In order to facilitate real estate financing, a great deal of your personal data is required. Some level of concern is understandable. Many of us happily hand that sort of information over to our banking institutions without a second thought - because we are accustomed to doing that.
Your experience with me should be and will be no different. I am a vault. Every single individual piece of private information you share with me is protected by a series of industry standard processes and policies. Your data will be shared with no one except lender representatives as required to arrange your mortgage.
Your digital documentation will be stored in a dual wall, password protected, offsite server - upon completion of your file, all documents will be deleted from my computer.
Any paperwork generated by our endeavour will be shredded upon completion of your file.
Your personal information is safe with me!
First Time Home Buyers
Buying your first home can be a bit of a daunting process. There are a lot of unknowns and sometimes it can feel like things are moving more quickly than you would like.
Confusion does not have to be a natural part of buying your first home! With some basic knowledge and understanding up front, before you start shopping, you can buy your first home calmly and deliberately.
All lenders require some basic employment, income and downpayment information to proceed. A detailed letter of employment, a recent pay stub, your two most recent T4s and proof of the source of down payment are generally all that lenders require for basic income earners.
See the documents available for download below. You will find my service agreement and credit report authorization as well as my purchase application. Both are PDFs ready to print, fill out and send back to me.
Let's get you pre-approved today so you can start to shop for a home!
Repeat Home Buyers
As a repeat home buyer, you're well versed on the necessary steps of securing real estate financing. However, the more you know the easier the process. Buying your next home is much like buying your first. Lenders require that we prove your employment and income. The source of your downpayment is also required. Most often for repeat home buyers, that downpayment is coming from equity built up in the first house. The documentation required to prove that downpayment is just as straight forward as any other.
Sometimes, depending on the timing of the transactions, you will take possession of your new home before the buyers of your first home do - meaning you will not have the cash in hand to close your purchase. In these cases, bridge financing is a common option. I am able to arrange bridge financing as well.
I am your one stop for all mortgage needs!
A refinance occurs when you turn some of the built up equity in your home into cash. There are a few more rules for this type of transaction than for basic real estate purchases - but there is nothing too complicated about it.
Refinancing your mortgage is a great way to turn your existing equity into cash to use for investment purposes, renovations or debt consolidation.
A refinance is a great way to generate large cash sums when they are needed.
Renewal and Mortgage Transfer
When your mortgage term is about to mature, you often have the opportunity to seek different or better terms, depending on the mortgage product you have. One option is to speak with a Mortgage Agent with the aim of moving your mortgage from one lender to another. This is called a transfer or switch. The main reason for this is to take advantage of more favourable terms or sharper rates that you can access because your term is up.
There are a number of relatively uncommon reasons that could preclude access to a conventional lender. This does not mean that you cannot attain a mortgage. If some aspect of your employment, income, debt servicing or credit falls outside of the policies and guidelines of standard lenders, a Mortgage Agent can approach an alternative lender with your file.
There is almost always an option!
One of the most important pieces of information that a lender uses to qualify and approve mortgages is the debt service ratio. There are in fact two ratios: the gross debt service (GDS) and the total debt service (TDS). The GDS is essentially monthly incoming funds compared to monthly outgoing funds used exclusively for housing. Lenders want to be certain that you are not spending too much of your income on housing alone. Under normal circumstances this ratio can be no higher than 35%.
The TDS is calculated by comparing your total monthly income to all monthly debts that require servicing. This includes housing costs as well as credit card debt, car payments, lines of credit payments, student loans and more. Normally, lenders want to see this ratio no higher than 42%.
These ratios are what lenders use to ensure that you are able to afford the home you wish to purchase while ensuring that you can continue to service the cost of your debts. It is a safety measure to ensure that you will not get into financial uncertainty by purchasing your home.
Debt service and its importance in the mortgaging process is not often well understood by borrowers. My view is that nothing should go unexplained.
The importance of a pre-approval really can't be understated. The aim of a pre-approval is to perform an initial assessment of your employment, income, credit and downpayment details to determine the likelihood of securing a mortgage. It is a basic and easy step that can generally be done very quickly once some essential data is provided to your Mortgage Agent. The process of a pre-approval is also an opportunity to discuss some preliminary concerns and perhaps move past some early speed bumps before you have a live offer on a house.
Your downpayment is the amount of funding you wish to contribute towards the purchase of your home. Under normal circumstances you can use as little as 5% of the purchase price as a downpayment. Any downpayment below 20% of the purchase requires that you have mortgage default insurance added to the mortgage.
There are few different ways to source a downpayment. Of course, the most straight forward way is to save your money. That can be a daunting task though. A downpayment can also be gifted from an immediate family member (parents, grand parents, siblings, spouse).
If you are a first time home buyer, you may take advantage of the Home Buyer's Plan which allows you to withdraw up to $25,000 out of your RRSPs, tax free, to use towards the purchase of your home. You then have fifteen years to pay those funds back into your RRSPs in order to maintain the tax free status.
Mortgage Insurance (Default, Life and Disability)
There are two very different types of mortgage insurance in Canada.
Mortgage default insurance is specifically required when buyers have less than a 20% down payment. It is calculated on the benchmarks of 5%, 10% and 15% down with a lowering interest rate respectively. This type of mortgage insurance is often simply called CMHC (Canada Mortgage and Housing Corporation). CMHC is a crown corporation and there are actually two other companies that provide this type of insurance in Canada: Genworth and Canada Guaranty. The lender determines which company to send your file to and the lender handles that end of your file entirely. Mortgage default insurance is effectively protection for the lender should the borrower default on the mortgage. The borrower pays the premium, which is blended into the mortgage. The existence of mortgage default insurance is the safety net that allows mortgage lenders to approve Canadians who have less than 20% as a downpayment.
On the other hand, mortgage life and disability insurance is more like a traditional insurance product that protects the borrower should the unexpected occur. While this coverage is not normally mandatory in Canada, it is very wise to include it in your mortgage planning. Once you borrow the significantly large sums required to purchase a house in Canada, you are responsible for paying those funds plus interest back in their entirety. This responsibility remains even in the event of a life altering disability or worse. Adding mortgage life and disability insurance is an integral part of protecting your investment, your future and the financial future of those who rely on you should life take an unexpected turn. Licensed Mortgage Brokers in Canada are able to arrange life and disability coverage through the Manulife Mortgage Protection Plan (MPP). It is a very sound product with common sense features. However, should you decline the coverage up front, it would be wise to allow your Mortgage Agent to recommend a consultation with a licensed insurance advisor to seek an alternative.
Most people are familiar with the concept of a credit score though few of us know what our scores are. That information is not easy to ascertain. Consumer credit reporting agencies like Equifax and TransUnion determine your credit score which is produced by evaluating a combination of consumer habits around the use of credit. The length of time you have had access to credit, the percentage of your limits that is carried as a balance, the amount of late payments, the number of available credit products; all are factors that will ultimately have an effect on your credit score.
The 2-2-2 Rule is an effective way to establish good credit. Under ideal circumstances, you will have two active forms of credit with limits over $2,000 with at least a two year history. The easiest way to maintain a good credit score: don't max out your limits, make your monthly payments on time and don't apply for credit you don't need. Follow these simple rules and your credit score will remain strong.
Most lenders want to see a score above 650 with anything below being an exception that requires a very strong application in every other aspect.
Here are some useful files for home buyers. Most importantly, you can download my client service agreement and credit report authorization as well as a DLC Elevation Mortgage purchase application. Fill these two documents out and email them to me for a quick pre-approval!