Credit Reports - The good, the bad, and the ugly

Credit Reports. I know what you're thinking. What can be more exciting than talking about credit reports right? Well thats why I'm here to make it a bit more interesting than your average person talking about them would.

Yesterday I sat in on a presentation by CMHC which discussed the importance of ones credit report. Here's what I gathered from it all.

One major thing that came about was the misunderstanding that if your credit is constantly checked, it negatively affects your credit score. This is slightly misleading. When you are searching for a new rental and or a mortgage for a new home, each time your credit gets checked, it is documented however similar checks into ones credit gets bundled together and only impacts your actual score once. So that means you can apply to 10 different mortgage companies at once if you like and your score will only be impacted as though it was one incident.

So you have bad credit, like most of the population, or maybe even no credit and youre looking to buy a home. Just because you can't buy one right this second doesn't mean you can't get yourself in shape to buy one in the near future. Here are some tips on how to get yourself back into decent credit standing.

If you are a newcomer or borrower with no credit
- get a credit card
- pay your bills on time
- open a bank account and use it frequently

Maintain and improve
- Avoid changes in employment and your residence
- always pay bills on time
- pay bills in full on or before due
- pay debts as quick as possible
- keep balance below the limit(it is suggested to keep your credit cards below 35% of the limit so it doesn't negatively impact your score)
- reduce the number of credit applications
- contact creditors immediately if they are having trouble making payments, do it before to late

So what affects your credit score you ask? Here is what the score is mainly compiled of:
35% - Payment History(do you pay your bills, and on time?)
30% - Use of available Credit (Are all of your cards maxed out most the time?)
15% - length of credit history (Did you just get a credit card?)
10% - number of recent inquiries made about credit report.
10% - type of credit being used
(Phone bills are sometimes uses, utilities usually only once they hit collections)

It's also suggest that you pull a credit report on yourself. It is FREE in person or to have it mailed to you. One should get their report at least once a year to verify info is up to date and correct.

Scores
300-559 = POOR
660-774 = GOOD
760+ = EXCELLENT

CMHC's average credit score in their portfolio is an astounding 724!

www.fcac-acfc.gc.ca to further understand your credit report

Or feel free to give me a shout whenever you like.

Breakdown of Closing Costs in a Purchase

This blog is from one of my fantastic Mortgage Specialists Nick Bachusky over at Mortgage Specialist Direct, a new branch of Dominion Lending. Be sure to check out his website for other great information at www.mortageinottawa.com

Estimating your closing costs after the excitement of buying your home is about as appealing as sorting out travel insurance after you’ve booked your dream vacation. That said, closing costs are unavoidable so the best approach is to prepare for them ahead of time. The old rule of thumb for closing costs was to conservatively assume that they would account for approximately 2% of your purchase price but with HST being applied to some new home purchases, that approach is somewhat dated. Today’s post will give you a brief explanation of closing costs and then I’ll close with a couple of insights that I think every home buyer should hear.

Closing Costs for Every Buyer

Land Transfer Tax:

This is usually the largest single charge. It is calculated by taking your purchase price and multiplying it by a table of rates that rise with the purchase price. The top rate of 2% kicks in after $400,000, which means you pay 2% in tax on every dollar that you spend over $400,000. I know. Ouch. At least first-time home buyers get a rebate of up to $2,000.

The tax rate has not changed since June 1, 1989.

• 0.5% of the value of the consideration up to and including $55,000,
• 1% of the value of the consideration which exceeds $55,000 up to and including $250,000, and
• 1.5% of the value of the consideration which exceeds $250,000, and
• 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.

Legal Fees and Disbursements:

The lawyer’s fee for his/her time can only be estimated until you get a quote. Don’t be shy to ask for one. If you need a great real estate lawyer, let me know, I work closely with a few excellent ones that will be in great contact with you. I know a lot that are not very good at communication. Fees vary widely from lawyer to lawyer and they are often based more on law firm policy than on difference in service. Standard disbursements include registering the deed and mortgage charge, performing a title search and preparing your tax certificate. Each disbursement includes a standard administration fee with the lawyer’s time added on top.

Closing Adjustments:

These are reimbursements to the seller for any payments that were made for a period extending beyond the closing date. Put another way, you are reimbursing the seller for the portion of each charge that applies to the time when you are the owner. Examples include property taxes and condo maintenance fees. Interest Adjustment: Lenders like to start mortgage contracts on the first of the month, but buyers and sellers aren’t as regimented. Your interest adjustment cost covers the period between your closing date and your first scheduled payment (which if you choose to pay monthly is the first day of the following month). It works out to a little less than you would be paying if your mortgage term started on the same day you bought your house because it doesn’t include any principle repayment (it’s an interest only charge).

Fire Insurance:

If you need a mortgage, your lender will insist that you have fire insurance. This isn’t a big upfront cost because you can pay it monthly, but you have to prove you’re covered before the lender will advance funds on your behalf.

Closing Costs for Sub-groups of Buyers
Mortgage Default Insurance:

If you have a down payment of less than 20% you have to pay for mortgage default insurance so that if you default on your loan, the lender gets reimbursed. It’s based on a sliding scale where the smaller your down payment, the higher your insurance fee (CMHC is the largest provider). The fee is calculated as a percentage of your purchase price and you can add it to your mortgage balance, but you have to pay PST (8%) on the fee at closing. This is commonly forgotten by many financial advisors at banks.

HST for New Home Buyers:

If you buy a new house after July 1, 2010, you have to pay HST. All buyers get a rebate of $24,000 regardless of the purchase price, which is the same as paying no tax on the first $185,000. Some builders are including the HST in their sale price, so be sure to check. Go to the government for always up to date information here!

New Home Warranty Program:

New home buyers are required to enroll in the Tarion New Home Warranty program. Most builders also include this cost in the sale price but otherwise you will have to pay the fee at closing. Your new home warranty begins before you even move in. Once you provide the down payment for your new home, it’s protected. You also have a right to compensation if your builder delays the closing of the sale without giving you proper notice. Before you take possession of your new home or condominium, your builder will walk you through a pre-delivery inspection (PDI). For freehold homes, the builder pays the warranty enrolment fee to Tarion on or before the date the building permit for the home is issued. Condominiums are enrolled at least 30 days before construction begins. Tarion then gives the builder an enrolment number for the home. Some builders will include the warranty enrolment fee in the purchase price of the home, while others show it as an item on the Statement of Adjustments. You can find out more here!

Status Certificate:

Condo buyers need to pay for a status certificate, which their lawyer will review at closing. It includes the condo corporation’s financial statements and bylaws and it will give you a sense of the overall financial health of the partnership you are about to join. Your lawyer will use this document to gauge the probability of a significant increase in your condo fees. The good news is that the fee for this certificate is capped at $100. Want more information, go here!

Lastly, estimate your closing costs upfront and include them in your purchasing budget. Too many people wait until they’ve signed a purchase and sale agreement and then the money has to come out of their budget for new carpets and curtains. If you need to work out the costs, I can do that for you!

Summer coming to an end, but the market is HOT!

Well the summer may be almost over, but the housing market here in Ottawa is hotter than ever. Homes that are priced properly are selling as though it were spring time. I myself sold my last listing in only 3 days for 99% of the asking price!

If you are thinking of buying or selling now is the time to do it. My advice to friends has been to get it done before the winter hits. The mortgage rates are still at all time lows but won't last for long.

Don't waste time waiting for the best deal in town, there is just too much competition out there right now. Let me find a place that has all of your NEEDS covered, and we can work on the WANTS after that. No house is perfect for everyone, and it is important to distiguish that fact.

If you are thinking about buying, or you know of someone who is, please don't miss the boat on these low mortgage rates, contact me as soon as you can. Alternatively, if you or someone you know is looking to sell your home, with all these buyers out there, it is a no brainer that a well priced home, that is marketed properly and shows well, will sell quickly.

Sincerely,

Andrew Miller
Sales Representative
Keller Williams Ottawa Realty Ltd.
Brokerage, Independently Owned and Operated
610 Bronson Avenue
Ottawa, Ontario
K1S 4E6
Office: (613) 236-5959
Direct: (613) 447-7669
Fax: (613) 235-1515
Email: amiller@kwottawa.ca

Weather may be poor but the housing market is HOT!

Last October was the beginning of some tough times for most canadians, as well as most other parts of the world. This has been the first recession of the new millenium. Although most of the nation's housing market was strongly affected by the recession, here in the nations capital, things remained fairly stable. Luckily for us prices didn't see a huge decline and now that signs of the improving economy are in our sights, the market is heating up quite a bit.

We have low interest rates, the lowest they have been in years in fact. The government has decided to freeze the prime rate at 2.25% until the second quarter of 2010(June). This is great news if you were deciding to make a purchase in the next year.

The time to buy is now, while the rates are still at an all time low, and before the housing prices begin to rise again.

If you or anyone you know are thinking of buying or selling, please don't hesitate to contact me immediately to get started. I am your one stop shop for real estate needs and I have all of the contacts you will need in your home purchase, lawyers, inspectors, contractors, mortgage specialists, and movers. You name it, I got it. I look forward to helping you find your dream home soon.

Your Downpayment for your purchase

Most lenders require you to pay a portion of your own funds--the down payment--toward the purchase of a home. Saving for a down payment can be one of the most challenging steps in buying a home.

Your down payment plus your pre-approved loan amount will determine how much home you can afford. A down payment can come from many places: savings, investments such as stocks and bonds, gifts from relatives, company bonuses, equity in other assets, and life insurance policies, to name a few. Then again, there may be home mortgage alternatives that do not require a down payment.

If you currently own a home, then you may want the equity you have built in that house to serve as the down payment on your next home. But how much is your current home worth? I would be happy to provide you with a market valuation so that you will know its current value.
With some basic information about your home, I can establish a list of comparable properties in your area as reported by the Multiple Listing Service (MLS). If you would like a more precise and thorough market evaluation, I can stop by for a quick view of your home.

Please call or email me if you are interested in a free market evaluation of your home or if you have any questions.