Monetary Requirements For Down Payment- some thoughts

Mark Carney has been VERY clear that he will not use monetary policy as a tool to keep credit demand in check.  It is too blunt a tool.  While they can reign in consumer borrowing by raising interest rates, they will simultaneously crush business spending, a key driver of growth coming out of the recession.  People who have been calling for a rapid rise in interest rates have been dead wrong for exactly this reason.  Last year they were adamant that we would very likely revisit emergency low interest rates before we would see rates shoot to the moon.  Deflation and not inflation remains the greater near-term threat.
With all of that in mind, it is very clear that the Bank of Canada is looking to Ottawa to rein in consumer debt.  They have made some clear policy suggestions in this paper, and you can bet that Jim Flaherty and Stephen Harper will be hearing all about them:

Recent international discussions have begun to examine the merits of adjusting mortgage market rules over time. For example, country authorities could change the maximum LTV ratio in acountercyclical fashion, lowering it during housing booms and raising it when house prices are depressed. One outcome of this type of policy is an increase in the resilience of the financial system since it requires borrowers to have a larger equity stake in their property during booms, thus reducing the potential losses to financial intermediaries during the bust phase when income and house prices fall.  In addition, the lower LTV ratio (higher down payment) would act against the boom in the first place by reducing the extent to which borrowers could extract equity from their homes or take on more leverage to buy a bigger home.

Christensen and Meh (forthcoming) investigate the role of a time-varying maximum LTV ratio in a model based on Christensen et al. (2009).13 They consider the impact when the public authorities respond to a credit boom by lowering the regulatory maximum LTV ratio below its long-run setting of 80 per cent.  The extent of the countercyclical response of the LTV ratio is determined by a regulatory rule that links the change in the LTV ratio to the level of mortgage credit relative to its long-run value.  Housing booms and busts are often attributed, at least in part, to an easing of mortgage-underwriting conditions. We now turn to the case in which lenders themselves supply more credit and consider how the outcome might differ if the LTV ratio was lowered in response.

And with that, the Harper government has just felt the heat to adjust down payments.  This move, coupled with the reinstitution of the regional maximum mortgage ceiling by CMHC would go a long way in letting air out of this exceptionally buoyant market and limiting consequences in the future.
Expect a flood of rebuttals from the mortgage industry...

Who Has the Lowest Cost of Borrowing?- That's the Right Question: Ask it!

I get several calls and emails a day asking something like: “Who has the lowest rate?”
Rarely do I hear folks ask: “Who has the lowest total cost of borrowing?”
There’s a big difference between the two. The interest rate is just one of multiple factors that determines your total cost of borrowing over the term
There’s so much in the fine print that can turn a low rate into an expensive rate, including but not limited to:

• Poor term selection
• Overlooked mortgage restrictions
• Bad conversion rates
• Onerous mortgage penalties (relevant when refinancing or terminating before maturity)
• Unanticipated fees
• Bad advice (e.g., on deal structuring, penalty minimization, etc.)

Regardless of where you plan to get your mortgage, you owe it to yourself to ask a professional if the mortgage you’re considering really does have the lowest “total cost of borrowing”, given your needs.
Make sure your adviser compares all available lenders for alternatives, not just the lender(s) he/she works for or work with, most often.

Lower Fixed Rate Mortgages on the Horizon

Yields Crash, Lower Fixed Mortgage Rates Coming

The 5-year bond yield has nose-dived 16 bps today, crashing through “support” at 2.00%. It’s the biggest plunge in yields since March 2009.
As of this writing, the 5yr GoC sits at 1.87%—seemingly en route to its 28-month low of 1.835%.

Yields are hurtling lower in response to a slew of negatives including:

• “Austerity measures” (spending cuts) built into Congress’s debt agreement. Those will drag on Canada’s economy.
• Weaker economic data out of the U.S. (like yesterday’s brutal ISM number)
• Ongoing angst about the euro-debt dilemma.

On a positive note, global investors are now finding Canadian treasuries far more appetizing—due in part to Canada’s AAA debt rating, budgetary prudence, and stable currency. That has sparked a money rotation into Canada, adding to today’s bond buying. (When investors bid up Canadian government bonds, our yields drop.)
With the American debt Band-Aid in place and yields crashing, lenders should now be ready to drop posted fixed mortgage rates (barring unforeseen events).
Today we’ve already seen:

• A major bank lower discounted fixed broker rates by 10 bps to 3.69%
• A few non-bank lenders cut 5-year fixed rates by 10 bps
• Brokers offering 3.39% on no-frills mortgages.

Variable-rate mortgagors should also benefit from all of this (mortgage-wise, if not economically). That’s because a BoC rate hike appears to be off the table in 2011…if you believe what Overnight Index Swaps (OIS) and BAX futures are implying. If true, prime rate will stay put for at least the short-to-medium term.

Deciphering The BoC's Hieroglyphics

When it comes to the future of interest rates, the Bank of Canada (BoC) is cryptic. It rarely comes right out and says what it’s thinking because that could disrupt financial markets.
Instead, the BoC plants clues in its public statements.

In yesterday’s rate announcement, for example, the BoC removed the word “eventually” from its commentary that rates will rise. When questioned about it today, Governor Mark Carney laughed it off. The market took that as a clue that rates may jump sooner than expected.
The common wisdom today is that the overnight rate will gently rise until it nears the “neutral rate.” *
But that’s not a given, says Carney, at least not in the next year or so.
"You cannot mechanically assume that because the output gap...(will close)…that the bank's target interest rate will be back at neutral, however you define neutral,” he said.
That’s because economic risks could remain, including a high Canadian dollar, a languid U.S. recovery and potential European debt defaults.
If you decode that, says RBC economist Dawn Desjardins, it means the BoC is likely "prepared to maintain a lower than neutral policy rate."
BMO economist Douglas Porter agrees. He says the BoC’s language affirms that “rates are highly unlikely to approach so-called neutral (i.e., somewhere between 3% and 4%) perhaps until well into 2013, and potentially even later on.”
By the way, the Bank of Canada doesn’t announce what it considers to be a neutral policy rate. Economists can only speculate. Current estimates of “neutral” range from 2.5-4%—with approximately 3.00-3.25% being somewhere near consensus.
This all boils down to one thing, say analysts: The probability of rates skyrocketing anytime soon is minimal.
Granted, current rates are "exceptionally stimulative,"as Carney puts it, but that’s been warranted in order to maintain what little economic momentum we have.
Carney also went out of his way to emphasize that yesterday’s rate announcement refers only to "some" of the “considerable monetary policy” being removed. In other words, the Bank is not contemplating aggressive rate increases.
That is exactly what variable-rate mortgagors want to hear.

---

*  The neutral rate is the rate level which, over the long run, keeps inflation near the Bank of Canada’s 2% target.

Mortgage Secrets from an Independent Mortgage Planner

If you are buying a house or refinancing your mortgage, the siren song emanating from your local bank branch can be mighty tempting. It’s just so darn convenient, and with all of those TV and radio ads featuring happy people reassuring you that your bank has only your best interests at heart - what’s not to like? Well…your available options for one…and certainly their terms and conditions…and maybe the rate – but hey, I hear that some branches are now giving away free donuts on Fridays, so at least there’s that.

All kidding aside, borrowers who partner with experienced independent mortgage planners gain access to a wide range of solutions that no single bank/lender will ever be able to offer. In today’s post, I’ll give you examples of mortgage options that you probably didn’t know you had, and that you aren’t likely to come across if your local branch teller doubles as your mortgage advisor.  

Terms and ConditionsThere are differences in the terms and conditions offered by the Big Five Banks versus those available at smaller lenders. The bottom line is that Big Five mortgage contracts are full of little clauses and conditions that have the potential to pull significant amounts of money out of your wallet over time. Examples include: inflating your prepayment penalty charge by using posted rates instead of contract rates, registering your mortgage as a collateral charge and convincing you to register a charge for 100% of the value of your property on title (terrible idea!), compounding variable-interest rates monthly instead of semi-annually, and then offering you lousy rates at renewal and hoping you won`t notice. Only an independent mortgage planner with access to the broader market will help you steer clear of these tricks and traps.

Equity LendingIf you are self-employed, there are reputable lenders who will loan you 80% of the value of a property with little or no formal confirmation of your reported income. You usually need to have been self-employed for a minimum period of time and your line of work has to pass the smell test (expect underwriter scepticism to take over in the $70 to $80k range). You also need to have a strong credit history. Furthermore, properties will always be subject to full appraisals, and mortgage rates will often be higher than the best available (but not unreasonably so).
As an aside, this type of lending is controversial and when done wrong, can lead to substantial lender losses. But it’s been available in the Canadian market for quite a long time and it’s about the closest thing we have to risk-based pricing. Done right, equity lending turns ‘no’ into ‘yes’ for borrowers who represent reasonable overall credit risks, and it rewards lenders handsomely for their marginally increased loan exposure.

Investment Property FinancingWhen CMHC stopped insuring high-ratio rental properties, it also opened up the conventional part of the market to more subjective underwriting (because the crown corporation’s guidelines no longer acted as an unofficial mainstay). Today, borrowers will find a significant variance in the way rental properties are underwritten, and partnering with the right mortgage planner can help you gain flexibility with income, expenses, vacancy rates, zoning, and more detailed aspects, like whether or not investment properties can be held in a corporation. Rental investors are well-advised to explore the wide range of mortgage options that are available to them across the lending spectrum (and experienced independent mortgage planners make great tour guides). As with most types of lending, slight changes in the circumstances from one case to the other can mean that one lender offers a much better deal - and it is by no means always the same lender.

Extended AmortizationsMost people think that amortization periods are now limited to a maximum of thirty years, but if your down payment (or built-up equity) is greater than 20% of the value of your home, that’s not the case. Independent mortgage planners have access to lenders who still offer amortizations as long as forty years. For borrowers who want to free up cash flow, this added flexibility can make a world of difference. To put this increased flexibility in perspective, a $300,000 fixed-rate mortgage at 4% that is amortized over thirty years will require a monthly payment of $1,427, whereas that same mortgage amortized over forty years has a monthly payment of only $1,248.
Extended amortizations can also be used to help you qualify for a larger mortgage amount, and if you’re determined to pay off your mortgage faster, you can set your scheduled payment using a shorter amortization period once you have passed the qualification stage. In the example above, if all else is equal, that extra ten years of amortization will increase the maximum mortgage amount you can qualify for by $43,000 – and extended amortizations can be had in combination with some of the best rates in the market.     

Relationship and AdviceDespite all of the advertising campaigns suggesting that your bank wants to be your buddy, you have a much better chance of forming a lasting relationship with an experienced independent mortgage planner. For starters, it takes time and sacrifice to build a successful independent practice and that means we’re in this for long haul, so if you need more advice a few years down the road, we’ll still be around to pick up the conversation where we left off. In contrast, you might have already noticed that the faces at your local bank branch change quite often.
Also, independent planners often have advanced training in financial planning or general finance, and we demonstrate our high level of commitment by working in the context of your long-term financial plan upfront, and by continuing to offer you an educated view of what’s happening in the interest-rate markets after your deal closes. Simply put: you are long term clients, not transactions.
The success of this approach has not gone unnoticed, and the Big Five have countered by dramatically increasing the size of their mortgage sales forces in a very short period of time, a strategic response that has focused on quantity - you will have to judge the quality for yourself. (Please note: I do not want to impugn all bank mortgage specialists; there are some good ones, but it’s no accident that the best among them usually convert to independent planners once they get established.)
The bottom line is that in the Canadian mortgage market, shopping around will usually save you money, increase your flexibility and get you better terms and conditions. The money saving point was recently confirmed by a Bank of Canada (BoC) report called “Discounting in Mortgage Markets”. Surprisingly, the BoC’s research showed that people with higher incomes and asset bases were more likely to pay higher rates if all is else was equal – and the main reason was that this group assumed that their bank would automatically provide the best offer and as such, they didn’t test the wider market. The report concluded that in the end “loyal customers pay more”.
None of this information will come as a surprise to the many first-time home buyers who are using independent mortgage brokers at a record rate (48%, according to the 2011 CMHC Mortgage Consumer Survey). Word has gotten around among that group. It is repeat buyers, refinancers and renewers who are lining the banks’ pockets and missing the many benefits that unbiased, independent advice can provide.
A final point to clarify: Even though I think there is a need for better disclosure, I’m not anti-bank. In some cases, borrowing from one may be your best option; but if you end up at a bank after partnering with an independent mortgage planner you’ll know it’s because they won your business fair and square, not because it was convenient or because you were lured there by their seductive advertising.

RRSP First-time Buyer Exceptions

Question:  I heard that I'm not considered a first-time buyer for the RRSP Home Buyers' Plan (HBP) if me or my spouse have owned a house in the past five years. Are there any exceptions to this rule?




Answer:  Yes. You can still qualify as a first-time buyer under the Home Buyer's Plan if...

from January 1 of the fourth previous year (i.e., 2006) until 31 days before withdrawal, you:

• Did not own a house that you occupied as your primary residence; and,
•  Did not make a spouse's (or common-law partner's) owner-occupied home your principal residence.

As this suggests, you can rent your primary residence while owning one or more rental properties, and still be considered a first-time buyer under the RRSP Home Buyers' Plan.
Even if you or your spouse owned a principal residence in the last 4-5 years, you can still withdraw funds under the HBP if you:

• Have a disability and are buying a home that is more accessible or better suited to your needs
• Buy a home for a close family member with a disability, and that home is more accessible or better suited to the needs of that person
• Give the funds to a close family member so they can buy a home that is more accessible or better suited to their needs.

Here's the definition of a close family member and other relevant details: HBP Link.

Think about your Options- Not just Rate

 It would seem that consumers put far more attention into the options, make and model of the car they would like to buy then they do regarding their financial wellness. Do you buy that new vehicle based solely on price alone? No you don’t, so why would you shop for your single largest investment, your mortgage, based on price alone?

Is it really a surprise that Canadians have managed to rack up 1.5 trillion dollars worth of debt?
It’s not about rate, in fact, rate alone can end up costing you more in the long run. It should be about the total cost of home ownership over the term of the mortgage. Mortgage products can differ from institution to institution and all with varying options built within the mortgage product itself i.e. prepayment options, penalty calculations, due on sale clause, registration, etc… Let me share a client story.

I had a couple referred to me and they were looking to purchase a new home and selling their existing residence. Upon speaking with their existing lender, it was determined that my clients were unable to port their mortgage (meaning take the mortgage with them to the new home). This is because the mortgage they signed for was not portable as per the “due on sale close”. To make a long story short, their only option was to incur a penalty to payout the existing mortgage and take out a brand new mortgage. This could have been avoided if the clients main focus wasn’t “rate”. That said, perhaps the situation could have been avoided had they have had the right advice. Planning is important and as the saying goes, if you’re failing to plan, you’re planning to fail.

It’s important that you do your due diligence and get advice from a professional and preferably someone independent of all institutions (i.e. Mortgage Broker, Financial Planner, Insurance Broker, etc…). I say this because if you are seeking advice from someone loyal to one institution, you may receive biased advice. Proper planning with ongoing proactive management can make the difference between comfortable retirement or no retirement, which would you prefer? In the case of your mortgage, ongoing, proactive mortgage management will dramatically lower your total cost of home ownership. 
It’s time consumers become more diligent about their finances.  Start taking your mortgage financing more seriously and get a plan in place today!

A Mortgage is kinda like piloting a plane....... Say What????? Read on!

Purchasing or refinancing your home is like taking an airline flight cross country. When you start your trip, you have no idea how the trip will go. Neither does the pilot! You could run into ALL types of turbulence, or you could have a smooth flight and land on time. Certainly, the pilot will try to use his or her experience to navigate around storms and go for the smoothest flight plan, but if they're honest, they can't promise a turbulence-free trip. Their job is simply to get you to your destination in the least time and with the least aggravation while keeping you informed throughout the trip.

My role is "the pilot" of your plan. My job is to assist you in getting your mortgage for the lowest cost, in the least time, with the least aggravation. I can't promise you there will be no turbulence but I can promise that I will use my experience and expertise to take you on the smoothest flight that I can. And if we hit turbulence, I won't bail out on you!  I will be your teammate throughout the flight until I get you safely to your destination.

See the different types of turbulence below.

Turbulence! The Lender:   Borrower does not qualify because of a late addition of information.   .                 Lender requires, at the last minute,an appraisal    The Buyer:     Wasn’t completely honest on the application.        Submits incorrect tax returns to lender.    Source of down payment changes.   Job change, illness, divorce or other financial setback    Comes up short on money they stated they had.   The Seller:      Illness, divorce, etc.   Home has hidden or unknown defects that are subsequently discovered Home inspection reveals average amount of small defects that the seller is unwilling to repairRemoves chattels/fixtures from the premises that the buyer believed was included.        Is unable to clear up encumbrances or liens.   Seller did not own 100% of property as previously disclosed. Seller thought getting partner’s signatures were “no problem”   – but they were.  Seller leaves town without giving anyone Power of Attorney.  Seller delays the projected move-out-date.   The Appraiser:    The appraiser is not local and misunderstands the market.    No comparable sales available.   Appraiser delays (too busy, etc.)   Makes important mistakes on appraisal or brings in value too low.   The Home Inspector:   Overly picky with the condition of the property and ‘scares’ the buyer. Infuriates the seller by comments made.      Makes mistakes and misrepresents the property’s deficiencies or good points. The Realtor(s):     Delays access to property for inspection and appraisals.   Unfamiliar with their client’s financial position – do they have enough equity to sell, etc.  Does not get completed paperwork to the lender in time.  Inexperienced in this type of property transaction.  Takes unexpected time off during transaction and can’t be reached.     The Property:   County will not approve septic system or well.  Home was misrepresented as to size and condition.   Home is destroyed prior to closing. Home is uninsurable for homeowners insurance. Property incorrectly zoned. Portion of home sits on neighbours property. Unique home and comparable properties for appraisal difficulty to find.   The Lawyer: Fails to obtain information from beneficiaries, lien holders,title companies, insurance companies, or lenders title companies, insurance companies, or lenders manner.Lets principals leave town without getting all necessary signatures.Incorrect at interpreting or assuming aspects of the transaction and then passing these items on to all parties such as lenders, buyers & sellers.Loses paperwork.       Incorrectly prepares paperwork. Does not pass on valuable information fast enough. Does not coordinate well so that many items can be done simultaneously. Does not bend the rules on small problems.                                       Does not find liens or any title problems until last minute.  Lender does not properly pre-qualify the borrower. Please remember- This is my opinion and these examples are just that- "examples". My experience and knowlegde will be invaluable in any situation as outlined- as I always say- there's more to it than rate!

Ready to Buy?

If you have made the big decision to buy a home read on for the next step!

The majority of home purchasers will select a knowledgeable Realtor to show them numerous homes and negotiate the best possible price for their dream home. When purchasing or selling a home with a Realtor, make sure you sign an Agency Agreement to determine if the Realtor is acting on the Purchaser's or Vendor's behalf.

Some Purchasers and Sellers will try to buy or sell privately. However, this process is not recommended for everyone. Without Real Estate and Legal knowledge problems may arise when determining the real market value and legal steps that must be followed.

When viewing Builder's Model Homes, remember that the sales person at the site is representing the builder. If you are working with a Realtor it is recommended that you let them represent you as the "Buyer Agent". This means that they are working on your behalf and looking out for your best interests not the builder's. Builder's Purchase Agreements are more complicated than a standard Agreement. Therefore, it is always advisable to have your Realtor or Lawyer review the document before signing.

We work regularly with trusted referral partners- please contact us directly if you need a trusted realtor, builder, or lawyer- we can help!

Home Financing Checklist

If you're thinking of purchasing a new home or refinancing or transferring your mortgage on your existing home, finalizing the paperwork is one of the last steps you take toward completing your home financing. Arriving prepared with all the documentation you need will make the process quick and easy!

What information to bring about your current property: Recent mortgage statement most recent property tax bill/statement Legal description of Property: You can find this on: Original Purchase Agreement Property Tax Statement Property Value - to help estimate your property value, refer to: Recent Property Tax Assessment and/or Neighbourhood sales comparables (MLS listings) Some of the common questions that you may asked to complete your mortgage application: What current assets or savings do you have? What current liabilities do you have? (Credit bureaus will ensure payments and balances are recorded but it's good for you to know to verify accuracy .) Specific questions about the property:   How much are the annual property taxes and heating costs? If the property is an condominium, what fees are associated with the corporation? What is the total square footage of your home? What is the total square footage of the land? Other Documents/Information Required Income Confirmation: If salaried or hourly employment (full time or regular part-time) - provide one of the following: A letter from your employer on Company Letterhead which includes your name, salary or hourly pay rate and name and title of person signing the letter. Current pay stub If self-employed or on contract, and/or you wish to include bonuses, overtime, gratuities or profit sharing, provide your last two years Notice of Assessments (NOA) from Canada Revenue Agency.   Let us be your guides!  If your income source is something other than mentioned above, please give us a call for more information on the type of income confirmation required.

Comparing and considering a secured LOC?

You may see some advertising from one of the big banks about LOC's at prime + .50%. This is an attractive offer however it isn't new. This bank is just jumping on the bandwagon now

Banks,through the broker channel, have offered prime +.50%  for well over a year now. Even better, prime +.25% can be found.

Comparing and considering a secured LOC?

 
Here are some common differences that separate competing lines of credit:

• Mortgage features and rates
  • This is obviously a factor if you’re getting a mortgage along with your credit line—i.e., a readvanceable mortgage.
• Interest offsetting
  • National Bank and Manulife have this feature, and it’s a helpful way to save interest.
• Number of sub-accounts
  • Multiple sub-accounts are useful if you need to track interest separately for investment or business-related borrowing.
• Online transfers directly from the LOC
  • This is a convenience feature that lets you pay bills or fund an investment account directly and automatically from your LOC.
• Credit line portability
  • Portability is nice if you move and want to bring your LOC (and its interest rate) with you.
• Ability to lock in
  • Some lenders let you convert individual portions of your prime + 0.50% LOC to a discounted fixed or variable-rate mortgage, any time and at no cost.
• Free banking
  • This can be worth $500+ over five years.
• Linked bank cards
  • Some lenders offer a credit or debit card that’s linked to your LOC.

If you need a hand sorting this all out, call me today. I will compare all the banks’ credit lines for you and suggest the cheapest option with the most flexibility.

Home Inspections

Buying a home is one of the most important and expensive purchases that an individual will likely ever make in their lifetime. When purchasing a home there is not a guarantee nor a money-back/return policy if you are not satisfied.

It is always a good idea to have a home inspection completed when purchasing a home. Please remember, an inspection is not a warranty or a guarantee. The inspection report is intended to educate you regarding the overall condition and functioning of the housing system. This enables you to make an informed decision about buying your home.

An inspector should provide a detailed written report. The report will detail any repairs that are required immediately or in the foreseeable future. The Purchasers usually accompany the inspector during the home inspection. This allows the Purchasers to walk through the house with the inspector to see any concerns he may locate plus the opportunity to ask questions while at the house.

Professional Inspectors can be located through Professional Associations (Canadian Association of Home and Property Inspectors, ) or your Real Estate Representative. In most Provinces, inspectors are unregulated so you should always ask questions regarding:

• The inspector's qualifications
• You may ask for 3 references
• How long has the inspector been in business
• Do they have "errors and omissions insurance"

"Errors and omissions insurance" is very important. If the home you are buying requires a costly repair that the inspector didn't report, then the inspector can be held financially responsible for the cost of the repair. The insurance can be required to pay the claims.

Though prices vary, a typical house inspection will set you back $500 and three hours. If that sounds like a lot, remember that your home may be the most expensive and most important purchase you will ever make. And there's no money-back guarantee.

If you have put a condition in your "Offer to Purchase" for a satisfactory home inspection, then you are responsible for paying for the cost of the report. The report is therefore yours to keep.

Credit Line vs Reverse Mortgage

I read the fine print: that's what I do to ensure you get a solution that fits your needs rather than the flavour of the week. In the fine print of a credit line agreement it says ( or a version of ) :

Your credit limit, interest rate, minimum payments required and other terms of your line of credit agreement may be changed at our sole discretion and without prior notice to you…

While a bit harsh, conditions such as the above are in fact part what allows the great rates offered on lines of credit.  However as it pertains to seniors, possibly your parents and grandparents, these hallmarks of a “demand loan” provide little in the way of piece of mind.

A reverse mortgage on the other hand, has a number of structural features that guarantee greater lending safety for the client:

1. No payments required – if rates do ever increase, this will at least guarantee that there will be no additional impact on their monthly cash flow and that’s on top of the zero impact it has all along.
2. No maturity date – as long as a client lives in their home they can enjoy their reverse mortgage.  There is no age limit, so if a 55 year old lives to 110 years of age, that’s 55 years they will have the loan.
3. No need to re-qualify – this is true even if property values decrease. 
4. No reduction of credit limits – you get to keep what we said you can have from the start.
5. Clients are never asked to move, sell or repay their loan – even if changing valuations cause the LTV to become higher.
6. Clients, or their estate will never owe more money that the value of their home – a reverse mortgage is fully secured by their home alone.  In the very unlikely event that their debt becomes larger then the value of their home  (it has happened less that a dozen times in the 26 years CHIP has been in business), we will take the loss, regardless of other client or estate assets.

However all this comes at a cost, that is a small cost.  Homequity Bank’s current variable rate for example is 4.75%

So if you are retired or know someone who is and they are considering financing, they may be a little on the risk averse side. Consider mentioning how a reverse mortgage might be able to uniquely help them and it may go a long way to improving their piece of mind.  Let me know if I can help- it's the cornerstone of customer satisfaction.

Difference Between "pre-approval" vs "pre-qualification"

Now that you know what you want in a home, you need to find out what you can afford. There are two ways to go about this: pre-qualification or pre-approval for a mortgage.

Pre-qualification is the simpler of the two processes. It can even be done online or over the phone. When you contact me, I will ask you for some basic information about your finances ? how much money you earn, your debt load, etc. I will take this information and give you a rough estimate of how much of a mortgage you might qualify for. Simple as that!

Pre-approval is more a more in-depth process. I will perform an extensive check of your finances including your credit rating, whether or not you're a first-time buyer, what your debt load is, how much money you have to put as a down payment, etc. This figure will be a much more reliable estimate of what you can afford.

In most markets, pre-approved buyers are preferred over those that are merely pre-qualified. Being pre-approved lets the seller know you have gone through an extensive financial background check and there should be no unexpected obstacles to you buying their home.

Still confused? Speak with me directly. Get the best mortgage suited to your needs and all your questions answered in plain talk.

Let Me Guide You!

 

What do banks look for in a mortgage application? Let us be your guide!

Once your mortgage application is filled out and sent to the lender for review, the first thing they will look for is your ability to pay back the loan you are requesting. Sarah and I have a streamlined the process to help you get your "ducks in a row" prior to this review. We ensure the loan package is in perfect order and answers all the important questions up front. We know what the lenders are looking for, based on long-term relationships with them and extensive knowledge of guidelines for all the programs that are available today.

What is the lender looking for when they review your application?
The lender wants to know about your personal financial picture, including savings and credit history and your employment stability. The co-borrower's history is also taken into consideration. The lender also considers the loan amount and appraised value of the home you are looking to purchase. Not every applicant is approved the first time through the process. If the underwriter has any questions or concerns, he or she will require certain conditions to be met before they approve the loan. Pre-approval prior to house hunting lets you know exactly how much you are qualified to borrow in advance.

What can you do to make it easier?

Before taking out a mortgage it helps to establish a consistent record of paying your bills on time. If you have utility bills that are overdue, bring these up to date. Make sure you are paying credit card installments in a consistent and timely manner.

We can help you evaluate your debt-to-income ratio to determine what mortgage payment will be comfortable and affordable for you on a monthly basis. You need to have enough savings to cover your down payment and closing costs, and this saving must be on file for at least 3 months.  

If I just started a new job, can I still apply for a mortgage?

A stable employment history is important, but the lender does take human factors into consideration. If you've recently completed college or university, you have good cause to have a lack of consistent work history. If your profession is seasonal, and gaps in employment are normal in your field, there are mortgage programs that can work with your situation. If you are a freelancer or do contract work, the lender will look for consistency in income over the last two years. If you have moved employers but stayed in the same field, lenders will still consider.

Consistency is the key word in the lender's mind. But know that lenders have developed many different mortgages to meet the needs of the general public. Times keep changing and so do mortgage rules. Sarah and I stay on top of current mortgage trends. We monitor rates daily and have a support network of Realtors, CPAs, Financial Planners and Credit Repair Consultants to lend you additional assistance.

Give us a call today to find your best options!