Affordable Housing Action Network (AHAN) Homeownership Forum March 2, 2006 SPEAKER: Mortgage Development Manager: Nancy Troke, Scotia Bank Big challenge gathering money for down payment, the $ for down payment is used to put the loan in place. Free down payment-you need to qualify and be able to cover closing costs at Scotia Bank Most banks require a 5% minimum of purchase price for down payment ex. $100,000 = $5,000 plus closing costs. Requirement for free down payment a)-1 permanent full time job for a year OR 2 permanent part time jobs for 2 years (proof of steady income) b)-good credit history – if you have some bad credit history it depends on the reasons…each case will be looked at differently. You may still be eligible you need to go and ask. How much can you afford to pay for a house? 1) Rule of thumb is 3 times your GROSS income. For example if you earn $30,000 a year you could afford a $90,000 home. 2) You can take money out of RRSP to buy a home without suffering any penalties 3) Government will now allow you to get your down payment from a friend or a relative. you need to consider other bills such as hydro, property taxes, utility bills etc. Mortgage: You can save money in the long run by paying your mortgage weekly or biweekly instead of monthly (reduces the cost of the loan) Condominium mortgage slightly different as additional condo fees have to be taken into account. Interest rates CAN be negotiable depending on the size of your down payment Renew mortgage in terms of 1 year, 3 years or 5 years. First mortgage should be a three-year minimum. There is no stability in short term mortgages Can split a mortgage so renewing them at different times-good strategy Open mortgage: higher interest rate Pre Approved mortgage last for 4 months Rent to Own: Bank not involved Homeowner uses part of your rent to build towards a down payment on the home. Owner hold Mortgage: Negotiate interest, Less restrictions Will be some adjustments made in the cost of the house. If the owner has already paid property taxes for the whole year but is selling, that year you must pay the remaining year’s taxes. If heated by oil you must pay to top off the oil, etc, 3 key messages: 1. Pay mortgage weekly or biweekly and investigate fixed fees options. 2. Get pre approved mortgage (look into qualifying for the free down payment option). 3. Commit to your mortgage for at least 3-5 years and lock in the rate. SPEAKER: Real Estate Lawyer: Rick Rolston, C. Roderick Rolston Law Office Rent to own: Do not do it… it is too risky! Trusting someone to use percentage of your rent to put it towards your down payment Anything could happen-person dies and deal is not taken over by inheritors – owner could go bankrupt. Cost of home ownership-legal fees Title searches ensure there are no claims/liens on the house already. If there is a lien on your home, it means someone else is already entitled to that property because the previous home owner used the property to guarantee something else such as a loan/other payment they have made/received in exchange for that property. There are Land tax transfer costs and registration fees Lawyer will ensure good title to property ex. no outstanding title to the property Title insurance drops the fee-there is a savings – could save hundreds of dollars Have to come up with closing costs ex. Lawyer fees, property taxes, heating costs such as filling up the oil tank if you have one. Remember you are buying a used product and things could go wrong Owner has to disclose if anything is wrong with the house but they do not always know and things do go wrong. You can put “conditions” for buying the house outlining certain things that need to be repaired first (example poor plumbing replaced with up to date materials) Buying a house is like signing a contact Power of sale homes are not necessarily a good deal. They do not sell for the amount owing. Must be sold at fair market value. Your lawyer takes the purchase money to the registrar’s office, meets with the homeowners lawyer, outstanding mortgage is paid and your lawyer gets the key to the house. Now you can use electronic registration. Fees are usually fairly predictable. If the title search were going to be more than anticipated, Rick as your lawyer would let you know. Need to ensure that you are buying a good title with no debts against the property to avoid problems/expenses and ensure a good record for resale. House Inspector: It is not necessary and it can be expensive. Not all of them are qualified, so if you use one make sure you check references. A home inspector is another set of eyes. 3 Key messages: 1. Buyer Beware! Remember you are buying something used, things can go wrong (might be an idea to have some sort of savings or plan in case of problems) 2. Government charges fees for things like land transfer etc. 3. Closing costs are usually between $1,500 and $1, 800 which includes lawyer fees, land transfer taxes, property taxes and title searches. The Legal fee will be the least expense of all in buying your own home. SPEAKER: Insurance Broker: Ray Dassylva, McDougall Insurance Certain features of the house can increase your cost ex. poor electrical, plumbing, age of oil tank (if there is an oil tank buried in the yard the cost would be huge as tank needs to be removed) Oil tanks: if 25 years old need to be replaced Roof on the home: any older than 15-20 years should be replaced. Furnaces-as long as they have been maintained they are not as much as of a concern Home close to fire hydrant? This reduces cost. Are you a smoker? This increases the cost. Advise getting carbon monoxide detectors – especially necessary if you have wood burning stoves Must have smoke detectors on each level of your home Liability insurance: can be a big problem if you don’t have it. Covers you if someone is injured on your property or if having left your property intoxicated and was in an accident. Replacement cost vs. Value of home. Replacement more expensive but wiser choice Insurance can depend on your location ex. If you live in an area where there have been problems with sewage then the deductible would be much higher. Insurance company will do a background check on the types of insurance claims that have been made on that property Wiring should be a minimum 100 amp service, NO aluminum wiring (if built before 1970, likely inadequate wiring) Information Source:-home owner should know about state of house as should the realtor If there is a wood stove make sure it is up to code. Insurance is higher for a home with a wood stove vs. a fireplace or not having either. Can have a house inspection done but does not reduce the cost of the insurance Not legal obligation to have home owners insurance if you are free of a mortgage (but would then be solely responsible for covering the costs of any accidents, disasters etc.) If you have contents or tenants insurance it will be easier to get home owners insurance Mortgage Insurance: pays mortgage if you die Life Insurance: May end with enough to more than cover your remaining mortgage Call insurance broker as soon as you look at a house-before the deal closes the house Home insurance just covers the home not the land. 3 Key Messages: 1. Match up your home and auto insurance through same company to save money 2. Buy a life insurance package instead of mortgage insurance more likely to have better financial advantages/more money coming back to you in the long run. 3. Start out with tenant insurance to build a history and make it easier to qualify for home insurance (building up a good insurance history can work to your advantage). SPEAKER: Real Estate Sales Representative: Wesley Cawker, Coldwell Banker Need to decide where you are going to buy your home. Detached homes are more affordable as are homes in Trenton compared to a house in Belleville Will help with the offer process: Can put conditions on the purchase of the house such as previous owner must update the furnace or replace wiring before you buy the home. The purchase of a house is conditional on: a) ability to attain home insurance b) ability to attain financing Prefer if the house has been looked at by a home inspector (Mr. Cawker can recommend inspectors from the area if you need them) Can cost up to $300.00 for an inspection. There is a disclosure form for the owner to fill out regarding issues with the house. What issues there were and the solutions to these problems. Can show any property listed regardless of who the agent is. Asking price is usually negotiable Pre approved mortgage is more advantageous-you know what you can afford and what to look for Real estate agent will help you through the qualifying process “Fixer Upper”-homes can go faster as they are usually cheaper If you have bad credit a mortgage broker may be able to help more than a bank. A mortgage broker has more lending resources than a bank does Consolidate your debts-may have enough left over to put towards closing costs or down payment. Power of Sales least negotiable sale If purchasing a duplex, you can rent out the other side and help offset the cost of your mortgage and taxes. Your real estate broker will also look over your contact before putting in an offer for a house 3 Key messages 1. Start the home ownership process by securing a pre-approved mortgage. 2. The asking price listed for a home is usually negotiable and can include buying conditions. 3. Home inspection is recommended. SPEAKER: Manager: Dell Whittle, Quinte Region Credit Counseling Tips: 1. Don’t use all your cable stations? Cut them down to save money. 2. Don’t use all the features on your phone like call answer, call display and call waiting? Cut them off to save money. 3. Don’t need a cell phone? Don’t use one. 4. QRCS has an application in which you can ask them to check your credit rating for you free of charge. If you do it yourself, there is a cost. 5. If buying a house why not rent out a room or rent out the other half of a duplex to save/make extra money? 6. Get a credit check and do it yearly…there is a lot of identity theft, other problems and possible errors you might not be aware of. 7. Get a pre-approved mortgage if you can as it is easier to work with. 8. Ask about the consumption rates for the last owners so you can set up equal billing (heating, hydro etc.) 9. Get taxes included in your mortgage payment. 10. Develop budgeting skills and keep it simple. 11. Learn about how to handle deposits (equal billing) and what the hook up fees are This is a not for profit agency, so fees charged are small. If you go through credit counseling to pay your debts or another financial institute to consolidate your loans, you will receive an R7 rating and this rating will apply to you for two years after you finish the program/pay off the debt. If you have filed for bankruptcy, or have bills which have gone to a collections agency you will receive an R9 rating which is the worst and indicates a “bad debt”. This rating will apply to you for six years after you finish the program/pay off the debt. Before your six-year R9 period begins, there is a one-year discharge period to process everything during which time you are unable to seek credit from any other service/agency. During the six-year period following the discharge you are able to seek credit. Usually anyone who uses our services than wants to get a mortgage; they have to go through a mortgage broker. Programs are available through Quinte Counseling to increase financial credibility Credit Counseling will not help with: 1. Active utility bills 2. Household taxes (property taxes) Credit Counseling does assist with 1. School Loans (easier to deal with if gone into collections) 2. Income tax Debt 3. Major Canadian Credit cards 3 Key messages 1. Get taxes included in your mortgage payment. 2. A credit rating can be completed for free if you speak directly with an agent at Quinte Counseling. 3. Counseling checks should be completed annually to avoid fraud and error SPEAKER: Family Partner & Selection Committee Chair: Bonnie Dobson, Habitat For Humanity Geared towards a very small segment of the population. Must have a steady income but have earnings below the poverty line. Apply by attending an information session much like this one. The process is long as we screen the applicants then there are two home visits made. A police check and a credit check is done. This process can take up to 6 months. You must want better housing: Some conditions that must exist for you to qualify are that your rent is too high and that you live in an unsafe or unhealthy place. You must have no large debts. If you are on ODSP you can be considered for a home. EI and OW applicants will not be considered. Must be willing to partner with Habitat for Humanity. We ask that you put in 500 “sweat equity” hours. These can be done by contributing to the build of your home if you have the ability, it can be participating in fundraising or doing volunteer work in the office. There are a variety of ways to fulfill this obligation. Costs: material, land and contractors. There are two mortgages held on the house. We do not charge interest. The second mortgage can be forgiven if you met all the criteria and do not sell the home. The first loan is based on a 20-year loan. Mortgage is usually about $500.00 a month. The mortgage includes insurance, mortgage payments and property taxes. Mortgage looked at yearly and reassessed according to income. Bad debt does reflect on acceptance. 3 Key messages 1. Need to have a steady income but still be below the poverty line (LICO-Low Income Cutoff- Government produced figures) 2. Two mortgages held on house. Second mortgage can be forgiven if all criteria met. 3. Prioritize according to applications received.
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