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 

5 Reasons why you need a home inspection before buying in Calgary

Several  years ago I had a client who wanted to buy a home before he moved to my city. He was in a hurry as he had to get back home. He put very few conditions in his offer to purchase but he did have a financing condition and an home inspection.  A few days later he called me to say the inspector found 10 things that showed him that this house was a former grow op. If he had not had the inspection and found out after he had removed conditions he could have been unable to get financing, home insurance and been stuck with a hefty remediation bill.

     One thing I always encourage my clients to do is get a home inspection. It’s $500 well spent.

You may not be buying a former grow op but there can be costly repairs that you  may have missed while inspecting the home yourself. If you have watched even one home renovation program you know that once the work starts they usually find a surprise or two.

 Here’s a list of the most common faults in homes

Foundation Cracks - the biggest and a very costly item is a cracked foundation. While some cracks in the basement floor are acceptable cracks in the foundation walls need to be excavated and filled which is expensive.

Roof Problems – did you go up on the roof and check the shingles , the pointing around the chimney, etc? Probably not.  Did you check the tresses in the attic? This can be another big repair cost that could be difficult to pay after purchasing a home.

Loading Bearing Walls Removed -  1950’s homes converted to open plan are popular but do you know if a support wall was removed and the roof could end up in your new open concept living area?

Encroachments – are any building, retaining wall ,fence or driveway that extends into a neighbour ‘s property or the City Right of Way. . It was 2 weeks after I moved into my first home that I found out that my retaining wall behind my home was falling into my backyard neighbours’ yard.  Another unexpected repair that I had to handle. 

Electrical or Plumbing Issues – while heritage  homes close to the city centre have character, they also have old wiring that uses fibre insulation. All you need is for a mouse to chew on it and you could have a fire.  Find out how much it will cost to re-wire your home and save yourself headaches down the road.

The same goes for plumbing . It’s old. There’s a chance it could have a slow leak.

     As I said before, it’s always wise to get a house inspection and include this in your offer to purchase. The anguish that you can avoid by doing this is well worth the time and expense. 

Checkout my website here.

Thinking Outside of the Box - Blanket Mortgages

Thinking outside of the box – blanket mortgages

When someone calls me up out of the blue for a mortgage , I often ask them, “Why did you call me?”

 Often the reply is that a family member suggested it. I then ask, “Do you know what I do?”

 Once again , I will get a reply that they aren’t sure.  I will then explain to them that while banks do mortgages, they don’t specialize in them. They also do deposits, GIC’s, RRSP’s , insurance ,car loans etc.

 I only do mortgages, day after day. As I result I have more experience in unusual situations and we are getting more of them all the time. Sometimes you need to think outside of the box.

   Here’s an example,  Sally and Ted want to buy a home but they don’t have a down payment.  A recent HSBC Bank study found that 37% of young Canadians count on the Bank of Mom and Dad for their down payment.

Unfortunately in many cases, Mom and Dad would like to help them out but they don’t have the cash.

They own their home or have a low mortgage balance but their savings are tied up .  This is where thinking outside of the box comes in handy.  A blanket mortgage is a mortgage that covers the subject property and another property that has sufficient equity in it to carry both properties.

 

    If the parents are willing, a mortgage can put  placed on the parents ‘ home and the new home. If the property value for the 2 homes is more than 80% of the mortgage amount the new home can be purchased without the young couple having to save a down payment and pay expensive CMHC fees.

     What risks or down sides are there to this idea.?  If Mom and Dad want to sell their home and move to Arizona the children will have to get a new mortgage to cover their home .There may be penalties for breaking the mortgage which will have to be paid.  There’s also the risk that the children may fall behind on their mortgage due to layoffs  or maternity leaves and that could jeopardize the parent’s home.

 Is a blanket mortgage a good idea for everyone? No. Discuss your issues with your mortgage broker and they may find this to be the best solution for you or they may suggest something else .Email me  You can contact me here .