15 Oct

Documents you need to for your mortgage pre-approval

Mortgage Tips

Posted by: Kiki Berg

Being fully pre-approved means that the lender has agreed to have you as a client (you have a pre-approval certificate) and the mortgage broker has reviewed, approved ALL your income and down payment documents (as listed below) prior to you going house hunting. Many bankers will say your approved, you go out shopping and then they sorry you not approved due to some factor. Get a pre-approval in writing!
Excited! Of course. You are venturing into your 1st or possibly your next biggest loan application and investment of your life.

What documents are required to APPROVE your mortgage?
Being prepared with the RIGHT DOCUMENTS when you want to qualify your mortgage is HUGE; just like applying for a job or going for a job interview. Come prepared or don’t get hired (or in this case, declined).
I assist all my clients along the way to ensure any questions are asked and when you are my clients YOU are prepared UPFRONT and fully PRE-APPROVED before you go house hunting.
No stress, no running around, no surprises.
Why is this important?
You can have a leg up against the competition when buying your dream home as you can have a very short timeline (ie: 1 day to confirm vs 5-7 days) for “financing subjects”.
Think?: you’re the seller and you know the buyer doesn’t have to run around finding financing and the deal may fall apart? This is the #1 reason deals DO fall apart. You will likely get the home over someone who isn’t fully approved and has to have financing subjects. Home is yours and no-ones time is wasted.
If you just walked into the bank, filled an application and gave little or no documents, and got a rate – you have a RATEHOLD. This is NOT a pre-approval. This guarantees nothing and you will be super stressed out when you put an offer in, have 5-7 days to remove financing subjects and you need to get any or all of the below documents. That’s not fun is it? Use a broker ALWAYS…me preferably. We don’t cost you anything!
When you get a full pre-approval, you as a person(s) are approved; ie: the broker did their work of reviewing (takes a few days) to call your employer, review your documents, etc. All we have to do is get the property approved, which takes a day or two. Much less stress, fastest approval…faster into your home!
Here is exactly the documents you need MUST have (there is NO negotiation on these) to get your mortgage approved with ease. Keyword here is EASE. Banks/Lenders have to adhere to rules, audit files and if you don’t have any of these or haven’t been requested to supply them…a big FLAG that your mortgage approval might be in jeopardy and you will be running around like a crazy person 2 days before your financing subject removal.
Read carefully and note the details of each requirement to prevent you from pulling your hair out later.
Here is the list for the “average” T4 full-time working person with 5-15% as their down payment (there is more for self-employed, and part-time noted below):
Are you a Full-time Employee?
  1. Last 2 paystubs: must show all tax deductions, name of company and have your name on it.
  2. Any other income? Child Support, Long Term Disability, EI, Foster Care, part-time income? Bring anything that supports it. NOTE: if you are divorced/separated and paying support, bring your finalized separation/divorce agreement. With some lenders, we can request a statutory declaration from lawyer.
  3. Notice of Assessment from Canada Revenue for the previous tax filed year. Can’t find it? you can request it from Rev Can to send it to you by mail (give 4-6 weeks for it though) or get it online from your CRA online Account.
  4. T4’s for your previous 2 years.
  5. 90 day history of bank statement showing the money you are using to put down on your purchase.
    Why 90 days? Unless you can prove you got the money either a sale of a house, car or other immediate forms of money (receipt required)…saved money takes time and the rules from the banks/government is 90 days. They just want to make sure you aren’t a drug dealer, borrowed the money and put it in your account or other fraud issues. OWN SOURCES = 90 days. BORROWED is fine, but must be disclosed. GIFT is when mom/dad give you money. Once you have an approval for “own sources” you can’t decide to change your mind and do gifted or borrowed. That’s a whole new approval.
Downpayments
Own Sources: For example for “own sources”: if you are a first time buyer and your money is in RRSP’s then, have your last quarterly statement for the RRSP money. If your money is in 3 different savings account, you need to print off 3 months history with the beginning balance and end balance as of current. The account statements MUST have your NAME ON IT or it could be anyone’s account. I see this all the time. If it doesn’t print out with your name, print the summary page of your accounts. This usually has your name on it, list of your accounts and balances. Just think, the bank needs to see YOU have X$ in your (not your mom’s or grandparents) account.
GIFT: If mom/dad/grandparents are giving you money…then the bank needs to know this as the mortgage is submitted differently (this is called a GIFT).
If you are PART-TIME employee?
All of the above, except you will need to bring 3 years of Notice of Assessments. You need to be working for 2 years in the same job to use part-time income. You can have your Full-time job and have another part-time gig…you can use that income too (as long as it’s been 2 years).
If you are Self Employed?
  1. 2 years of your T1 Generals with Statement of Business Activities
  2. Statement of Business Activities.
  3. 3 years of CRA Notice of Assessments
  4. if incorporated: your incorporation license, articles of incorporation
  5. 90 day history of bank statement showing the money you are using to put down on your purchase.
Now let’s get started! Give me a call 778-808-7756 to start your mortgage plan, find out what you want from your mortgage, and get you moving along, having fun and being excited! There are so many options for you.
Going to the bank direct is such a big dis-service to you. That is like walking into Ford and asking for a Mercedes or Toyota. As a broker: I am FREE! I work with ALL the banks, know ALL the rules, get the bank you choose pays me to give you great service and a fantastic product. There are over 300 of them…so don’t sell yourself short.
15 Oct

4 MORTGAGE STEPS TO OVERCOMING HIGH CONSUMER DEBT

Debt

Posted by: Kiki Berg

Client success stories are what make our job WORTH IT (We think most mortgage brokers would agree). So, with this in mind, we are sharing a recent client’s story that allowed them to not only purchase the home they wanted, but also pay down their own debt.

Mortgage Problem:

We had a young couple with two young children come to us looking to buy a detached home with a rental suite. They had several thousand dollars of consumer debt they had yet to pay off, and very little funding for the down payment. The husband was employed, and his wife ran a small business from their home. Their combined income was average, but with their significant amount of debt they weren’t sure they would be able to buy their dream home.

A close friend recommended that they visit a mortgage broker, and instantly we were able to see how we could help them not only find the down payment funding, but also help them pay down their debt.

Mortgage Solution:

Step 1: By the numbers.
First up, we looked at the numbers we would be working with to make this happen.

Purchase price of dream home: $600,000
Requested Mortgage Amount: $570,000
Loan to Value: 95%
Credit Score: 699 and 768

Step 2: Collect documentation.
For this particular mortgage we collected:
● Lease agreements for two suites (loft and basement)
● Notice of assessment and T1 generals from the last two years
● Standard income documentation for full-time employment
● Confirmation of self-employment for the last two years

Step 3: Calculate the total debt services ratio.
We took the above numbers and worked with them to present a debt service ratio that started out as 47.74% and brought it down to 42.5%

Step 4: Share the mortgage solution!
The down payment was provided by the parents and the rental income from the subject property was used. All their remaining debts were paid with $25,000 cash back from the lender who also provided an interest only payment Line of Credit to cover both the mortgage and consumer debt.

Our clients were thrilled to be able to purchase their dream home and to have their consumer debt under control. We are proud to be able to help couples like this to make their dreams become a reality, and really, all it took was 4 simple steps to get them into their home! If you have any questions, contact a Dominion Lending Centres Mortgage Professional near you.

 

 

 

 

 

 

 

 

 

 

 

 

 

Repost from:

Geoff Lee
GEOFF LEE
Dominion Lending Centres – Accredited Mortgage Professional
Geoff is part of DLC GLM Mortgage Group based in Vancouver, BC.

5 Mar

4 Costly Mortgage Mistakes of New Home Buying “Incentives”.

Mortgage Tips

Posted by: Kiki Berg

It’s exciting! brand new shiny homes are being promoted, opulent new appliances and granite countertops followed by massive marketing with deep discounts, rebates, cashback, free tv’s, will pay your strata and mortgage payments? Developers are throwing in these incentives to entice buyers and many are getting shocked with the ramifications when they close at the lawyers.
 
Nothing comes for free. Period. There is always a catch somewhere. From a mortgage perspective, I have had countless homebuyer mortgage files land on my desk because the bank wouldn’t or couldn’t approve your mortgage after you have already plunked down that 5-10% deposit. Which by the way is NON-REFUNDABLE in most cases! TIP: ensure your contract has an assignable clause. READ here
 
Let me tell you a story about 28 year old Jim. He worked for a developer and was told it was a GREAT location to buy. He could move in and flip it in a few years with all the equity increase. He was excited!  He strolled into the sales office and a BIG banker was their selling RATE. The banker asked a few questions, looked at his paystub and said your pre-approved! Jim put down $25,000 deposit. The place would be ready to move in about 8 months.  6 months later, Jim goes to BIG BANK to get all his financing approved for his new shiny condo and “I am sorry, Jim…we can’t approve your mortgage”.  WHAT!
Jim was referred to me.  I reviewed his income. His credit was great, he had his $25,000 downpayment/deposit (5% down)  in place…the problem was his INCOME.  The banker person didn’t get enough information to ascertain that he really didn’t qualify right the beginning. Why? While he was a T4, paycheque, tax paying employee…he worked for his family and insurers and lenders require that 1) you have to have TWO years of working history when working for family 2) he ended up being off on medical for 4 months and his 2nd year of income was WAY lower than his first year…he didn’t qualify for his mortgage. He lost his $25,000 deposit as the builder could not Assign his contract.
There are MANY reasons that buying “brand new” requires a licensed mortgage planner to be watching your back. Right from the time you decide to put in the offer to the day you close at the lawyers.
Yes, many banks will OFFER to do a 1 year rate hold…but that is all it is…a rate hold. It DOES NOT mean your pre-approved or will get the approval come closing time. That’s NOT a risk you should take.
 
Here are the 4 COSTLY mortgage mistakes:
  1. The value drops in your new place. If you are only putting 5-15% downpayment, and your property closes in 6-12 months; you could be putting yourself at financial risk. Lender lends money on the value of the property, not the purchase price. If you bought at $300k and the lender has it appraised before closing at a value of $280k…you only get the mortgage loan based on this VALUE amount. If you only have 5% down and no money to make up the cost…you will be up the creek (or borrowing from bank of mom/dad or reducing your downpayment). You’re on the hook for the difference! You promised to pay Mr Developer $300k to buy it, but the bank will only give you a maximum of 95% of the $280k value, not $300k purchase price. While in the Metro-urban cities this isn’t a concern today, certain areas in Alberta and rural areas this could be a factor.

  2. Who is watching that your credit score or your spending habits? It might be good today, but in 8 months you could decide to buy a new car (hey what’s $200 a month?) Well that $200 a month might be enough monthly debt payment to ensure you don’t qualify for a mortgage.

  3. Who is making sure that if you change jobs, go from full-time to part-time that you still qualify? Part-time income is looked at ENTIRELY different than full-time. Maternity leave and disability…same story.

  4. Those “perks” you are offered? They are called “Decorating Allowances” or “incentives”. They WILL be DEDUCTED from your purchase price/ value if it’s written INTO your contract of purchase and sale. This can be confusing and potentially have financial impact if you have limited funds for downpayment or are expecting a “cashback”.

    What are they and when are they good?  “monetary cashbacks”, “cars”, “TV’s, furniture, mortgage or strata payments for a year…will be deducted from your purchase price. This is where lies the confusion and costs.

    Say you put 5% down or $15,000 on your $300k home and that’s all you have. The Developer/Realtor offers $15k incentive (such cash to go buy furniture) into the contract. The lender would remove the $15k from the purchase price meaning $300k p/price now = $285k with a max mortgage of $270,750. Remember, lenders LEND on VALUE! So the client would need to come up with a down payment of $300k- $270,750 = $29,250. So you don’t actually GET the cash as it cancels each other out.  The important clarification is any builder incentive that becomes a “credit” at closing will be deducted from the purchase price and could affect your downpayment or expectation of a monetary rebate. If the LENDER is not aware of the “incentive” or credit and finds out after the fact when lawyer sends in addendums to contract at closing then this is where you could end up with an increase in downpayment. This is where it is CRUCIAL for the mortgage to be submitted correctly and be intouch with the Developer/Realtor to prevent confusion or closing cost expectations. Many times this is more of a marketing ploy than any financial benefit to you.

    So when are “incentives or decorating allowances” good? Exceptions to this would be stove, fridge, laundry or things that are necessary to LIVE in the property. They are not incentives.

These are just a FEW of the challenges. Please feel free to get that “rate hold” from the developers banker person…just ensure you have a licensed and experienced BROKER monitoring your file monthly until closing, so you DON’T LOSE YOUR DEPOSIT or end up sitting at the lawyers office like a sitting duck, and no money to close your new dream home.
 
Happy home buying..