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Tuesday, January 15, 2013

How to avoid having your mortgage approval “unapproved”



 It happens every year.  A client will go to a mortgage broker or the bank and get a pre-approval and then go house hunting.  They find a home and make an offer which is accepted. They then go back to the lender with the offer and all the paperwork and all of a sudden, they are not approved.
 How did that happen? What happened to the preapproval?   What most people do not realize is that a preapproval is a brief overview to see if you are creditworthy and it tells you how much you can afford. The pre-approval is really no more than an interest rate hold.
   Inexperienced bank employees and a few brokers fail to give their clients the 5 Commandments when they give their clients the pre-approval.
 Here they are:
1-   Don’t make any large purchases – don’t buy a new car or change the lease. Do not go out to buy the new furniture for your home until after the mortgage is approved. Even if you have one of those no payments for 90 days plans from the Brick, Sears or Leon's , they do appear as purchases made at this time on your credit bureau report.
2-      Don’t apply for new credit – I know the zero down balance transfer looks appealing but you don’t need another hit on your credit bureau. Put off the temptation until after the deal is done.
3-      Keep your job – This may sound like a no-brainer but there are a lot of people who will switch forgetting about the 3 month probation or will become consultants which means they are self-employed. Don’t change industries.  More than one mortgage has been shot down by a job change.
4-      Pay your bills – pay them on time and don’t let the balances get close to the credit limit.
                           If you let your balance get close to your limit you can lose 30 points. Go over by a                   dollar and you will lose 35 points in a flash. Lenders often check for credit score drops in the days leading up to your visit to the lawyer’s office.
5-      Don’t move large amounts of cash around in your accounts. If you are receiving a gift for your down payment from your parents be sure to photocopy the cheque and the deposit receipt. Money laundering is a big worry with lenders so you should wait until your broker tells you it’s okay to move funds.
Finally,  be aware that the lawyer will ask you for 2 pieces of identification. If you make an offer on a house use your formal name, not your nickname. If the name on the offer and the name on your identification do not match you could delay or kill the home purchase at the last minute.

Let’s face it. Buying a home is a life changing event. Deal with a professional mortgage broker and you can avoid making stupid mistakes that will deprive you of owning the house of your dreams. 

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Monday, January 7, 2013

The best time to buy a house is now

When is the best time to buy a home? People have differing opinions as to when the optimum time is to purchase a new home. According to Mark Di Vincenzo from Time Magazine's  Business & Money section, January is the best time.
 He feels that as there are fewer buyers due to nasty winter weather, you are less likely to have bidding wars. He also figures that after the Christmas season bills arrive, carrying a mortgage for a house you do not want makes you want to sell even more. While I agree with him on these points he seems to forget that after Christmas no one wants to list their homes and that the majority want to wait until spring.
    I have found that the start of the second week in January brings out the buyers. After the Christmas decorations have been taken down many people start to think about spring and the idea of moving into a new home. Perhaps it's because their rental apartment is getting too cramped with all the new Christmas toys but I have found that year after year, this January trend continues to occur.
    I , however, have a different view on when the best time to buy a home , rental property or second home is; the best time is NOW.  Why?  There are a number of reasons.
   1-  While you are saving to purchase a home, housing prices are going up. Don't expect them to drop unless you live in the greater Vancouver area or perhaps in a condo in downtown Toronto.
 2- No matter what price you pay now, you will start developing equity in your property by having the value of the property go up and your mortgage payments lowering the balance each month. When you are renting, it's the landlord who is benefiting, not you.
3- finally, the sooner you move into the home you can start making improvements which will add value to the home; unfinished basement, upgrading the kitchen or bathrooms , landscaping or building a detached garage can all add to the value of the home. Some of these improvements can even be attached to your mortgage to make the monthly payments manageable.
 Contact me to find out about the Purchase Plus Improvement program available through CMHC and Genworth Financial.
   If you agree that now is the best time to buy, the first step is to get pre-approved for a mortgage.. Contact me via my website to get started on the home buying process.
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