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 The holidays are over the joy of giving has been replaced by the reality of dealing with all the credit card bills.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

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 . 

Locksmith Scam Rips Off Home and Auto Owners

Hundreds, maybe thousands, of locksmith scam artists are taking advantage of emergencies to rip off home and auto owners across the United States. Some professional locksmiths even believe the widespread fraud is part of an organized crime operation.

According to the Consumer Federation of America (CFA), which published its annual Top 10 list of consumer complaints this past August, locksmith fraud is one of the fastest growing scams in the nation.

The basic structure of a locksmith scam is simple.

You're locked out of your car or your home or you urgently need to change the locks on your property for any of a number of reasons -- like securing it against previous occupants, or even a divorced spouse.

You look up a listing online or in the phone book and call up the supposed locksmith who subsequently grossly overcharges you for the service. $1,500 or so is not uncommon for a service that generally should cost around $150.

"Often unlicensed locksmiths use the Internet to advertise very low prices," says the CFA. "Typically, they disassemble the locks and then demand more than the amount they originally quoted to finish the jobs. Faced with the alarming prospect of not having working locks, consumers are forced to capitulate."

If the victim refuses to pay, the phony locksmith will often use bullying tactics, threaten to call the police, or refuse to return a credit card that the customer may have handed over at the outset.

Sometimes, too, bogus locksmiths can damage your property in the process of doing a botched job, costing even more to put it right. While this is an American problem it has spread to Canada as well

.  

I spoke to a locksmith recently and found out how you can spot a bogus locksmith.

1. look up the company. If they advertise on Kijiji but do not have a legitimate website, they are probably a fly by night operation. They also need to have a registered address as their place of business.

2. Look at their trucks. If they are unmarked this means trouble.

3. look up the telephone number. If it’s a cellphone or not registered anywhere this can be a red flag.

4 Ask to see their provincial license. As their occupation is breaking into homes and cars, believe me,

   The province wants to know who they are and that they are honest people. They should have a licence on their person and in their vehicle.

5. Ask how much the job should cost.

In this day and age, it’s easy to get ripped off. Take precautions and stay safe. 

for more information on homes and financing, contact David  at http://davidcooke.ca 

How would you like 10% of your CMHC fees back?

Taxes keep going up, the cost of gasoline is going up. How are you going to get ahead these days? You need to find rebates, deals and money back offers. Here's one from CMHC. If you can make your home more energy efficient or if you buy a home that is already Ener Guide rated at 82 or above you qualify for a rebate of up to 10% of your CMHC fees. Take a look at your mortgage documents and you may have paid $11-12,000 in fees when you bought your home. You could get $1100 to $1200 back just for proving your home meets the energy efficiency ratings. 
   Now here's the item your realtor or bank do not tell you. If you make your home for energy efficient 4 years after your purchase, you can still apply for the rebate. How sweet is that?
 This rebate is also available through the private mortgage insurers, Genworth and Canada Guaranty  .  You do have to prove that you have improved the energy efficiency and you need to do this with an energy audit. A full explanation is available from CMHC and I have added the link to the bottom of this article. If you need more information contact me, David Cooke, your Calgary mortgage broker.



CMHC fee rebate explained  

Understanding yoru Credit Report

Understanding Your Credit Report

As credit has become more and more abundant in our society, your credit report, and thus your credit rating, has become more important in your daily life. Your credit rating affects all aspects of your financial activities when it comes to borrowing money. Your credit rating also has the ability to affect the job you get, the apartment you rent, and even the ability to open a bank account.
Your credit report itself is simply a listing of all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. Every time you borrow money, or make a payment on a loan or credit card, the lender then reports the information about the transaction to these two agencies. In addition to credit information, you will also find liens and judgments on your credit report as well as your address and possibly your work history. The accumulation of all of this information is called your credit report.
The information on your credit report varies based on your creditors and what they have reported about you. Potential lenders and others, such as employers, view your credit history as a reflection of your character. Whether we like it or not, our financial habits have a lot to say about the way in which we choose to live our lives.
The credit score, or beacon score, is a number which gives mortgage lenders an idea of your lending risk.
Credit scores range from 300 to 900, the higher your credit score the better. The mortgage products and interest rate that you will qualify for are often determined by your credit score.
One thing that many people do not know is that you have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy of this report and go through it with you to verify that all of the information is true and correct.
The good news is that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.

Did you know that a mortgage broker can help you improve your credit rating and get you the financing you need for a home?  

Contact me for more information. 

Are Gift Letters blowing up the Real Estate Bubble?

Recently a National Post article brought up an interesting issue. Are parent's fueling the real estate boom in Toronto by giving their children a down payment to purchase a home now rather than let them take time to save it up on their own.
    IN a recent blog, Garth Turner, a former MP, said that this is running counter to the government's attempt to cool the real estate market by getting people into the market before they normally would be entering it.
   He felt that this was throwing the natural forces of the market off. I'm not so sure about that.
 When I got married and started looking at our first home, my parents gave us some money for the down payment. I found out years later that my grandparents did the same thing for my parents when they bought their first home.
   If this has been going on for 3 generations in my family, I think it probably is going on in plenty of other Canadian families.
  Sometimes people look for a problem when there isn't one.
 

Don’t put off getting your line of credit set up

In June 2012, the Minister of Finance announced that mortgage amortizations would be shortened once again. This time the maximum amortization would be down to 25 years from 30 years.  This would not affect existing mortgage but only affect those making new purchases. However, in the same week the OSFI , the Office of the Superintendent of Financial Institutions Canada, a division of the government of Canada also announced changes that could affect Canadians even more.

    The OSFI announced that effective October 31^st , the maximum amount that you could finance your home using a Home Equity Line of Credit (HELOC) would drop from 80% of the house value to 65%.

 How will this affect your average Canadian? If you were thinking about opening a line of credit to give you funds for finishing the basement, re-doing the roof , paying for a wedding or even buying a car, you will be limited in how much cash you can pull out of your home’s equity as of October 31^st.  If you have ever made a large purchase you know that paying cash gets you a better price. HELOC’s give you the option to pay cash and then pay the amount down over time when you have extra cash, while having an interest rate at or near bank prime rate. This is one of the cheapest forms of credit and it will be limited  soon.

   My advice is to establish a line of credit now even if you are not planning on using it right away. The reason being, that all lines of credit up to 80% will be grandfathered and you will have the freedom down the road of having re-advance able credit using 15% more of your house equity.

    Here’s another fact you should be aware of, Eco-rebates from CMHC and Genworth. When you purchased your home you paid a premium to CMHC or Genworth to insure your home. This may have been over $10,000 . Did you know that if you make your home more energy efficient you can get 10% of your premiums returned to you?  Did you know that there’s no DEADLINE on how long after your home purchase you can claim this rebate? $1000 could pay almost half of the cost of new furnace, or for a new window. You can find out more about this program by visiting CMHC’s website here http://www.cmhc.ca/en/co/moloin/moloin_008.cfm If your home was insured with Genworth, they have a similar program http://www.genworth.ca/homeownership/pdfs/Product_Overview_EEHP.pdf

    Why do you have to act now if there’s an October 31^st deadline? Experience has taught me that when these restrictions are announced the banks tend to react quickly and they won’t wait until October to implement the changes. I would think that by Labour Day we will see all the banks using the new guidelines. Now is the time to act. Call or email me at http://davidcooke.ca and we can discuss whether this is a good option for you.