22 Nov

DOCUMENTS YOU NEED TO QUALIFY FOR A MORTGAGE

General

Posted by: Bonnie Barker

Being fully pre-approved means that the lender has agreed to have you as a client (you have a pre-approval certificate) and the lender has reviewed, approved ALL your income and down payment documents (as listed below) prior to you going house hunting. Many bankers will say you’re approved, you go out shopping and then they sorry you’re not approved due to some factor. Get a pre-approval in writing! It should have your amount, rate, term, payment and date it expires.

Excited! Of course you are, you are venturing into your first or possibly your next biggest loan application and investment of you life.

What documents are required to APPROVE your mortgage?

Being prepared with the RIGHT DOCUMENTS when you want to qualify your mortgage is HUGE; just like applying for a job or going for a job interview. Come prepared or don’t get hired (or in this case, declined).

Why is this important?

You can have a leg up against the competition when buying your dream home as you can have very short timeline (ie: 1 day to confirm vs 5-7 days) for “financing subjects.”
Think? You’re the seller and you know the buyer doesn’t have to run around finding financing and the deal may fall apart? This is the #1 reason deals DO fall apart. You will likely get the home over someone who isn’t fully approved and has to have financing subjects. The home is yours and nobody’s time is wasted.

If you just walked into the bank, filled an application and gave little or no documents, and got a rate – you have a RATEHOLD. This is NOT a pre-approval. This guarantees nothing and you will be super stressed out when you put an offer in, have 5-7 days to remove financing subjects and you need to get any or all of the below documents. That’s not fun is it? Use a Dominion Lending Centres mortgage specialist ALWAYS. We don’t cost you anything!

When you get a full pre-approval, you as a person(s) are approved; ie: the bank’s done their work of reviewing (takes a few days) to call your employer, review your documents, etc. All we have to do is get the property approved, which takes a day or two. Much less stress, fastest approval…faster into your home!

Here is exactly the documents you MUST have (there is NO negotiation on these) to get your mortgage approved with ease. Key word here is EASE. Banks/Lenders have to adhere to rules, audit files and if you don’t have any of these or haven’t been requested to supply them…a big FLAG that your mortgage approval might be in jeopardy and you will be running around like a crazy person two days before your financing subject removal.

Read carefully and note the details of each requirement to prevent you from pulling your hair out later.

Here is the list for the “average” T4 full-time working person with 5-15% as their down payment (there is more for self employed, and part-time noted below):

Are you a Full-time Employee?

  1. Letter of Employment from your employer, on company letterhead, that states: when you started, how much you make per hour or salary, how many guaranteed hours per week and, if you’re new, is there a probation. You can request this from your manager or HR department. This is very normal request that HR gets for mortgages.
  2. Last 2 paystubs: must show all tax deductions, name of company and have your name on it.
  3. Any other income? Child Support, Long Term Disability, EI, Foster Care, part-time income? Bring anything that supports it. NOTE: if you are divorced/separated and paying support, bring your finalized separation/divorce agreement. With some lenders, we can request a statutory declaration from lawyer.
  4. Notice of Assessment from Canada Revenue Agency for the previous tax filed year. Can’t find it? You can request it from the CA to send it to you by mail (give 4-6 weeks for it though) or get it online from your CRA account.
  5. T4’s for you previous year.
  6. 90 day history of bank statement showing the money you are using to put down on your purchase. Why 90 days? Unless you can prove you got the money either from a sale of a house, car or other immediate forms of money (receipt required)…saved money takes time and the rules from the banks/government is 90 days. They just want to make sure you aren’t a drug dealer, borrowed the money and put it in your account or other fraud issues. OWN SOURCES = 90 days. BORROWED is fine, but must be disclosed. GIFT is when mom/dad give you money. Once you have an approval for “own sources” you can’t decide to change your mind and do gifted or borrowed. That’s a whole new approval.

Down payments
Own Sources: For example for “own sources”: if you are a first time buyer and your money is in RRSP’s then, have your last quarterly statement for the RRSP money. If your money is in three different savings account, you need to print off three months history with the beginning balance and end balance as of current. The account statements MUST have your NAME ON IT or it could be anyone’s account. I see this all the time. If it doesn’t print out with your name, print the summary page of your accounts. This usually has your name on it, list of your accounts and balances. Just think, the bank needs to see YOU have money in your (not your mom’s or grandparents) account.

GIFT: If mom/dad/grandparents are giving you money…then the bank needs to know this as the mortgage is submitted differently (this is called a GIFT).

If you are PART-TIME employee?
All of the above, except you will need to bring 3 years of Notice of Assessments. You need to be working for 2 years in the same job to use part-time income. You can have your Full-time job and have another part-time gig…you can use that income too (as long as it’s been 2 years).

If you are Self Employed?

  • 2 years of your T1 Generals with Statement of Business Activities
  • Statement of Business Activities.
  • 3 years of CRA Notice of Assessments
  • if incorporated: your incorporation license, articles of incorporation
  • 90 day history of bank statement showing the money you are using to put down on your purchase

Going to the bank direct is such a big disservice to you. That is like walking into Ford and asking for a Mercedes or Toyota. As a broker: I am FREE! I work with ALL the banks and know ALL the rules. The bank you choose pays me to give you great service and a fantastic product. There are over 300 of them…so don’t sell yourself short.

2 Nov

The New Normal

Latest News

Posted by: Bonnie Barker

’Tis the season… this was no surprise here! The latest round of mortgage guidelines has been announced by OSFI, or Office of the Superintendent of Financial Institutions. As of January 1, 2018, all conventional or uninsured mortgages will have to qualify at the Bank of Canada 5-year fixed rate or the contractual rate + 2%, whatever is greater.
What does this mean? Nothing for anyone wanting to renew or buy real estate with less than 20% down.
But anyone wanting to access their equity might just have to consider a slightly lower amount. And those wanting to purchase real estate with 20%+ down may need to adjust their expectations or relocate their search area.
Regardless of your scenario, there will still be options to exercise.
Next question on many people’s minds is how this will affect prices. Based historical data, I predict that there will be very little decrease in prices. Most people thought the ‘bubble’ was going to explode. Most comments were, “It just has to, how can prices continue to increase?” Well guess what… prices have continued to increase. Some market segments will experience a slight softening, but nothing drastic.
Here is a list of changes issued by OSFI since 2006. Did any of them bring prices down?

2006
Maximum amortization 40 years
100% financing, 0% down payment

2008
Maximum amortization 35 years
Maximum 95% financing, minimum 5% down payment required

2011
Maximum amortization 30 years
Refinance maximum 85% of the market value

2012
Maximum amortization 25 years
Refinance maximum 80% of the market value
If mortgage insurance is required, then the maximum purchase price of the owner-occupied home is $1,000,000

2015
Minimum down payment – 5% of the first $500,000 and 10% on the portion remaining

2016
Qualification rate increases to Bank of Canada benchmark rate for all insurable files (less than 20% down)

2017
Conventional (20% down or greater) stress test increases to contract rate plus 200 basis points (2%) or the Bank of Canada benchmark rate, whatever is greater

2018
What will happen in 2018?

There is no need to slam your fist on the panic button. This is simply the new normal for mortgage finance consumers. The sun will still rise in the east and set in the west. The earth will continue to rotate in a counterclockwise direction. People will still buy and sell real estate. Those consumers with available equity will still have access to it and borrowers will still renew existing mortgages. If you are receiving or buying into “the world is ending” type information, please look away… it’s wrong and misleading.
Nothing changes.
If you are worried about things you cannot control, stop it! If you are going to put any energy into something, I would recommend building a bulletproof personal borrowing profile. More than ever it’s vitally important to have AAA credit, minimal-to-zero consumer debt and strong reliable income and savings. If you start with that, I can assure you everything will be OK!
If you have any plans to become an active mortgage consumer, start looking at your options now as some lenders will adopt the new rules before January 1, 2018.

1 Nov

How to Get a Mortgage After Bankruptcy

General

Posted by: Bonnie Barker

Bankruptcy is always the last resort-and it’s never easy or comfortable. However, sometimes it is the only option to turn to when life throws you something unexpected. The lasting impression it can have on one’s financial profile though can be overwhelming.

If you have bankruptcy in your past, don’t fear-we have 6 steps to take to help get you back on track and qualifying for your mortgage!

Step 1: Get official discharge quickly.
The quicker you are discharged from your bankruptcy, the quicker you can start rebuilding your credit. This starts with finding a good bankruptcy trustee. You can contact the BBB or Chamber of Commerce to find out recommendations, but we can also provide you with connections to complete your discharge in the shortest time possible.

Step 2: Review your most recent credit score.
You will need to pull from Equifax and TransUnion Canada. They are the two governing credit bureau organizations that manage credit reports in Canada. Look over both reports carefully and make sure there are no surprises and that your debts have been paid off completely. As a general guideline, getting a credit report yearly is a good rule of thumb. You’re managing your credit-if you see a mistake on the report it is up to you to follow the steps to get the mistake corrected.
If you find a mistake, you do have the right to dispute or explain ‘situations or mistakes’ to your bureau. Contact the credit reporting agency immediately and ask about their dispute resolution process. If you still do not agree with an item following the agency’s investigation, visit this link for TransUnion or this link for Equifax to find out how you can add an explanation statement to your report.

Step 3: Re-establish your credit
Mortgages are much easier to get with good credit. You will want to start to rebuild your credit as soon as you possibly can. To do this you will want to open up 2 tradelines (credit cards) through a secured institution such as Capital One, Home Trust, Peoples Trust, etc. They start with putting as little as $500 down with your credit being based on your deposit. Next, follow the 2-2-2 rule. This means you will want to keep those 2 lines of credit with a max limit of $2000 for 2 years. Keeping in mind that you must pay your bill on time each month (even if it is just the minimum payments).

Step 4: Pay any outstanding taxes to revenue Canada
This is probably one of the most important things to remember when you are getting a mortgage! If your taxes are unpaid then there is nothing we can do to help! You won’t qualify for any mortgage until any owing debts to Revenue Canada are paid off.

Step 5: Start Saving!
With all of the mortgage regulations in place now it is important to understand how much you will need to save to put down on a home. This will vary from person to person and situation to situation. Your personal history, credit score, etc. will have an effect on this as well. There are literally 100’s of ways that you can start saving money. Remember, every little bit helps!

Step 6: Put budgeted savings into an RRSP for the down payment
One of the easiest ways to make money on your savings, is to keep them in an RRSP fund. If you are a first-time home buyer in Canada you can borrow up to $25,000 from your RRSP’s to use towards the down payment on your new home. The beautiful thing about keeping it in an RRSP fund is the larger tax refund you will receive—for every $1,000-dollar contribution you will get $400 back! Now that’s smart saving!

In addition to these 6 steps, we recommend that you keep all bankruptcy documents on hand. Even though your bankruptcy has been discharged, the lender which you are applying for a mortgage with may ask you to provide a copy of the statement of discharge, along with copies of the bankruptcy papers. Keep them safe and on hand as this is a key piece of information to help you get a mortgage faster and easier.

Declaring bankruptcy is one of the life events that no one wants to face. But if that is part of your history, a Dominion Lending Centres mortgage specialist will walk you through the mortgage process and go above and beyond to make sure that you acquire the mortgage you are looking for!

Geoff Lee