The MapleMoney Show » How to Spend Money Wisely » Real Estate

Getting Prepared to Buy a Home in Any Market Condition, with Bekim Merdita

Presented by Wealthsimple

Welcome to The MapleMoney Show, the podcast that helps Canadians improve their finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of MapleMoney, where I’ve been writing about all things related to personal finance since 2009.

The price of Canadian real estate is all over the map. We’ve been hearing that prices will continue to fall, but how far and for how long? With so much volatility, how does one know when it’s a good time to buy a house?

Bekim Merdita is the Vice President of Sales & Business Development at Rocket Mortgage Canada, a mortgage broker that uses a fully digital experience to transform the home buying process.

Bekim joins me on the show to discuss the current state of the Canadian housing market. Bekim explains why buying a house is like buying a stock, and shares tips on how to get started if you’re planning to buy a house soon.

Regardless of which direction housing prices go, the best thing you can do is plan ahead if you want to purchase a home shortly. Bekim takes us through the mortgage approval process and shares tips on key steps, like saving for a down payment, managing your credit, and seeking the advice of professionals.

Interestingly, he cautions against taking on a huge car payment before applying for a mortgage. Big car payments can be mortgage killers. If you’re considering getting into the housing market, you don’t want to miss this episode.

Do you prefer to invest in socially responsible companies? If so, our sponsor Wealthsimple will help you build a portfolio focusing on low carbon, cleantech, human rights, and the environment. To get started with Socially Responsible Investing, head over to Wealthsimple today!

Episode Summary

  • House price volatility is making it difficult to time the market
  • Why buying a house is similar to buying a stock
  • Where to get started if you’re planning to buy your first house
  • The impact of a huge car payment on your mortgage affordability
  • The importance of maintaining low credit utilization in a mortgage approval
  • Take time to understand the rules surrounding down payments
  • The crucial step that too many prospective homebuyers miss

Read transcript

The price of Canadian real estate is all over the map. We’ve been hearing that prices will continue to fall but how far and for how long? With so much volatility, how does one know when is a good time to buy a house? Bekim Merdita is the Vice President of sales and business development at Rocket Mortgage Canada, a mortgage broker that uses a fully digital experience to transform the home buying process. Bekim joins me on the show to discuss the current state of the Canadian housing market. Bekim explains why buying a house is like buying a stock, and shares tips on how to get started if you’re planning on buying a house in the near future. 

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Do you prefer to invest in socially responsible companies? If so, our sponsor, Wealthsimple, will help you build a portfolio that focuses on low carbon, clean tech, human rights, and the environment. To get started with socially responsible investing, head over to today. Now, let’s chat with Bekim…

Tom: Hi, Bekim. Welcome to the Maple Money Show.

Bekim: Thank you for having me, Tom.

Tom: I wanted to have you on because lately, I’ve noticed something where prices of real estate are kind of all over the map. It almost depends on different cities but in the past it seems like real estate was going up and up and was leaving people out. That was a whole different conversation about how anyone could afford a house. I just pulled some numbers today with two cities I tested as an example. I saw in the Calgary area, in December, the average house price was $478,000. In February, it jumped up to $548,000. That’s a $70,000 change. Then it came back down again in August and went up again a little bit in October. But these are annual salary kind of change. In Toronto, it was interesting in a different way where if you looked at August to August it’s almost flat. But, hiding in that average price, in February there was a $260,000 increase. So, if someone was looking at year-over-year prices for Toronto, the average price didn’t look that bad. But the timing of this—you feel the need to jump in but pay an extra $260,000. Then, just months later it’s back down to where it was before. What’s your initial take on this? It seems like it’s very volatile and that almost makes it harder to prepare for than when it was just going up. The volatility, even though it’s great to have lower prices, still makes me even more unsure. 

Bekim: I think you’re speaking to something that every Canadian is feeling right now which is uncertainty in a challenging market where things are moving around quite quickly. And it is quite hard to keep up, even for someone who does this on a daily basis. I think it’s all the more reason why people should try to access as much knowledge as they can. But for me, it’s also a good reason to really make decisions that are best for you as an individual. Not one that would be tracking the market and trying to time it. I really look at buying a house the same way I look at buying a stock. If you have long-term belief in your country, a long-term belief in the importance of housing and how home ownership plays into the overall market, then you buy when it’s right for you. You buy when your income justifies when your credit is in line. You buy when you have enough money for the down payment and enough in reserves to be able to make that purchase comfortably and not have to worry about the month-to-month (part). To me, that’s the way I look at buying a home. I’ve been through a lot of markets now. The world was ending plenty of times but we’re still here, today. Markets went up really fast but now they’ve cooled off a little bit. But it really is regionally dependent, as you mentioned, Tom. Trying to predict world events, then trying to predict interest rates and hyper-localize to figure out how all of that matters to your local market is close to impossible. No economist, no mortgage person, no financial analyst, has found the perfect algorithm that tells you when you should and shouldn’t buy a home. I really think it’s an individual decision. 

Tom: Yeah, I’m glad you mentioned market timing because I’ve said that many times in relation to stocks. You can’t time the market. In trying to, you’re just going to end up wrong more often than not. Using the Toronto example where it did increase so much halfway through a one-year span, I feel like you could maybe have a general sense that maybe you should hold off? But you never really know, right? It’s tough. It’s easy to look back and see that was the wrong time to buy. But, even in the moment, if something increases a lot all at once, maybe you can kind of have some feeling that you might want to wait. Maybe it’s a seasonal thing or just the number of properties for sale at the time? I guess you could look at that as well? 

Bekim: Yeah, and that’s what makes it all the more difficult, really, when you’re trying to time the market. Supply and demand haven’t changed in any way over the last several years. Now, the market has gone way up and down over that same time period. But who predicted war? Who predicted Covid? Who predicted a lot of the things that are taking place around the world right now with election cycles, inflation, and things like that? These are things that are completely outside of our control. I try to really focus on supply and demand, thinking about it that way. Canada continues to bring in a lot of new immigrants to the country. And we’re building slower that most other developed nations. When you put those two things together, yes, there will be some fluctuation in the short-term but when you look at it from a long-term perspective, people need a place to live. Whether they rent those homes or own those homes, they need shelter. Then you just have to make the decision for yourself as to whether you want to be a renter through those markets, or do you want to be an owner through those markets? The decision is really for individuals to make but I would focus less on being hyper-active in the market and more on your long-term strategy. Do you feel that being an owner over the next 20 or 30 years will benefit you financially? Most people would tell you, yes. 

Tom: Yes, that’s a good point because I opened up talking about this one year span of volatility, but as much as I couldn’t have predicted that, I feel pretty confident in saying 10 years, or certainly 20 years from now, any price you bought at now you’ll have a higher value in the future. I guess you’ve got to price it out as compared to renting as another option. I fully believe you can expect to buy into a market now (or even at the high points like six months ago) and 10 or 20 years from now you’d be fine.

Bekim: Absolutely. I still think back to my parent freaking out in 2014 when I bought the house I own today. It’s come up significantly since 2014. I’m in Windsor which has been one of the biggest bull markets over the last several years. You know, we used to be that city on the southern border of Ontario that was kind of like a blue-collar town. Wages haven’t increased tremendously. We certainly haven’t seen a surge like Toronto, Vancouver or even a Waterloo. When I spend as much money as I did (which really wasn’t that much) my parents said, “Oh, my gosh! You must have over-leveraged yourself. You must have over-spent on the house…” all those things. And I was living with all this doubt thinking, “Oh, my gosh! Did I make a huge mistake here with this house that I spent a couple hundred thousand dollars on? Is it going to be worth $80,000 or $90,000?” It turns out, that was not the case. In hindsight, I look like a genius. But really, it was just a life event. I got married so I bought a house. I knew I wanted to be a homeowner, long-term, and cut my own grass. I’m actually tired of cutting my grass but my home has increased in value so it all worked out in the end. 

Tom: I’ve said on the podcast before, almost every real estate transaction I’ve made has just been dumb luck—the timing of things. It was always sort of benefiting from the market increasing. But then there’s a little dip and it just happens to be the time I’m upgrading into a bigger house. It’s completely dumb luck. Like you said, it’s not this genius moment. You happen to fall into it. I’m sure there’s some stories the other way, especially if it’s short-term where you can only be in your house for three years or something like that. Then, certainly, you might end up on the wrong side of it. But some of it is just going to be luck when you buy or sell. 

Bekim: Absolutely.

Tom: With this idea in mind, in the long-term we can feel a bit more confident. How can we plan for that in the long-term? If you’re not in the market right now and you don’t own any property, how do you set up for this? There is everything from saving for a down payment, multiple government programs (that I can barely keep track of the names for) so where does somebody get started if they’re looking to start today, planning toward that first house?

Bekim: There are really four pillars that we look at when we’re trying to qualify, for someone. I think that’s a great place for anyone to start. It’s your income, the type of property, your assets, and your credit. We call it the, ipac. Starting with income, there’s an old rule of thumb out there that isn’t exactly one-to-one because it’s really dependent on the individual’s debt but start looking at how much you make on paper and the consistency of that income. Are you salaried or is a portion of your income commission? Are you self-employed? That’s going to play a big factor into how your income is looked at from a mortgage perspective. For instance, if you’re base salary, often right from day one (after the 90-day period for folks who are on probation) you can take the full salary and start qualifying for a mortgage with that. But, if you’re self-employed, you’re typically going to need at least a one-year history but, most often, a two-year history of being self-employed so you can show some consistency in your income. So, start there. Just start thinking about how the mortgage company thinks and how they’ll look at your income from that prospective. The next one is the property. Is it a combo, single-family home? Is it a manufactured home? And, talking to an expert to understand how the type of property you buy plays into lending decisions because the more off the beaten path you get in terms of location or in terms of the type of property, the less and less lenders are willing to lend on that property so you end up with fewer options across the market. Assets are obviously a major factor right now across Canada. One thing that makes it tough as these homes get more expensive is you need more down payment. Though, by a percentage, it’s not any different—20% down for a lot of folks with 5% being the minimum. Most people nowadays are putting 5% down. But as we know, 5% down today is very different than 5% down 10 years ago. You need a little bit more money upfront. Then you do a little bit more research and find out there are these government programs that actually help you tremendously to even get to that 5% standpoint. By doing the math, your homework and working with professionals upfront, will really help you out. And the last piece is just understanding your credit—keeping your revolving debts really low or paying them off every single month is a big factor towards qualifying. Not over-leveraging yourself on car payments is a major factor as well. That will not only decrease your cash flow it will also decrease the amount you can qualify for on a mortgage. The rule of thumb is typically four to one of what you can qualify for. So, $100,000 in income will get you $400,000 worth of mortgage. But, again, it can be a lot more than that and it can be a lot less than that, depending on how much debt an individual is carrying over a monthly basis. I would look at the ipac first and talk to someone.

Tom: I can’t remember if it was on the podcast or in person with a mortgage broker but somewhere someone had mentioned to me that one of the biggest killers of a mortgage approval is someone that goes and gets a new car after they’ve been pre-approved. Even then, they go get a new car and all of a sudden that pre-approval is not worth anything because the bank or lender takes another look at it and the numbers no longer line up. 

Bekim: Yeah, we have a joke in mortgage circles that those five words “I bought a new car” have destroyed more mortgage applications than can be counted. By all means, everyone needs a vehicle but just be really mindful that if you’re taking out a larger payment than you previously had, it will affect the amount for which you can qualify. Try to be really diligent and not move a ton of money around in the lead up to the purchase of a home. That even goes for account to account. Taking a bunch of money from one checking to another checking or transferring banks, or from this investment account to that investment account—all that money needs to be sourced. It makes it a heck of a lot more difficult if you’re tracking from account to account and the moving of money because the broker’s going to work through that. The lender is going to work through that. Compliance is going to work through that. There’s a lot in play when you start moving money around so you typically want to solidify whatever assets you’re going to be using towards a down payment. And you want to have as little amount of activity on your financials as you possibly can leading up to the purchase of the home. 

Tom: Yeah, that makes sense to keep it clean so people can just look at it and see this is where the money comes from instead of seeing how you’ve moved this here and there. And is this deposit—was it a gift from someone or is it part of the money that’s going towards the house? I guess it gets pretty messy sometimes to where they can’t track at all. 

Bekim: Absolutely, yes. Tracking being the key word there. If you say you’re putting $30,000 down for a home and suddenly there’s a $30,000 deposit into a bank account, there’s going to be a lot of questions that come as a result to that. Where did it come from? Were taxes paid on it? All that good stuff. 

Tom: Yeah. The first mortgage I got, I got very into my credit score and making sure it was as perfect as possible. I don’t know how big of a difference that makes but, obviously, I made sure all my debts were paid off. I went as overboard with it as my oldest debt which was my student loan. And even though it was so close to being paid off, I actually called them and asked for an extension where they could reduce the rate because I didn’t want to pay it off before I had my mortgage. I wanted to show that this history of credit went back further than anything else I had. So, I called it up. They were kind of unsure (about calling it up) because normally when you call it up is because of an inability to pay the monthly amount. And I said, “No, no. I just want to pay longer,” so they did it for me. I don’t know how much of an influence it had on my credit score at the time but I went to that detail of making sure it was as good as it could be. How effective is the credit score? I’ve heard it can change the rate you get? Obviously, just being approved or not approved is the biggest thing but even the rate, right?

Bekim: Absolutely. There are buckets for credit that lenders typically operate in. Within those buckets is how they figure out where you’re going to land in terms of rate. A 600 to 650 credit score is going to give you one rate where 650 to 700 would be in the next bucket. Some of them, as lenders, will go a little bit deeper to figure out between 700 and 720, this is our rate. And 720 to 800 we’re here… And 800 and above, we’re going to give this rate out. So, you probably took it the extreme, Tom. But, if you’re trying to get yourself the best rate, then that is the way to do it. Rightfully so, showing prudent financial history in doing the right thing over an extended period of time is expected to save you money. You would expect to be receiving a better rate as a result of your good financial decisions over a long time horizon. And why shouldn’t you? Keeping your balances low on any revolving debt or making sure you pay them off every single month—not so much even paying them off every month but understanding the timing of the reporting to the credit bureau to never let the balance to get to a certain point. Because we see that from time-to-time, too. Folks say, “I pay that credit card off every month,” but in a snapshot in time when they reported that to the credit bureau— we look at Equifax, it actually shows that you’re right (or near) your max. So, make sure you’re keeping it below a certain debt utilization. Because really, the most important things are, on time payment history, debt utilization and the length you’ve had those accounts. It’s pretty much in that order. You want to make sure you’re paying on time. You want to make sure you’re not leveraged to the top of your debt utilization limit. Then you want to make sure you have quality accounts over an extended period of time which is harder when you’re younger. But if that thing is student loans, like you mentioned or that one credit card you opened up as an 18-year-old, hold onto those things and let them show proof of positive history over an extended period of time. That will help you when it comes time to purchase a home. 

Tom: What you said about credit utilization where someone is paying off their credit every month but it’s still sort of pops as high on the credit report, is definitely interesting because someone might not look at it that way, right? It’s just their monthly expense, they’re always paying them. But certainly, yeah, if it’s a $2,000 credit card and they’re always at $1,800, it’s not going to look great. Even though they’re always paying their bill, there really always is a balance because the time between getting your statement and when it’s due, you’re pretty much always going to be carrying something on there and not have it right down, right?

Bekim: That’s right. The amount of available credit limit you have is a good way to help yourself. So, calling up your credit card companies and asking them to extend the limit on your credit card, that way you can keep that utilization rate down which is key. Now, they may need to check your credit when they initially do it. But getting out in front of these things and actually exploring the mortgage is part of your financial journey. Even if you’re a little out in front and you’re not planning buying for six to eight months, it’s still not a bad time. Even if you’re 12 months away from buying, look at your financial profile. There might be some key suggestions in that period that you can do. If you’ve got 12 months, between now and the time you actually buy, here are some things you can do from a credit standpoint, a cash flow standpoint, from an investment standpoint. Even if it’s just plugging money into an RRSP, lowering your tax rate now and being able to draw on that money later because as a first-time homebuyer, you can pull money out of your RRSP towards the purchase of a house. There are some things you can do leading up to that big, financial purchase that sets you up to get the best rate, the best terms. Ultimately, and most importantly, qualify. 

Tom: You mentioned earlier that a lot of people are doing a 5% down payment. With some of the volatility we’ve seen, is there ever a case where banks are having issues with that? I remember hearing down in the US, the underwater mortgages, where banks kind of wanted to call that. Is that something that happens in Canada? That Toronto example where maybe all of a sudden your home is worth $200,000 or more less than it was before, I could see that may be concerning banks with a smaller down payment?

Bekim: Mortgages are registered far differently in Canada than they are in the US. We don’t have the same elements such as Fanny Mae, Freddie Mac, and things like that. Pre 2008, in the US as well, people were lending in excess of 100% of the home’s value which is why some of those mortgages were called due. There was a lot of fine print that said that if your home ever dips below X value, that does not exist in Canada today. Really, the government of Canada as well as the lenders that exist in this space today—and we work with a lot of them, they’re sharing in the risk of home values. That’s not one thing I would concern myself with. If you believe in housing, long-term, then you should make the purchase, quite frankly. You mentioned earlier, if you really have the intention going in of, “I’m going to buy today and I’m going to sell it within two to three years,” you may need to look a little bit deeper at the investment you’re making if you’re only putting 5% down. Could homes go down in the short-term? Sure. But that’s not unique to today compared to any other time in history. Anytime you’re making an investment, short-term, it could go down. But if you put 5% down and then with each passing biweekly payment or monthly payment (however you’re making your payment on your mortgage) your balance is going down on that mortgage. Fast forward a couple of years, even if values stayed the same—or even if they went down—maybe they went down 10%. But now you’re 20% paid into your house. So, you’re still right side up on your equity. You have to really look at it from a long-term perspective rather than a short-term timing of the market. And I think if you look at the last couple of years, the only people who are really hurt by any dip in value (if there has been any) over the last nine months or so, are those who tried to create some sort of market timing mechanism thinking they were going to get rich quick. A few people may have done that but the vast majority of people who try to buy low and sell high, it doesn’t work out very well as a long-term strategy. 

Tom: So, if over a year someone’s taken all these steps, hopefully improved their credit, got their down payment ready, what’s next? I’m sure people have heard the term, pre-approval. I believe it’s not necessarily really a thing. Like I said, someone buys a car since then, it’s not a set-in-stone approval necessarily. But is that the next step to at least have a lender—a lender that works for you where it’s the rate or maybe even being approved, period. Whatever your personal criteria, is that what’s next? Figuring out who that lender will be and what the details are?

Bekim: Being a broker ourselves here, at Rocket Mortgage, we have the ability to shop over 50 lenders. Even if things change a little bit, we often can pivot. Maybe we’re looking at one lender for the mortgage and now we have to go find an alternative option at a different lender who will take you with a little bit more debt. The pre-approval is really a very important step in the process because it just helps you have a holistic picture of your entire financial portfolio as well as under the upper limits of your qualification. A lot of people don’t want to buy at the absolute max of what they qualify for. A lot of times people will say they want to get pre-approved for a mortgage of $500,000 and we’ll tell them, “We just ran all of your income, property, assets and credit and you actually qualify for $750,000. We’re going to give you the pre-approval for $500,000 to keep you in the range of what you’re hoping to find and have you go out home shopping by yourself or with a real estate agent on your side.” And from there, they just have a clear understanding of what they can and cannot do over that period. With that, we take it a step further and actually give people a home buying guide. We walk them through that. Part of that home buying guide is talking about, don’t go out buying a Porsche if you’re currently driving a 2003 Ford Taurus and think that’s not going to affect your situation because it will. So, we will basically walk them through the dos and don’ts. And actually, part of our pre-approval letter gives you a whole list of dos and don’ts. Don’t open a bunch of new credit accounts. Don’t upgrade all of your luxuries in life, things like that. We really want to try to keep it as simple as possible. Then, to take it step further, one thing we do at Rocket is, we have a verified approval letter. The reason why you hear and see what you do about pre-approval letters not being that “iron clad” is because a lot of times people are issued pre-approval letters without going into the full financial profile. What that means is, they haven’t pulled an actual credit report. They haven’t actually collected documents on the income and assets. We take it a step further at Rocket where we will actually do a full underwrite of your mortgage, upfront. We will go through just as though you were buying the home today and closing your mortgage. We will go through, document by document, all your asset statements. All of your income. We’ll examine the property types and the area you’re looking to buy to give you some dos and don’ts for the home you’re looking for. Then, ultimately, your credit as well. We’ll actually put a moneyback guarantee behind that of $1,000 where, if and when you actually go to buy that house and we can’t close on that house as promised, we’ll give you $1,000 because it was something that was miss-underwritten and not something you did wrong. 

Tom: Oh, okay. If they stay within whatever range and they didn’t find a house for $10,000 more than they should have or something like that. As long as they’re sticking within the parameters? 

Bekim: Exactly. We’ll give them the range (or number) and tell them, “Here’s your don’ts, basically. And as long as you stay here and don’t do these things, you’ve got our guarantee of purchase in closing.”

Tom: I like it. What else should people be prepared for? What have we missed here so far? Is there anything else someone needs to know?

Bekim: I definitely think if you’re a first-time home buyer, understanding your first-time home buyer options is key. One of the things our home buying guide does is help people understand what those first-time home buyer options are. Understanding where they can pull that down payment from, I think, is key as well. There are limits as to what you can pull out of an RRSP for example, if you’re using an RRSP toward the down payment of a house. I would definitely say that the biggest thing in today’s market, more than ever, is really just understanding that down payment aspect. Where can you get it from? How can you accumulate that down payment? You mentioned gift funds earlier. There are limitations as to who you can receive a gift from. Employers are one of them. Immediate family member, things like that. So, you want to understand, going into it, that you can’t just get money from anywhere to make that down payment happen. And, if you do, then there are some time constraints in which that money needs to sit in your account. I would still say the biggest mistake we’re seeing out there from people trying to navigate the market right now, is they don’t set themselves up with the right financial professionals on their side. And they don’t actually get a pre-approval. Tom, you’d be shocked how many people say, “I just bought a home,” the first time they’re talking to us. And when we ask, “Great, who pre-approved you?” No one. They just assume they will qualify because they’ve got a job and things like that. But there are all these unknown and unknowns about making sure you’re set up. Both your income and your assets are key, there. Then, understanding your full credit because you may monitor every aspect of your credit but every day we take a look at someone’s credit bureau and they say, “Oh-oh, I didn’t know that was still on there. I paid that off.” And now we’ve got to go help them do this journey of getting something removed from their credit. Whereas, if we had done all that beforehand and prepared well in advance as a team. When I think of teams, I think of the client, of course, the person who is going to be buying the house or refinancing the house. It’s the mortgage broker or the real estate agent. And in the cases where people have a banker or financial advisor, really, you should have your whole team in the know. If I’m buying a house, I’m lining up my whole team in advance and I’m saying, “I need you guys to understand what I’m doing. I need you to make sure I’m set up to do it. And I need to make sure that when it happens you can help me bring down my stress level from a very stressful transaction by making sure I’m good to go and that whatever I do, when I put that offer in and it’s accepted, I have what I need to actually close on that mortgage.” That’s going to bring you a lot of certainty to the process and make you feel good. 

Tom: Well, thanks for going through this and giving people a little bit more sense of being sure and able to handle this. Can you let people know about the company you’re with and where they can find you online?

Bekim: Absolutely. With Rocket Mortgage Canada, you can find us at Our website there has a great learning center that anyone can use. And there’s tons of home buying tips, down payment tips for buying a home. Things to look at like a home refinance analyzer when you’re consolidating some of your debt. What does that look like? What should you be saving to make sense of it? I think the biggest thing that’s going on in today’s market, or biggest question people are asking is, “Do I go variable? Do I go fixed? Do I go open? Do I go closed?” We’ve got articles on all of those things to help people navigate a complex transaction and make it simpler. 

Tom: Great, thanks for being on the show. 

Bekim: Thanks for having me, Tom. 

Thanks, Bekim, for calming some nerves when it comes to home buying in the current housing market situation. It really is true that buying a house is a long-term decision. You can find the show notes for this episode at Thanks, as always, for listening. We’ve got a bunch of new guests lined up to join us on the show. I look forward to seeing you back here next week.

I really look at buying a house the same way I look at buying a stock…you buy when it’s right for you. You buy when your income justifies it, you buy when your credit is in line, you buy when you have enough money for the downpayment and enough in reserves… -Bekim Merdita Click to Tweet