Brokers make a Difference

While many people will go to their bank to obtain a mortgage or line of credit they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.

 A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.

     This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs . Do they prefer emails or phone calls?

   When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification.  I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.

I then list the areas I want to highlight: Income, Credit, Property , Down payment and start with it their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As  a result, underwriters trust me and have given my clients a second look or asked for an exception.  Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file. 

     I never yell or give my underwriters a blast if they decline a file. I will , however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation.  Just as a FYI,  a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation.  Now who do you think mortgage clients should deal with? A bank or a broker? 
 Contact David Cooke at http://davidcooke.ca 

How our new Liberal government will affect realtors and housing in Canada

One month ago today Canadians gave Justin Trudeau and the Liberal Party of Canada a majority. Some people were unsure as to how this would affect Canada's economy and the housing market. I am optimistic that this will be a good thing for realtors, mortgage brokers and the general home buying public.

It was a very clear verdict that Canadians were seeking real change,” said Pramod Udiaver, CEO of online advisor service, Invisor. “The Liberals campaigned and won with a focus on the middle-class,” says Udiaver, “with many of their promises attempting to make a meaningful difference for middle-income families.”

While most Canadians still struggle with paying too much in taxes, trying to maximize savings while making sound financial decisions, the new Liberal majority government will have real impact on the nation’s real estate market.

 

First-time buyers might get incentives

One way the Liberals propose to deal with housing affordability is to analyze all factors that help or hinder housing affordability in Toronto and Vancouver and in other parts of Canada.

The Liberals have also made vague promises about helping the first-time homebuyer, explained Robert McLister, independent mortgage broker and founder of Ratespy.com. “This might mean looser policies, such as longer amortization limits for first-time buyers, but so far few details have been released.” First time home buyers might qualify for a 30 year mortgage term, which would lower their monthly payments

Changes to the Home Buyers’ Plan

Homeowners may, yet, come out ahead with the Liberals, explained McLister. “They’ve promised to open up access to the Home Buyers’Plan (HBP), which will give more people access to money for a down payment on a house.”  The HBP has a limit of $25,000 and the Liberals don’t plan to increase that but they will loosen the existing qualification rules for the HBP to allow more Canadians affected by sudden and significant life changes—such as divorce, death of a spouse or an employment move—to access their RRSP savings for a down payment.

   This will be a great help to many Canadians. I don't know how many times I have had couples who are splitting up  call me saying that they want to refinance their house to allow one  spouse to  buy out the other one. Unfortunately, many times there isn't enough equity in the home for this to happen and dad ended up moving to the basement. Think of the stress on the children and the family as a whole. 

   Now , if there's a shortfall, we can access RRSP money to make up for any shortages. Now Dad can get his condo and Mom and the kids avoid the conflicts that arise by being stuck under one roof. 

      This plan can also be used in the case of the death of a spouse. Let's say, Dad dies. Mom is alone in her home and trying to sell it. You want her to move in with your family but due to her age and infirmities she needs to live in a house with lift to access the bath tub and you need to to widen the doorways and build a wheelchair ramp. Accessing RRSP money to pay for these renovations will now be possible. 

  Finally, if you lose your job and find one in Ontario. The only problem is that by the time you pay realtor and legal fees to sell your home you have nothing left to pay for the move. Now  you can pay for your moving expenses to move to the new job using the Home Buyers Plan.  

   In conclusion, the changes we can expect will help to keep home sales up during this  very challenging time in Western Canada. We look forward to seeing these changes enacted as soon as possible. 

David Cooke is a Calgary mortgage broker. Find out more at his website at http://davidcooke.ca 

8 Tips For Finding Your New Home

A solid game plan can help you narrow your homebuying search to find the best home for you.
House hunting is just like any other shopping expedition. If you identify exactly what you want and do some research, you’ll zoom in on the home you want at the best price. These eight tips will guide you through a smart homebuying process.
1. Know thyself.
Understand the type of home that suits your personality. Do you prefer a new or existing home? A ranch or a multistory home? If you’re leaning toward a fixer-upper, are you truly handy, or will you need to budget for contractors?
2. Research before you look.
List the features you most want in a home and identify which are necessities and which are extras. Identify three to four neighborhoods you’d like to live in based on commute time, schools, recreation, crime, and price. Then hop onto REALTOR.com to get a feel for the homes available in your price range in your favorite neighborhoods. Use the results to prioritize your wants and needs so you can add in and weed out properties from the inventory you’d like to view.
3. Get your finances in order.
Generally, lenders say you can afford a home priced two to three times your gross income. Create a budget so you know how much you’re comfortable spending each month on housing. Don’t wait until you’ve found a home and made an offer to investigate financing.
Gather your financial records and meet with a mortgage broker  to get a prequalification letter spelling out how much you’re eligible to borrow. The lender won’t necessarily consider the extra fees you’ll pay when you purchase or your plans to begin a family or purchase a new car, so shop in a price range you’re comfortable with. Also, presenting an offer contingent on financing will make your bid less attractive to sellers.
4. Set a moving timeline.
Do you have blemishes on your credit that will take time to clear up? If you already own, have you sold your current home? If not, you’ll need to factor in the time needed to sell. If you rent, when is your lease up? Do you expect interest rates to jump anytime soon? All these factors will affect your buying, closing, and moving timelines.
5. Think long term.
Your future plans may dictate the type of home you’ll buy. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in the home for five to 10 years? With a starter, you may need to adjust your expectations. If you plan to nest, be sure your priority list helps you identify a home you’ll still love years from now.
6. Work with a REALTOR
Ask people you trust for referrals to a real estate professional they trust. Interview agents to determine which have expertise in the neighborhoods and type of homes you’re interested in. Because homebuying triggers many emotions, consider whether an agent’s style meshes with your personality.
Also ask if the agent specializes in buyer representation. Unlike listing agents, whose first duty is to the seller, buyers’ reps work only for you even though they’re typically paid by the seller. Finally, check whether agents are REALTORS®, which means they’re members of CREA- the Canadian Real |Estate Association, Canada's national real estate association.
7. Be realistic.
It’s OK to be picky about the home and neighborhood you want, but don’t be close-minded, unrealistic, or blinded by minor imperfections. If you insist on living in a cul-de-sac, you may miss out on great homes on streets that are just as quiet and secluded.
On the flip side, don’t be so swayed by a “wow” feature that you forget about other issues — like noise levels — that can have a big impact on your quality of life. Use your priority list to evaluate each property, remembering there’s no such thing as the perfect home.
8. Limit the opinions you solicit.
It’s natural to seek reassurance when making a big financial decision. But you know that saying about too many cooks in the kitchen. If you need a second opinion, select one or two people. But remain true to your list of wants and needs so the final decision is based on criteria you’ve identified as important.
Source:  Future Investments Inc. blog

Troubling news on mortgage rates

As a consumer you have to be aware of changes that are occurring in the mortgage market. It's tough to stay on top of things which is why you really need to consult a mortgage broker now. Float downs are not automatic anymore.
 Contact me at http://davidcooke.ca for more information

Get your RRSP deduction & use it for down payment !! A legal loophole.

If you know you are buying your first home in the next 90 days, you can make a $25,000 RRSP contribution or $50,000 for two people. That means a big refund in April. You then withdraw the $25,000 or $50,000 to pay for that initial home’s down payment.

• Most people have the RRSP room to make a contribution. If you are buying a house by June and you have the down payment in cash, you can make the contribution to get the tax return.
• The “catch” is the contribution normally has to be in the plan for 90 days before you can take it out. Your possession date would have to be 91+ days after you make the RRSP contribution. If you would like more information on this call me at 403-836-1201 or visit my website .

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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What's the Score? How you can improve your credit score

The credit score, also referred to as a “FICO score,” is a mathematical formulae created by Fair, Issac and Company.

The credit score is used by most companies to decide if the applicant is a good credit risk or not. Equifax and Trans Union will calculate the numbers from the credit report and generate a number between 300 and 900.

A low score indicates a bad risk. A score of 680 or more puts the applicant in the lenders’ good books.

How scores are calculated:

Factor Weight Points Payment History Bankruptcies, late payments, past due accounts and wage attachments, collections, judgements - none is better 35% 315 Amounts Owed Amount owed on accounts, proportion of balance to total credit limit - moderate use is best 30% 270 Length of Credit History Time since accounts opened, time since account activity – The longer you have had your account open, the better. 15% 135 New Credit Number of recent credit inquiries, number of recently opened accounts - less is best. 5 per year max. 10% 90 Types of Credit Number of various types of accounts (credit cards, retail cards, mortgage) - variety is good 10% 90 Potential Totals 100% 900

 

Fair Isaac reports that the American public's credit scores break out along these lines. It would be similar for Canadians.

Credit score	Percentage
499 and below	2 percent
500-549	5 percent
550-599	8 percent
600-649	12 percent
650-699	15 percent
700-749	18 percent
750-799	27 percent
800 and above	13 percent

How Clients Can Improve Their Credit Score

1. Order a copy of the credit report, review it carefully and correct any significant errors. 
2. Pay bills on time. 
3. If there is a questionable credit history, they could open a few new accounts and use them responsibly, paying them off on time. 
4. Avoid opening accounts without intention of using them. You can, however, open it use it once and then maintain a balance of 0 which will build up your score.
5. Having a credit card or instalment loan can help boost a credit score, as long as the balance is not too high. 
6. Keep balance low in relation to available credit. If the credit limit is $1,000, keeping the balance below $500 (or 50 per cent of the limit) will improve the score. Balances of more than $750 (or 75 per cent of the limit) will decrease the score. Going over the limit has an even more negative effect and you can lose 35 points quickly.
7. Pay off credit card debt instead of moving it around to lower rate cards. Moving balances to other credit cards (i.e., “balance transfer”) and closing an old account can hurt the score.

 If you would like advice on how to improve your credit score so that you can buy a home contact me through my website at davidcooke.ca