As a property owner you may think you know what to expect.  After all, you’ve already been through the purchase process before, and probably think it can’t be too different the second time around.

However, even if you are a seasoned property owner, there are three things you need to consider when you are buying AND selling:

1. You need a deposit    

If you have not sold your existing property yet, you probably have most of your cash tied up in your house.   So how do you come up with the deposit you will need when placing an offer on your new home?*   

• You can use a line of credit that is attached to your home, if you have one set up.  
• You can use a line of credit that is attached to your chequing account.
• You can ask your lender for a demand loan to cover the deposit and it gets paid out with the sale of the property.
• You can borrow from family and pay them back after the sale goes through.

*If none of these options are available to you, talk to your mortgage broker to come up with a different solution.

2. Do You Buy or Sell First?

Most people do not want to sell and risk being left homeless, especially in today’s hot real estate market where you are not guaranteed to have your offer accepted on your new purchase.   So you definitely need to talk with your realtor and mortgage broker about the best strategy for you.  

Make sure you have narrowed down the area you want to buy in and the price range you can afford.  Take a look at how much inventory is available that meets your criteria.  If you feel that your property will sell relatively easily and there is enough choice of inventory for your new property, then sell first with a long closing date (at least 3 months) and as soon as your buyer has removed subjects, get out there and start looking for your new home.  

The alternative is to find that new property first, again, go with a long closing date, and then put your place on the market ASAP and ensure that if you do NOT sell, you have a backup plan – and this is where your mortgage broker will have to advise as to whether you can carry both properties.

3. Bridge financing

Bridge financing is when you have sold AND bought but your dates don’t line up.   So your sale is going to go through AFTER your purchase.   Some lenders do an excellent job of bridging funds.  Some will only bridge your down payment, some will bridge the down payment and your closing costs – inquire with your mortgage broker about what’s possible for you.

Lenders need to see that you have the income to support a mortgage.  When you apply for a mortgage, you should have the following ready to go:

• 1. Recent paystubs;
• 2. Job letter stating your position, salary, and duration of employment;
• 3. T4 from the previous year;
• 4. Tax return; and 
• 5. Notice of Assessment (NOA). 

Most of the time, a lender will only ask for a recent paystub and job letter, however, in some situations they may need further documentation—so be ready to produce the documentation listed above.

There are some situations where more information will most likely be needed, such as:

• – If you have recently changed jobs;
• – If your income is mostly from commission;
• – If you have a contract position;
• – If you are taking a leave of absence from work; or
• – If you are self-employed.

Having a mortgage broker on your side means that someone will be there to make sure that you are providing the right documents to the right lender, and that your income is adequately represented in your application.

Stay tuned for the fourth part of my First Time Home Buyers Series, where I will discuss what you need to know about down payments!

The Office of the Superintendent of Financial Institutions (OFSI), announced today its recommendations to all federally regulated institutions to promote “prudent underwriting of residential mortgage loans.”

OFSI made several recommendations that will put mortgage applicants under increased scrutiny, including suggestions that lenders more closely examine rental income and appraisals.  OFSI is also calling for an end to the idea that a considerable down payment (35% or more) or equity will translate into an automatic mortgage approval for potential borrowers.  OFSI expects lenders to emphasize income and character when assessing a potential borrower’s application.

What does this mean for you?

If you already have your mortgage approval, make sure you don’t lose it!You already worked so hard to provide all the right paperwork to get your approval, and it would be a shame if you had to not only redo everything, but provide additional paperwork and documentation if lenders amend their guidelines.

For new borrowers, you can prepare for stricter lending rules having your ducks in a row and ensuring your 5 C’s of Credit are in line: 

        Collateral – is there any issue with the property that a lender may not approve (e.g. presence of an oil tank, asbestos, etc.)?  

        Capital – where is your down payment coming from?  Do you have bank statements to show you have the funds?  

         Credit – have you been making your monthly debt payments on time?   Are there any issues on your credit that you need to take care of like an unpaid collection or credit card bill? 

         Capacity – ensure your income confirmation is current (job letter and paystub).   If you are self employed, ensure your income taxes are up to date and you can provide full copies of your tax returns and Notice of Assessments.  Avoid changing jobs if you are planning to apply for a new mortgage.  

         Character – your mortgage broker will tell a story to the lender about your application – does the story make sense?   Is it reasonable?

What does this mean for the Vancouver market?

If financial institutions actually make changes to their policies to reflect OFSI’s recommendations, it will be harder for borrowers to get mortgages, possibly reducing the number of home purchases in Vancouver.

Furthermore, these guidelines may only make it more difficult for new buyers to break into the Vancouver market, while buyers with more access to funds can continue to qualify for mortgages. However, it is important to note that it may take lenders months to implement policy changes, if they decide to adopt any recommendations at all. 

It is impossible to determine how these recommendations, if implemented by financial institutions, will impact the Vancouver market.  What is clear is that buyers will have to be even more prepared to provide documentation and to prove they have the character to have their mortgage approved.

What should you do?

OFSI’s recommendations that lenders increase scrutiny on income and character means that buyers should have their paperwork proving their income ready, and then call a mortgage broker.  A good mortgage broker knows how to tell your story in a way that demonstrates that you have all the Cs, making you more appealing to a lender.

Call me today to discuss how OFSI’s recommendations will impact your situation, and how I can help you get your mortgage approved in this increasingly challenging market. 

You can read OFSI’s press release and letter to financial institutions here: http://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/Pages/nr20160707.aspx

As a first time home buyer, you may not be aware of all the costs in buying a home.  This makes determining how much of a mortgage you can afford difficult.

Qualifying ratios
Generally, lenders will use a 32/42% Gross Debt Service (GDS)/Total Debt Service (TDS) ratio.  This means that 32% of your GROSS income (before taxes) can go to your housing costs, which include: mortgage payments, property taxes, strata fees (if applicable) and heating costs.  42% of your gross income can go towards your housing costs plus your other monthly debt payments.

What else you should consider 

Strata fees
When you are shopping for prospective properties, make sure to pay attention to the strata fee, as these can be up to $400-$500 a month in some developments.

Other debts
Lenders have specific formulas when calculating minimum payments on loans and lines of credit.  Be prepared for the possibility that you may have to pay down some debt or re-organize it.  Your mortgage broker can assist you here, especially since they have so many lender connections.

Credit Checks
Your mortgage broker will do your credit check.  Make sure you get this done early in the pre-approval process, just in case there are issues you may have to address.  If your credit score I unexpectedly low, you will need time to get it to the minimum level where a lender will consider it.

Budget
While your mortgage broker will tell you what you qualify for, every person has different expenses.  Review your bank statements for the last 3 months and determine how much you can realistically pay for housing costs.  If you live at home and don’t pay rent, each month put aside what you think you would pay in housing costs and see if that amount is sustainable with your lifestyle.

Pre-approvals are often the first step you take when you are seriously looking to buy a home. 

Pre-approval: a lender has committed to loan you money, subject to conditions, such as a property valuation.

This should not be mistaken with a rate-hold, whereby a lender is simply holding a rate and has not reviewed your documents.

Even though your mortgage broker has done your credit checks and reviewed your income—this is only a review of your application, NOT the property.

Therefore, when making an offer, you should still include a “subject to financing” clause in your offer, because the broker/lender does not know anything about the property, and issues may arise that can preclude you from buying that particular property.  With a subject to financing, the buyer can walk away from the accepted offer if they cannot get satisfactory financing.

If you have to offer without a subject, talk to your mortgage broker and closely review the situation to ensure you understand the risks of that situation. Having been pre-approved does not mean that you can/should offer subject-free.

Why Get Pre-Approved?

• You will know exactly what you can afford, narrowing down your search and saving you time and effort.
• You will have a better idea of what your monthly payments would be, allowing you to budget accordingly.
• Real estate agents and sellers will know you are a serious buyer, ensuring you will be given the serious consideration you deserve.
• A mortgage broker can get you a pre-approval at no cost to you, and you will be under no obligation to accept the mortgage!

Pre-Approval Process

With a mortgage broker, the pre-approval process is straightforward.  You will be asked to fill out one application, which the mortgage broker can use when approaching different lenders.  A mortgage broker will discuss your financing strategy, needs, mortgage amount, down payment, deposit requirements, etc.

Your mortgage broker will also discuss the various mortgage options available to you, such as rate types, payment options, etc., and discuss which options best suit your needs.  At this time, it would also be good to review your strategy when it comes to subjects.

A mortgage broker will also be able, with your consent, to do one credit check for your application.

When you use a mortgage broker to obtain your pre-approval, you are not only ensuring you find the best mortgage for your circumstances, you are saving yourself time, effort, and uncertainty.  You will only need to fill out one application and have one credit check done, unlike if you approached different lenders on your own.

Best of all, using a mortgage broker to get you your pre-approval will not cost you anything, nor will you be under any obligation to take the mortgage. 

When your offer has been accepted, your mortgage broker may advise you that it’s better to go with a different lender than your pre-approval.  This could be because of the rate, timing, etc. Also, further documentation may be required once the lender receives the accepted offer.

Call me today to discuss how I can get you the pre-approval that best suits your situation and bring you closer to achieving your dream of home ownership!

You’ve done it!  Your hard work, saving, and relentless home-searching has finally paid off and you’ve found your first home purchase! Congratulations! 

The next step is to find the mortgage that best suits your circumstances.  For many first time home buyers, the mortgage application and approval process can be stressful and intimidating.  In today’s market, lenders are being particularly careful about what they require from applicants in order to secure a mortgage at a competitive rate.  

As your mortgage broker, it is my job to walk you through the entire process, from when you start looking for your home, to providing advice after your mortgage has closed.  I am with you every step of the way, to make sure that your home owning dreams become a reality.

In my five part First Time Home Buyers Series, I will walk you through the mortgage application process, including the documentation you will need to provide to secure your mortgage approval.

Part One: The Pre-Approval
This first post will go over pre-approvals and the importance of “subject to financing” clauses.

Part Two: How Much of a Mortgage Can You Afford?
Here I will discuss how lenders calculate qualifying ratios, and what other fees and debts should be included in your calculation of how much of a mortgage you can afford.

Part Three: Income
I will discuss what you will need to provide for proof of income, and the situations where lenders may require more documentation or information.

Part Four: Down Payment
This post will provide an overview of the questions the lender will need answered about your down payment, as well as stipulations lenders may have on where the money is coming from.

Part Five: First Time Homebuyer Grants and Credits
In this last post I will provide a brief overview of first time homebuyer grants and credits that may be available to you.

When buying a strata property, most of the time your offer will include a subject that the seller must provide various strata documents to the buyer by a certain date.

As part of your mortgage approval, the lender will ask for the Form B, which cannot be more than 30 days old, and possibly other strata documentation as well.

The Form B: discloses information about the strata corporation and lot.  An owner, purchaser or person authorized by the owner or purchaser may request a Form B.  This confirms what the current situation is of the strata and if there are any special assessments outstanding, special levies, and how much is in the contingency reserve fund.  This information is important to the lender as it gives them an indication as to the condition of the property.

Lenders may also ask for additional documents, which may include:

1. 1. A depreciation report.
2. 2. The last strata meeting minutes.
3. 3. The last AGM minutes.  
4. 4. If there was a special assessment, they may ask for details on that.
5. 5. If there was an engineer’s report commissioned, they may ask for details on that.

Lenders vary on what they require so best to work with your realtor on providing these documents and ensuring they are available. Don’t leave this to the last minute – a rush order for strata documents can increase from the standard fee (approximately $35 – $50) to over $150 if the request is urgent!

As a buyer, you should be sure to give yourself enough time to go through the strata documents and disclosure statement, to make sure you understand what is included in your strata fees.  The documentation should provide a detailed description of what your fees cover, and should also include a budget.  While strata fees will vary depending on the building and property, they should cover maintenance of common property, insurance for common areas, landscaping of the grounds, and building amenities.

Remember, the strata fees will be on top of any mortgage and other payments you will have to make!

Strata fees and other costs make determining how much of a mortgage you can afford challenging.  A mortgage broker can crunch the numbers and help you find out how much of a mortgage you can afford, and will take into consideration your strata fees and other costs so you don’t have any surprises.

Call me today to talk about how I can help you find the perfect mortgage for your situation today!

In today’s fast-paced Vancouver real estate market, your best offence is a good mortgage broker.

Mortgage brokers have access to multiple lenders, so if one lender does not seem to be working out on your file, they can quickly send your file to another lender.  And quickly is the key word here.

To be a successful purchaser in today’s market, being quick is key.  And having great connections with lenders, lawyers/notaries and appraisers will ensure the process goes as smoothly as possible.

Your mortgage broker is a problem-solver.  All they do are mortgages, ALL DAY, EVERY DAY.  So if an issue arises on your file, whether it’s income, property, timing—they are equipped to help you find the best solution.

Call me today to discuss how I can find the best mortgage package for your situation!

You have bought a property, your financing has been approved and you now have a month before you close on your purchase! Congratulations!    

While most of the hard work may be done, you are not out of the woods just yet. Your mortgage broker may have found you the perfect mortgage, but there are many ways you can sabotage your mortgage approval, even after you have been approved.

If you don’t want to kill your mortgage match made in heaven, avoid these common pitfalls:

1. Take on new debt.
You’re excited about your new home and you have taken on a new mortgage that’s lower than what you initially thought.  You think you can afford that new car after all.   WAIT….don’t take on new debt before your mortgage closes.  A new car loan payment can adversely affect your approval.   Talk to your mortgage broker first before taking on a new loan.

2. Take a new job or quit your old one. 
Your mortgage was approved based on the income you provided to your broker.  If your income situation changes before closing, the lender has the right to cancel your application if they feel the new job does not support the income situation they require.

 3. Leave town. 
The two weeks prior to your closing date are crucial for your solicitor and they will be contacting you for further information.  Generally, the solicitor will not have your final payment figure until a couple days before closing, so being available and flexible at that time will ensure the closing process goes smoothly.

 4. Change your purchase contract without consulting your mortgage broker, especially the dates! 
The broker has advised the lender of your closing date and your file will be processed accordingly. If you want to make any changes to your dates, you must speak to your broker first.  Same goes with changing the price or any other condition that can affect your mortgage approval. Bottom line: talk to your broker before making any changes.

 5. Stop paying your existing mortgage, if you have one, or any other credit cards/loans, etc.
Let’s say you have arranged a refinance/consolidation for your existing mortgage and/or other debt.   This does not mean you stop paying your existing debt.  Stopping these payments can mean a huge drop in your credit score, which you don’t want to happen before you close on your new mortgage.  So keep paying your bills, mortgage, etc, right up until your closing date.

 6. Spend your down payment or closing cost money! 
Remember, you will need to come up with your closing costs and any other down payment that is still owed.  So even though that trip looks tempting, don’t spend your funds that you have put aside for closing.  Your mortgage broker can solve most financial issues but they can’t print money!

Bottom Line: When in doubt, ask your mortgage broker.

Call me today to find out how I can get the best mortgage for you!

While a hot housing market and a rise in home values may be a boon to those looking to sell, those not looking to sell their homes may also benefit.

An increase in your home’s value may allow you to reach the minimum 20% home equity, thus making you eligible to refinance your home. 

What is Refinancing?

You are eligible to refinance when you have reached a minimum of 20% equity on your property.  Equity is the difference between the amount owed on the home and its current market value. 

Equity = Amount Owed on the Home – Value of the Home. 

Many homebuyers can only put down 5% or 10% on their purchase and may wait years to reach 20% equity.  However, given the steep rise in home values recently, many homeowners are now reaching 20% much faster.

Refinancing is the process in which a new loan is obtained, often with different terms than the original loan.  

Refinancing is not the same as getting a second mortgage.  A second mortgage is in addition to your first mortgage, and does not replace it like refinancing.  

What are the Advantages of Refinancing?

You can use the equity in your home to consolidate your debt.  Moving your debt from unsecured to secured against your home can be beneficial to your credit score.

Refinancing can also reduce your interest rate on other debts, which can reduce your overall monthly payments, potentially saving you hundreds of dollars a year and improving your cash flow.

Tip: Take the monthly savings in payments and apply at least half of it to increasing your mortgage payment.  You will reduce your interest rate on other debts, improve your cash flow AND pay your mortgage off faster.

You can also consider refinancing to pay for large purchases, such as cars, renovations, or university tuition.

What are the Risks?

While refinancing may be an appealing option, it is critical that homeowners pay close attention to the risks involved.

If you choose to refinance, you may be subjected to a penalty fee by the lender.  It is important to calculate whether the benefits of refinancing are worth the costs that may be incurred. 

What’s Best for You?

Every situation is different, and requires careful calculations of the costs and benefits.  A good mortgage broker can clarify what options are available to you, and help you determine if refinancing your home is the right option for you.

Call me today to discuss your refinancing options!