Our role is to negotiate on your behalf for the best rate and conditions for your situation.
When a client comes to see a mortgage broker, what they are in essence doing is having an appointment with over 20 lenders, all ranging from conventional banks to virtual banks to insurance companies and even private lenders. The banks, as great as they are, only have access to their own rates and products. I guess you could say that at the end of the day, we represent your interest not the banks’.
Every year, we complete thousands of mortgage transactions. A client that goes to a lender through us instead of directly going to that lender will almost always get a more advantages rate since we hold a certain amount of weight with the lenders and usually have more advantageous rates and conditions for the client. For example we have recently partnered up with a major bank so that we may offer a mortgage that is tailored to the clients’ specific needs.
In essence it’s a balancing act between three elements:
Credit worthiness, Equity and Income.
In most cases all 3 elements need to be present to complete a mortgage transaction, however that is not necessarily always the case For example in the case of 100% financing of a property there is no money down (equity). Also in the case where a person with poor credit is granted a mortgage they usually have strength in the other 2 elements.
In the case of residential mortgages the client does not pay us anything. Our services to him or her are free of charge. Once a mortgage loan has gone through final approval and is satisfactory to both the lender and the client, the lender will pay us a finder’s fee for that mortgage.
You have to do your homework and shop around. We encourage all our clients to go to the bank and see what they are offering as well as ask questions to professionals in the industry. Advice for the most part is free and everyone is ready to give their two cents, but make sure it comes from a credible source. When a client comes to see us, one of the first things we do is go online together and look at what the major banks are offering. Then we look at what we can offer, that way there is no doubt about what we are advising them on. Most importantly you need to be able to build a relationship between you and the person who is advising you. Make sure you can trust them and that they work for a credible company.
That is a matter of personal preference and risk tolerance. A variable mortgage will give you the benefit of a lower interest rate to start off with but it is directly affected by the fluctuation of the banks prime rate and can go up anytime.
A fixed rate will give you rate protection for the term of the mortgage but will come at a slightly higher cost.
On the first purchase of a home, a person may use up to $25,000 worth of RRSPs without penalty, we call this a RAP. The rules are that the funds need to have been in the RRSP for 90 days or longer prior to using them, and that the person cannot own the home longer than 30 days when he/she does the RAP. This money will have to be paid back within 15 years, starting from the 3rd year that you pulled the RAP.
Homeowners build equity with every mortgage payment, which becomes part of their financial net worth. This equity later on in life can be extracted by selling the home or by refinancing the property.
The first thing we would recommend is that you speak with a mortgage professional so that you may assess your buying power and determine what is right for you. Also, it is a good idea for you to verify your credit report with one of the credit reporting agencies such as Equifax or TransUnion to avoid any surprises that may come up. Once that is done you should look into getting yourself a Pre-Approval for the amount of money that you need. Real estate agents more and more are demanding them before any transactions can take place.
We like to advise our clients to have around 1.5% of the purchase price available at closing to make sure they can cover any and all eventualities, like notary fees & welcome tax..
- Looking for a home without getting pre-approved.
- Choosing a lender just because they have the lowest rate, or offer perks like free appliances.
- Choosing a lender just because your realtor recommended.
- Not getting a rate guarantee in writing.
- Using an agent who represents both the buyer and seller on the same transaction.
- Buying a house without a professional inspection.
- Not shopping for home insurance until you are ready to close.
- Signing documents without reading them.
- Making moving plans too tight.
Pre-approval is the process where the lender will look at a basic credit report and use the information you supply to determine how much of a mortgage you can afford.
Approval occurs when all credit and employment information has been verified and the mortgage is approved, subject to the appraisal of the property.
Final Approval takes place once all conditions and appraisals have been fulfilled in a satisfactory manner.
- Payment History
- Amounts Owed with respect to limits
- Length of credit history
- New Credit
- Types of credit used
- Amount of inquires made on the file
- a score of above 680 is considered very good with respect to mortgages
- a score between 650 and 680 is considered average
- scores under 650 are usually taken on a case by case basis
- Missing payments
- Excessively shopping for credit
- Closing credit card accounts
- Settling with your lender on a past due amount
- Over utilization of your credit card limits
- Not knowing your credit standing
- Not having credit
- Pay your bills on time
- Make sure that credit card debt is kept well below the 50% mark of the limit of the card and if possible below 30%
- Avoid unnecessary inquiries into the file
In today’s market, people with a poor credit do have options and at times very attractive options. Situations like this are looked at on a case by case basis and other elements of the file are focused on, for example does the person have cash down? What is their income? Etc.
Genworth and CMHC have insurance programs available for people that are looking to purchase a home with little money down. Although 100% financing is not offered anymore, 5% cashback mortgages can be a good option, however it is important to have a small float of money available for eventualities such as closing costs and welcome tax usually around 1.5% of the purchase price.
A conventional mortgage would be for someone who has 20% to put down on a property.
If you do not have the 20% to put as a down payment the bank is taking a higher risk with you and at this point they will ask you to insure the loan with one of the programs available from CMHC, Genworth or AIG.
Today, there are three mortgage insurers: CMHC, Genworth, and AIG. In the coming months, there will be more, but for now these are the players in the industry. They offer different programs like 95% financing, programs for bad credit, programs for first time home buyers etc. You need to have an advisor that works with all the insurers – looks at your situation – and clears the smoke to see what program you fit best in.