promised to investigate this incident and Tostawaryk said that will impact other companies.
“The other contractors who are doing the program correctly, the PCLs, KBRs and Horton CBIs, will have a harder time bringing people in here because the government is going to scrutinize more.”
Tostawaryk said none of the ironworkers who were laid off last week have been called back, and the Croatian workers are still on the site.
“Some of the guys want to go back to the (PPJV) project, but others have taken other jobs. I told them that if (PPJV) called we would work with them and get them back, but other contractors have also put in extra calls to pick up these (laid off) ironworkers.”
Meanwhile, Alberta Federation of Labour president Gil McGowan said Monday that the actions of PPJV are “a perfect example of how this (TFW) program is being used to drive down wages. And this situation is not unique. This is happening at work sites all over the country because this is how the TFW program is designed to operate,” he said in a statement.
“Some trades cannot supply the manpower needed during peak periods, and for us that is spring and fall when energy firms do their turnarounds and close for several weeks,” said Joseph Maloney, an international vice-president of the Boilermakers union.
His union trains boilermakers and works closely with “quality contractors” to ensure properly trained staff are available. And when they are short, they use the TFW program.
“We bring in about 400 journeymen in the spring and fall from our pools in the U.S. and Ireland, where they are trained to the same standards as Alberta boilermakers and welders. When they come they are paid the same as Canadians and are treated the same,” he said.
“When properly used, this program is able to assist contractors and unions to get these jobs completed on time and on budget, and safely.”
The Ironworkers union, which saw 65 of its members laid off last week and replaced by Croatian TFWs, still supports the program, says Harry Tostawaryk, business manager of Local 720.
“We assist contractors, we go to trade fairs, and we work with them to ensure workers meet the criteria,” he said.
But the problem with the Pacer-Promec Joint Venture (PPJV) at Imperial’s Kearl oilsands project goes back several months when Tostawaryk said his union “told (PPJV) that the Croatians did not meet the standards, but they brought them anyways.”
The federal government has promised to investigate this incident and Tostawaryk said that will impact other companies.
“The other contractors who are doing the program correctly, the PCLs, KBRs and Horton CBIs, will have a harder time bringing people in here because the government is going to scrutinize more.”
Tostawaryk said none of the ironworkers who were laid off last week have been called back, and the Croatian workers are still on the site.
“Some of the guys want to go back to the (PPJV) project, but others have taken other jobs. I told them that if (PPJV) called we would work with them and get them back, but other contractors have also put in extra calls to pick up these (laid off) ironworkers.”
Meanwhile, Alberta Federation of Labour president Gil McGowan said Monday that the actions of PPJV are “a perfect example of how this (TFW) program is being used to drive down wages. And this situation is not unique. This is happening at work sites all over the country because this is how the TFW program is designed to operate,” he said in a statement.
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