Mortgage 101 – a hot take on first time home buyers | October 2022 Part 4

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7 and CityNews 101.1, Clinton tells Todd about his controversial, hot take on first time home buyers. Here is all the advice Clinton has for those who are trying to purchase real estate for the first time.

Mortgage 101 with Clinton Wilkins & Todd Veinotte: A hot take on first time homebuyers

Don’t feel like watching the video? Check out the transcript below.

Transcript:

Clinton’s hot take on first time home buyers

Todd Veinotte: [00:00:00:01] Talking about first time home buyers.

Clinton Wilkins: [00:00:01:10] We’re talking about first time home buyers. And I’m going to go out on a limb to say in the 17 years that I’ve been doing mortgage lending, as a mortgage broker, now is the best possible time for a first time home buyer to buy a home.

Todd Veinotte: [00:00:19:12] Wow. Why is that controversial?

Clinton Wilkins: [00:00:22:18] You know, because the rates are high and they can probably qualify for less now than they could up before.

Todd Veinotte: [00:00:28:21] Okay.

Clinton Wilkins: [00:00:29:09] Why is it the best time?

Todd Veinotte: [00:00:30:20] Yeah. You tell me.

Clinton Wilkins: [00:00:32:01] One, the people that are qualifying, are qualifying at a higher rate than it really has been the last several years. For those people who do end up buying a home, Todd, they are going to be prepared for the future.

And when the rates go down, if they’re smart and if they’re a client of ours, maybe a client of somebody else is too, who knows? They will then do a payment increase and keep their payments at where they were when they first started. Those borrowers will then pay down their mortgages much, much faster than their peers did when they got a when they bought their home. They were probably just affording what they could afford.

So I think those borrowers are going to be better suited, better educated and if they are smart, when the rates go down in the future, they will pay off their mortgages much, much faster than their cohorts that have bought homes the last few years.

Todd Veinotte: [00:01:27:02] Just simply because if they are able to buy in this environment, then they’re inherently more responsible?

Clinton Wilkins: [00:01:32:16] I would say they’re probably more responsible and they can pay off their mortgages faster and they’re probably qualifying for a much smaller mortgage.

Todd Veinotte: [00:01:40:20] Yeah.

What is the demand for real estate right now?

Clinton Wilkins: [00:01:41:13] Than they might have a couple of years ago. So I think in terms of the level of responsibility, I think these borrowers are going to be in better shape. The other thing and the other elephant in the room, is maybe the prices will actually be a little bit less, right? You know, the average home price here in Halifax has gone down. Is the price of real estate down? I don’t know. I don’t think so.

I think that maybe in in some cases, people are not bidding $100,000 plus over the listing price. And I think in some cases there’s not 20 offers on a property and that’s okay! You know, I think that was very normal in some areas of Ontario. That was the norm. You know, you went in and there was tons and tons of offers and it was always way, way over. And it just, you know, it was a survival of the fittest and whoever could basically pay the most.

I think now there certainly are some more price reductions. I think sellers are willing to work with buyers on conditions, and I think some real estate is selling for at the asking price or below the asking price. So I think things are normalising a little bit. The issue is, and Chris said this earlier in our show, there’s not enough inventory and there’s more demand than there is supply. So that’s one thing to be taken into consideration.

Todd Veinotte: [00:03:01:10] Yeah. So what about the on the supply side of things? Is there supply in the Halifax market that that suits first time homebuyers because that’s been a real challenge.

What are the real estate prices like right now?

Clinton Wilkins: [00:03:13:18] Yeah. And I think the average house price is somewhere around that $500,000 mark. That’s still a tough price point for first time homebuyers. I will be honest with you.

The interesting thing about Nova Scotia is the further you go out of the core, the lower the prices are. And it’s really not that far. You know, I think that, you know, the way that we’ve worked has changed too. You know, obviously more people are back to the office, but there still are a lot of people that work from home.

Todd Veinotte: [00:03:42:04] That trend is probably going to stay the same.

Clinton Wilkins: [00:03:43:20] You know, in rural areas here in Nova Scotia, there’s a lot of rural areas that have really good internet. There’s some rural areas that have really bad, bad internet.

So, you know, obviously these are things that you need to do with your research. Figure out what you can afford. And, you know, I think that if you were a first time homebuyer that’s buying now, you will likely be in better shape in the long run.

Todd Veinotte: [00:04:06:18] Yeah, absolutely. And again, these are things that people need to consider and you need to consider amenities.

Clinton Wilkins: [00:04:13:19] Yeah, you have to consider all these things when you’re buying a home, but.

Todd Veinotte: [00:04:16:25] You’re saying scared. How so? What do you mean?

Clinton Wilkins: [00:04:18:19] I think consumers are scared because they think prices are at all time highs. And rates are at all time highs.

Todd Veinotte: [00:04:24:11] Right.

What are the mortgage interest rates like right now?

Clinton Wilkins: [00:04:25:08] You know, the rates have been higher. When I started 17 years ago, a five year fixed rate was 6.25. We’ve all heard about the rates that were in the 80s, you know at 13%, 19%, whatever. We’re not going to get there. You know, I think that can we handle a little bit more and increases? I think we can.

And I think they will go up a little bit more. But I think they’re going to go up 1%, maybe 1.25% more, and then we’re going to start to see things soften. So if you’re a first time homebuyer today, I would still recommend a variable rate. If you can stomach some more increases over the next 12 to 18 months and then keep your payment where it was, as the primary goes down, do a payment increase, pay off your mortgage faster. You will thank me in a year or two years or three years.

You’re gonna be like, You know what? This is the best advice I think I have ever received. And I can tell you, I don’t think anyone else is saying now is the best time for a first time homebuyer to buy. But these first time homebuyers are going to be set up for success.

What are the challenges for getting a down payment in order?

Todd Veinotte: [00:05:29:00] Yeah, absolutely. Down payment. This is obviously a challenge. For down payments, you’re seeing a lot of, in some situations, many situations, probably gifts for down payments?

Clinton Wilkins: [00:05:40:29] That it’s very, very common to see a gifted down payment or a portion of the down payment to be gifted. So typically a gift needs to be from a direct family member. So mother, father, brother, sister. And we’re actually seeing some very large family gifts to the tune of six figures plus.

And the reason that we’re seeing the gifts at that level, is really because to qualify, the borrower, in some cases, needs to put down 20%. And maybe the first time homebuyer doesn’t have that amount of savings. But the parents are like, “If this kid doesn’t buy now, it may be a by never type situation if the values continue to go up.” So I think parents are really helping out with the with the down payment.

Co-signing vs gifted down payments

Some parents are choosing to do co-signing. I think, you know, from what I see here in my purview, we definitely see more gifts and less co-signing. And I’m not saying that co-signing is absolutely the worst, most terrible idea ever. I’m not saying that. It’s just I think some parents, if they do have the ability to write a cheque, they would rather write a cheque and then be done and not have the financial liability.

Todd Veinotte: [00:06:48:11] Yeah, for sure. So, look, first time homebuyers, don’t be intimidated and get up and see a mortgage advisor. I don’t know what else can be done, right?

What are the first steps for first time home buyers?

Clinton Wilkins: [00:06:58:11] I think seeking the advice of an unbiased mortgage professional is definitely the way to start figuring out what you can afford. And once you know what you can afford, then you really need to work with a licensed real estate professional in your area, that lives and works in the area. You know what I mean?

Depending on where you’re buying and in what city and what province, it’s really good to have someone who is an expert in that area that you want to live because, you know, they know things that are happening. They know where the good areas are. They maybe know about listings before they even come up.

So I think, you know, seeking that advice is really important. And I think negotiating. I think maybe you don’t need to buy the first house you look at. And you know, when I first started 17 years ago, first time homebuyers were buying starter homes.

Todd Veinotte: [00:07:48:09] Right.

Clinton Wilkins: [00:07:49:02] It is okay to buy a house that doesn’t check all your boxes or a condo or whatever. It’s about maybe getting into the market, paying down your mortgage and hopefully the value of the real estate will go up and you can build some equity and then maybe you can get your dream home. The first home doesn’t need to be the forever home.

Todd Veinotte: [00:08:08:21] No.

Clinton Wilkins: [00:08:09:01] And I think that’s where the trend has changed a little bit. You know, my parents owned three homes in their life. And you know what? That’s kind of a lot for people in the 70s and 80s.

Todd Veinotte: [00:08:20:05] Of that era. Yeah.

Clinton Wilkins: [00:08:21:14] Of that era. You know, they had one house in Vancouver and they bought another house in Nova Scotia. And then they have the house that they’re in now. So, I think that people’s needs and wants have changed, but I think the focus on needs versus wants will be really important, I think for the rest of the year and going into 20.

See you next time!

Todd Veinotte: [00:08:39:10] Okay. Quickly, how do people get ahold of you?

Clinton Wilkins: [00:08:41:00] Check us out online at TeamClinton.ca/radio, all kinds of great information on there. There’s links to our social media, hundreds of blog posts. We’d love to be in touch.

If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.

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