Pandemic Personal Finance Update No. 6: First-time home buyers with job security should get preapproved for a mortgage

Your personal finance to-do list for this week:

• Get your financing lined up if you want to buy a house;
• Learn how to have respectful spousal money discussions that don’t escalate into nastiness;
• File your taxes, even if you have until June 1.

The Pandemic Personal Finance Update is a weekly feature of practical, actionable ideas and tips to help people manage their finances through the difficult times ahead. If there’s anything you’d like to see covered, contact me at rcarrick@globeandmail.com. Let’s get started.

Get a mortgage preapproval

With unemployment rising and incomes plunging, expect to see home prices fall in the months ahead. First-time home buyers with job security, this is your time. Get preapproved for a mortgage while we wait for physical distancing guidelines to be relaxed enough to allow for more normal real estate market conditions.

Some mortgage brokers say requests for preapprovals are well off normal levels. But a few report that the flow of inquiries about preapprovals is at usual levels for spring, or better.

“I thought when COVID started, I was actually going to clean out my sock drawer and my pantry,” Toronto mortgage broker Jake Abramowicz said. “But the amount of people in the hopper is tremendous.”

Chris Allard in Ottawa, one of the hottest markets in the country prepandemic, said preapprovals at his office are marginally ahead of last year. “I’ve been scratching my head on that one,” he said. “I think that rates have been in the news more, so people are more curious. They’re reaching out and getting prepared for when they’re ready to buy.”

In the Vancouver suburb of Burnaby, broker Alma Pasic said preapproval requests dropped significantly when physical distancing kicked in, then started to increase in the past couple of weeks. By e-mail, she said buyers of late have included newlyweds and people starting a family. “I have no investors at this time," she said. “Real people are buying due to a life event.”

Preapprovals let you lock in an interest rate for 120 days in many cases (they don’t commit you to a lender)​, which means buyers can take their time to see how prices respond when the economy is reopened. Preapprovals do not necessarily turn into home purchases. But strong interest in preapprovals, even if inconsistent, suggests that first-time buyers have their eye on the market. Mr. Abramowicz said his preapproval inquiries have overwhelmingly come from first-time buyers.

Mortgage brokers say lenders are getting tougher in evaluating mortgage applications, which means buying in the months ahead will only be realistic for people who have jobs and incomes that are solid now and likely to remain so.

Mr. Abramowicz said lenders are asking for information about the liquid assets that borrowers have beyond their down payment. And where they might have accepted a paystub and a T4 tax slip previously, they now want a letter confirming employment, two years of T4s, two tax returns and verification that funds are available for a down payment.

Read more: Shopping for a mortgage this spring? Oil’s collapse has changed the equation

Follow these rules for spousal money discussions

Layer money stress on top of the confinement of physical distancing and you have the potential for next-level marital arguments about finances.

“People start making accusations in all-or-nothing terms and they’re more hurtful because of that,” said Moira Somers, a Winnipeg-based psychologist who coaches executives, investment advisers and high-net-worth families. “People say you ‘always,’ you ‘never.’ Things that bring up past hurts instead of staying in the moment.”

Dr. Somers has a few suggestions for keeping necessary discussions about money from degenerating:

• Set aside a specific time to talk about finances;
• Mutually agree on an agenda, and keep it short and sweet to avoid drawn out sessions that leave everyone angry;
• Prepare for these discussions by settling yourself emotionally through exercise, listening to music or reading (not by numbing yourself).

Insomnia is also common when you’re stressed about money, Dr. Somers said. So is a condition called decision fatigue where scarcity makes every choice about money seem fraught with risks. Getting through it may require you to consider what brings meaning to your life beyond money. “Nobody is going to get through this crisis without paying attention to their emotional life,” Dr. Somers said.

Don’t forget your taxes

Canada Revenue Agency has extended the filing deadline for 2019 taxes to June 1, and the deadline for paying taxes owing for 2019 to Sept. 1. Quite a few people are taking advantage – CRA numbers show that 13.9 million returns had been received between Feb. 10 and April 20, down 24.5 per cent from year-ago levels.

The reason to get cracking: People receiving refunds by direct deposit got $1,848 on average, while refunds by cheque averaged $1,571. In many cities, that’s enough to pay a month’s rent.

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