19 Nov

PRE-APPROVED FOR YOUR MORTGAGE… WHAT DOES THAT REALLY MEAN?

General

Posted by: Dustin Larsen

Come and see me for your pre-approval.

PRE-APPROVED FOR YOUR MORTGAGE… WHAT DOES THAT REALLY MEAN?

There is a myth out there that once you’re pre-approved for a mortgage, you’re good to go out and buy a home… with a no subject offer… DON’T do it!

A pre-approval means that based on being able to PROVE (through documentation) your CURRENT income, expenses, down payment and credit bureau you SHOULD be able to get fully approved once you find the right property (this is the first half of the equation).

Remember that there cannot be any major changes to the your mortgage application details prior to the completion of their purchase as it may affect the your qualifications and change the conditions of the approval.

I always recommend my clients put in a “subject to financing” clause with their realtor when they are putting in an offer to protect themselves.

Here’s why:

The lender can like you and your financial picture, BUT the lender doesn’t know which property you want to purchase (this is the other half of the equation). Here are 3 examples:

  • A bidding war has bid up the price and the best offer (yours) has been accepted. YIPPEE!!! The lender sends in their appraiser to determine the value of the property. The appraisal comes in at a lower price than your accepted offer DRATS!! You now have to come up with the difference between the appraised value and your offer, since lenders will only offer a mortgage based on the appraised value of the home.
  • You are buying a condo/townhouse and the strata minutes indicate that there are: leaks, electrical issues, roofing problems, etc. that the strata needs to act upon. If the Strata doesn’t have a big enough contingency fund, the lender can decline due to potential special assessments down the road.
  • Property zoning – if the zoning is anything other than residential then your options will be limited. Some condos are zoned commercial if there is a large commercial component to the complex. Industrial, Agricultural Land Reserve (ALR) in B.C., or leasehold (government or otherwise) limit a buyer’s options.
    As you can tell “you may be pre-approved” but most certainly the subject property is not!!

There are several properties that most lenders will not touch these days. Here’s a (partial) list of property details that can affect most lender’s decisions on approving your mortgage:

  • A remediated grow-op or drug lab
  • Leased land or co-op
  • Age-restricted property
  • Special assessment (pending or otherwise)
  • Any reference to water or leaks in the minutes
  • A “fixer upper”
  • Contains asbestos, vermiculite insulations or has (even partial) knob-and-tube or aluminum wiring
  • Is on land with a commercial zoning component
  • Livestock is present, etc.
  • Self-managed strata’s (no strata management company)
  • Size of the property- below 500 sq. feet,
  • Doesn’t use municipal sewage or waste
  • Over 1 Acre and/or multiple buildings
  • Ongoing or upcoming assessments or legal proceedings
  • Strata with small contingency fund

The lender reviews the details of each property in detail once you have an accepted offer in place.

It’s important that the real estate agent discloses the information to their buyer ASAP so that it can be brought to the lender’s attention. The agent should be proactive in getting all documentation pertaining to the building/property, so that the buyer can make an educated buying decision. Many of the issues stated above can affect the long-term value and marketability of a property.

If you have a “subject to financing” clause in your purchase agreement, and you can’t find a lender (for whatever reason), then you can back out of the deal with no financial repercussions.

In my opinion you need to always put in a “subject to financing clause” as that’s the best protection you have. With subject free offers you could forfeit your deposit (and facing potential legal action from the seller) should you want to cancel your contract after the agreement has been made, even though you were technically “pre-approved”.

As you can tell there is lots to discuss about buying homes including pre-approvals! If you have any questions, contact a Dominion Lending Centres mortgage broker near you.

Kelly Hudson

KELLY HUDSON

Dominion Lending Centres – Accredited Mortgage Professional
Kelly is part of DLC Canadian Mortgage Experts based in Richmond, BC.

9 Nov

WHY WE CHOSE A MORTGAGE BROKER – OUR HOUSE MAGAZINE

General

Posted by: Dustin Larsen

A perfect explanation.

WHY WE CHOSE A MORTGAGE BROKER – OUR HOUSE MAGAZINE

Lindsay Austin and her husband never imagined they could get a home with a lakefront view. Their real estate journey began in 2012, when the couple purchased their first place, a townhome in Kelowna B.C. with the help of a Dominion Lending Centres Mortgage broker. By 2017, they were ready for something bigger and better. So the couple reached out again to their mortgage broker, who was there to lend a hand. After months of searching, the couple found their home. A one-acre property just outside the city overlooking Okanagan Lake. They purchased the home for $618,000 and moved in just before the summer.
“It’s rural, a little out of town. It’s exactly what we need,” Austin said, noting her mortgage broker was patient and right by their side as they spent months searching for the right place.

Q: Why did you choose a mortgage broker?
A: We got connected with our broker in 2011. At the time, being our first home, we were financially lost. We were new to the market and my mom said reach out and try. And it just made the process so simple. She’s a one-stop-shop. She collects all of our information once, and I have this touch point and this person who I can trust. My brother and sister-in-law just went through the process, and they had appointments at all sorts of banks, and they sit down and do this and that, and then they do it again with another stranger. Our broker was able to get our information streamlined and out to all of the available lenders and get us the best rates and just simplify it for us. I think that was so key. She made the first process in 2012 so smooth and so easy for us. It wasn’t even a question that we would go with her again because it was so easy the first time.

Q: How was it working with a mortgage broker?
A: It was fantastic. I can say her customer service was so high, and she was always looking at every option. Even with the changes (to mortgage rules) in the last couple years, I’m sure mortgage brokers have had to learn a bunch of new things. She was such a good communicator, and it’s so easy having just one touch point.

Q: What advice would you give someone in your situation?
A: Ask lots of questions, and your mortgage broker will have all the answers. That’s their job and that’s why they make it so nice and easy. Ask lots of questions and be totally honest. Those, along with communication, and you’ll have a very pleasant experience.

Jeremy Deutsch

JEREMY DEUTSCH

Communications Advisor

 

1 Nov

BANK OR MORTGAGE BROKER?

General

Posted by: Dustin Larsen

Great artice!! Thank you Ryan.

BANK OR MORTGAGE BROKER?

Mortgages are like vehicles. A bank is similar to the brand, Ford or Toyota for example. How long you have a mortgage before it’s time to renew is like the model, a Fusion or Camry. The rate is similar to the car’s paint color, and the mortgage benefits such as prepayment privileges and portability are like the car’s benefits; 4-wheel drive, hatchback, four doors instead of two, etc.

A bank is like a sales person at a Ford or Toyota dealership. He or she is an expert, they know everything about every car on their lot; engine size, warranty, all available colours, and their fuel ratings. He or she can match any car to your needs and lifestyle, as long as it’s sold at their lot.

But what if they don’t have the most fuel efficient car? What if you don’t like the design or you need four doors and a trunk and all they have is two doors and a hatchback? Are you still going to buy from that dealership just because you went there first? No, you’re going down the street to check out the Chevrolet, maybe even BMW, Mazda, or the new Chrysler dealership. That sales person doesn’t want you to go buy from another lot down the street, but you are buying to satisfy your needs, not the dealership’s needs of selling their own cars.

Now imagine a dealership that sold every single make and model of vehicle. Imagine you could choose one of their sales people, and have them work only for you. They know just as much or even more about every make and model, they do all the research for you and tell you what you need to look for, they ask you the important questions; they have your best interest. That is a mortgage broker, your own personal expert.

Now, you may not need a personal expert to buy a car. But what about mortgages? Is a 0.10% lower interest rate a lot? Or will a 20% prepayment privilege instead of 10% be more advantageous? Can you switch lenders and move your mortgage? $15,000 or $5,000 penalty? How is it calculated? Fixed or variable? Is a collateral charge good or bad? 2-year term or 5-year? Big bank or monoline lender? How about credit unions? The list goes on.

So, a bank or mortgage broker? Put it this way; would you buy from the first dealership you visit or hire an expert? If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Ryan Oake

RYAN OAKE

Dominion Lending Centres – Accredited Mortgage Professional

1 Nov

7 Tips for Buying Your First Home

General

Posted by: Dustin Larsen

7 Tips for Buying Your First Home
As a licensed Mortgage Broker, I am often asked “what do I need to know when buying my first home?”
Everyone has their own aims and objects when buying their first home. As a Mortgage Broker, I specialize in making sure your financing is in order to facilitate your dreams of owning a home.
Buying your first home is very exciting, but it can easily be overwhelming. Being prepared is the first step. The decision to purchase your first home can be a huge, life-changing event and you need to know exactly what you are getting into.
To get you prepared with the knowledge you need, here are my 7 tips to consider when you buy your first home: (Some of these may only relate to B.C.)
1. Strengthen your credit rating.
It’s pretty simple: the higher your credit score, the lower your mortgage rate will be.
Spend the time now to improve your credit. Check your credit report. Many credit reports have errors, so you need to ensure that your credit bureau is current and correct.
ALWAYS pay every single one of your bills on time. Set up automatic payments if you have had any late payments over the last couple of years.
Stop applying for any new credit a year before you are considering buying and continue until you sign the closing papers on your home. Spend only 30% of credit limits on credit cards.
2. Find a Mortgage Broker and figure out how much you can afford to spend.
The home buyer’s mantra: Get a home that’s financially comfortable.
Contact a Dominion Lending Centres Mortgage Professional. We work with you up to a year in advance to analyze your situation, and tell you how much mortgage and monthly payments you can afford.
Lenders like to see that you spend a maximum:
32-39% of your Gross income on mortgage payments, maintenance fees (if applicable), heat & property taxes
38-44% of your Gross Income on all debts
Including #1 above PLUS loans, credit cards, additional financing etc.
1 year+ prior to going home shopping, calculate the mortgage payment for the home in your intended price range, along with the increased expenses (such as taxes, insurance and utilities). Then bank the difference between the home payments and what you’re paying now. Not only will that simulate ownership, it also helps you save for your down payment!
When you are ready to start shopping for your home, as your Mortgage Broker, I gather all your financial documentation that the lender requires, in order to figure out much you can afford to spend. Then I work with you to get a pre-approval and lock in a low interest rate to protect you in case rates rise between now and the time you by your new home.
3. How long will you live in your new home?
The transaction costs of buying and selling a house are substantial including: real estate fees, legal fees, Property Transfer Tax, selling in a down market, moving, etc.
If you don’t plan to live in your new home for at least 3-5 years, you may not gain enough equity to make selling worthwhile.
Short-term home ownership can be a pretty expensive proposition. If that is the case, holding off on purchasing could be your best option.
4. How much house you need?
Buying a cheaper, smaller home might sound like a good place to start, but could end up costing you more if you need to move due to changes in your lifestyle, including a growing family. Then again, buying more house than you currently need will cost you more with higher mortgage payments, higher maintenance, energy and tax costs.
Prioritize your housing wish list. They say that the 3 most important things to think about when buying are home are location, location, location. In Greater Vancouver your first choice for location i.e. Kitsilano or Yaletown may not be within your means. You also need to think about how the new home space will be used and whether it will fit your lifestyle now and in the future.
5. Build a savings account.
Start now to build a healthy savings account. To avoid paying CMHC Mortgage Default Insurance you need to prove you have a 20% down payment.
Building your savings account, over and above the money you will require for the down payment and closing costs. Lenders want to see that you’re not living paycheck to paycheck. If you have three to five months’ worth of mortgage payments in your savings, that makes you a much better loan candidate.
6. Remember closing costs.
While you’re saving your down payment, you need to save for closing costs too. They’re typically 1% to 3% of the purchase price and due on the completion date.
In B.C. you need to also pay Property Transfer Tax (PPT). The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit. The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000. 3% on the portion over $2,000,000 and if the property is residential, a further 2% on the portion greater than $3,000,000
7. Shop for a Realtor that has your best interests in mind.
Interview at least three Realtors. Get referrals from people you trust who have recently bought or sold, including me, your mortgage broker. I work with a lot of realtors, some of whom are outstanding in their field. Once you’ve decided which Realtor is the best fit for you, they can help you focus your search to find your perfect home. There is no cost for the Realtor for the home buyer since the home seller pays the commission.
Besides the 7 tips I’ve listed above, there are many other things you should need to be aware of prior to buying your first home.
Mortgages are complicated… BUT they don’t have to be! Engage an expert!

Kelly Hudson
Dominion Lending Centres – Accredited Mortgage Professional