Your Credit Score, and How it Affects Home Buying

January is often the time of financial reflection. The holidays are over the joy of giving has been replaced by the reality of dealing with all the credit card bills. When reviewing which bill payments take priority, remember to keep your credit score in mind, as home buyers who are seeking a mortgage find out early how important their credit score is in the home buying process and in determining the interest rate that a lender offers.

WHAT IS A CREDIT SCORE?

A credit score is a number that lenders use to estimate risk.  Experience has shown them that borrowers with higher credit scores are less likely to default on a loan. Credit scores are generated by plugging the data from your credit report into analytical software. Credit reporting agencies don’t necessarily use the same scoring software, so don’t be surprised if you discover that the credit scores they generate for you are different.

Credit scoring software only considers items on your credit report. Lenders also look at other factors that aren’t included in the report, such as income, employment history and the type of credit you are seeking.

Borrowers with good credit scores are typically offered more financing options and belter interest rates, but don’t be discouraged if your scores are lower, because there’s a mortgage product for nearly everyone. Please call me with your questions on the types of financing available for your particular financial situation.

The pie chart shown here shows a breakdown of the approximate value that each aspect of your credit report adds to a credit score calculation. 

Dave Cooke is a Calgary mortgage broker. For more information contact him at 403-836-1201 or visit

  his website

I love what I do - I change people's lives

Recently a co-worker said that she loved what we do - changing people's lives. I felt the same.
   When you get a mortgage approval for a first time home buyer, their lives are changed forever. It's a great feeling. However, sometimes mortgage brokers are called on to help people out of a bind.

 January is the start of the new year and a challenge to many people. When the credit card bills come in after Christmas, there can be a sudden financial strain on the family budget.
     With all the layoffs we have had in Alberta over the past 2 years, some people are having a tough time paying their bills and their mortgage.
    This is when I don my blue cape and become a super -hero.
    There are a number of ways that a mortgage broker can help home owners:
1- we can set up a line of credit using the equity in their home to pay off high interest credit cards and get the family back on track.

2- we can set up a second mortgage to pay off the bills and perhaps a car loan as well.

3- refinancing the mortgage to either pay off bills or to just lower monthly payments is another option.

4- re-negotiating the mortgage to skip a payment or  extend the amortization to lower monthly payments or lowering the payments for a few months can also be a consideration.

    As you can see there are a number of possible solutions to money problems if you contact your mortgage broker before you get into foreclosure or have bill collectors calling.
 
   Let your mortgage broker be your super hero , it's all part of the job of changing people's lives.
For more information or help on picking the best option for you contact me : http://davidcooke.ca
or call me 403-836-1201

The Bank of Canada maintains its Interest Rate

More good news today for people who have variable rate mortgages or lines of credit tied to the Bank of Canada rate. The rate will stay firm once again. 

Here’s the statement from the Bank of Canada rate decision on Wednesday, July 13:

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

The Bank of Canada kept its key interest rate today at 0.5 per cent. 

Inflation in Canada is on track to return to 2 per cent in 2017 as the complex adjustment underway in Canada’s economy proceeds. The fundamentals remain in place for a pickup in growth over the projection horizon, albeit in a climate of heightened uncertainty.

In this context, the forecast for the global economy has been marked down slightly from the Bank’s April Monetary Policy Report (MPR). Global GDP growth is projected to be 2.9 per cent in 2016, 3.3 per cent in 2017, and 3.5 per cent in 2018. In particular, after a weak start to 2016 the US economy is showing signs of a rebound, with a healthy labour market and solid consumption growth. In the wake of Brexit, global markets have materially re-priced a number of asset classes. Financial conditions, already accommodative, have become even more so.

In Canada, the quarterly pattern of growth has been uneven. Real GDP grew by 2.4 per cent in the first quarter but is estimated to have contracted by 1 per cent in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires. A pick-up to 3 1/2 per cent is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray. Consumer spending will also get a boost from the Canada Child Benefit.

While the fundamental elements of the Bank’s projection are similar to those presented in April, the forecast has been revised down in light of a weaker outlook for business investment and a lower profile for exports, reflecting a downward adjustment to US investment spending. Real GDP is expected to grow by 1.3 per cent in 2016, 2.2 per cent in 2017, and 2.1 per cent in 2018. The Bank projects above-potential growth from the second half of 2016, lifted by rising US demand and supported by accommodative monetary and financial conditions. Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth.  Despite recent volatility, the Bank expects the underlying trend of export growth to continue, leading to a pick-up in business investment. Higher global oil prices are helping to stabilize Canada’s energy sector and household spending is expected to increase moderately.

The Bank forecasts that the output gap will close somewhat later than estimated in April, towards the end of 2017. Underlying this judgement is the downward revision to business investment, which lowers the profile for both real GDP and, to a lesser extent, potential output.  

While inflation has recently been a little higher than anticipated, largely due to higher consumer energy prices, it is still in the lower half of the Bank’s inflation-control range. Most measures of core inflation remain close to 2 per cent but would be lower without the impact of past exchange rate depreciation. The temporary effects of exchange-rate pass-through and past declines in consumer energy prices are expected to dissipate in late 2016, and the Bank projects that inflation will average close to 2 per cent throughout 2017 as the output gap narrows.

Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas. The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.

What to do When You Can’t Make Your Mortgage Payments

               My friends at Broker Plus Insurance asked me to share this with you. 

  So it is a hard reality that many people have been affected by factors well beyond their control.  Be it the economy or an illness there can be many life issues which leave you in a position where your savings are gone and you are unable to pay your mortgage or other bills.  So what should you do if you ever find yourself in this situation?

Mortgage Related Troubles?

·         Talk to your mortgage professional.

At the first sign of troubles make that difficult call to find out what options are available to you and keep in contact with them as things progress.

·         Clarify The Picture

Make a complete list of all credit obligations including any credit cards, loans and household bills.

You should also make a list of all of your assets including your current income, savings accounts, investments and RRSP’s.

·         Learn about your resources.

There is a great resource called Take Charge of Your Debts from the government of Canada.  You can use it to understand debt problems and how to budget, information on credit counselling, collection agencies, credit and credit repair.

·         Consider your options

If your mortgage was done through a mortgage insurer (CMHC, Genworth, CG) then you have a valuable ally.  They will work with you to find solutions such as:

-Converting a variable rate to a fixed rate to protect you against a sudden increase

-Offering temporary payment deferral

-Extending the original amortization

-Adding any missed payment or arrears to the balance and spreading them over the   remaining loan

-Offering a special payment arrangement until you are back on your feet

You need to stay in contact with your lender, your mortgage professional and whoever else is involved.  Avoiding the phone calls is no way to convince them you want to work to a solution

Other Credit Troubles?

·         Call the credit companies and ask for a reduction to your interest rate which will allow you to pay your debts out faster.

·         Apply for a consolidation loan which will allow you to pay one large payment as compared to many small which can be overwhelming.

·         Choosing to refinance your home to be pay out your smaller debts can be a valid choice if the penalty isn’t too high.  Again, it can be easier to manage one payment.

·         Orderly Payment of Debts – Under this government run program you allow this agency to take charge if you will.  They will negotiate with your creditors for a lower interest rate and then they will look at your overall financial picture and put you on a set repayment program until all of your debts are repaid in full.  You need to know that this program will require you to rebuild your credit carefully after the fact.

·         Bankruptcy – This is where you choose to work with a Bankruptcy Trustee.  Your assets and your liabilities are all weighed and then the trustee offers your creditors a set percentage of what you owe.  You will be required to go through the court system and there are additional costs.  This choice also requires a careful rebuild of your credit after the fact if you are to be able to borrow money down the road.

So as you can see there are options available to you when life throws you sideways.  Keep in contact with your creditors if they start calling so they know your situation and can make note of it in their systems.  Life happens my friends but there are solutions if you need them. Call me, your mortgage broker for help. My website is here. You can also email me . 

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.