All posts by That Mortgage Man

How to get a mortgage with bad credit

Truth: Your credit rating is not the only piece of the mortgage puzzle but you need to know where you stand.

I have been in the mortgage business for a long time and still, the most common question that I get asked is plain and simple……

“How do I actually get a mortgage with bad credit?”

I get asked this a lot and my very BEST ADVICE is NOT TO MAKE ASSUMPTIONS.  Many people think they have poor credit from something that happened years ago and are pleasantly surprised to find out the item in question is no longer pulling their credit down.  Conversely, many people think they have good credit only to find out that parking ticket or phone bill they didn’t agree with nor pay, is costing them dearly on their credit report!

Here’s what to do:

  •  let me check your report out so you know exactly where you stand. (Free)
  •  If you do have some serious problems, let me give you some tips on how to improve your situation, if not for now, for a future application (Still free)
  • You would be surprised how many mistakes I find on credit reports; things that have been paid off long ago but aren’t logged on the credit report – Again never make assumptions….

If your curious to know your score, give me a shout if there are improvements to be made, you would much rather tackle those now than have a nasty surprise later 🙂

5 Secrets You Didn’t Know About Mortgages

The big “secret” about mortgages, from the lender’s point of view, is that it’s all about competition and risk. Competition limits what a bank can charge because borrowers will look for the best deal. But competition is tempered by risk. People with good credit scores – evidence that they habitually pay their bills on time – are better risks than people who don’t, no matter the reasons, so they usually get better rates.

Whatever your situation, here are some things you may not know – but need to – when getting a mortgage. Be sure to keep them in mind.

If you have any questions, never hesitate to get in touch, I’m happy to help 🙂

Mortgage Brokers vs. Bankers

It is a mortgage tale as old as time… and one of the biggest choices that mortgage shoppers face when getting into the market is where to go….. broker or bank?

It can be a tough choice, many of us have been with our banks for years and it just seems easier to meet with the specialist there. Our parents went to the banks, your friend got a “great rate” at the bank and well, it just seems like the traditional thing to do.

Word is on the street that our society is taking a turn back towards “traditional” ways but before you make an appointment at your nearest financial institution, here are the top 5 reasons why mortgage brokers are just plain GREAT!

We offer mortgage plans that a banker does not have access to: Part of being an independent mortgage broker is that I am able to “shop around”! Banks only have typically about 3 products to offer, I can take your application to over 50 lenders and without a doubt find you the best rate and plan to suit YOUR needs.

We don’t turn our noses up at those with bad credit:  Mortgage brokers have flexibility and can often find a lender who will work with you.  Unfortunately, bankers have to adhere to their bank policies often placing restrictions on available options.

Flexible hours: Not a 8-5 person? No worries, I’m not either!! Now granted, if you call at 3 am you might have to give me a minute to fire up the Keurig but other than that, meeting outside regular business hours or at a location of your choice is not a problem!

Worried that you’re self employed? Don’t worry so am I: Banks can often times remind me of the government, there is not a lot of room for “grey area” black and white or nothing… If you are receiving your income from a non-conventional source ex: self employment, long term disability, alimony etc.  than have no fear. Brokers love the “grey area” in fact, we thrive in it. We keep ourselves up to date on the rules and the trends of the lending industry, knowledge is power and we will deliver your application to a lender who will happy to work with you!

We work for YOU: We offer a unbiased, free service to clients that helps them properly asses and understand the mortgage process. We love what we do and we like saving you money. We get down in the trenches, negotiate, shop around and provide options!

If I haven’t convinced you, feel free to give me call and get ready to be surprised.

Kelowna MortgageDave ~ Kelowna mortgage broker 🙂

Down payment rule changes, house hunters listen up.

The facts:

The change– Effective in the new year, those lucky enough to be house hunting for a new home over $500,000 this effects you…. you will now be required have 10% minimum as a down payment (previously 5%) on insured mortgages.

Timeline for the new change – Feb. 15, 2016

The background for the change – “The governments role in the housing market is to set and maintain a framework that is equitable, stable & sustainable. This change addresses emerging vulnerability in certain housing markets, while not overburdening other regions” said finance minster Bill Morneau in his recent release “They also re balance government support for the housing sector to promote long term stability & balanced economic growth”

The key motive  to ensure that homeowners have enough “skin in the game” (equity).  For many of us middle class Canadians, our biggest investment is our home. This change will increase homeowners equity and will help keep our housing market stable and secure for years to come.

If you have any questions about the upcoming change,  please get in touch and i will be happy to crunch some numbers with you 🙂

 

Is it time to abandon the 20% downpayment rule?

This one’s for the housing true believers out there.

You’re the buyers who keep pushing house prices higher in cities such as Vancouver, Toronto and Hamilton. Incomes are edging higher in these cities, prices are surging. If you’re primed to buy anyway, then listen up. Stop trying to save a 20-per-cent down payment and get into the market now!

A popular bit of advice is that you should ideally wait to buy a house until you have a down payment of at least 20 per cent and thus are excused from buying mortgage default insurance. But if it takes a few years to save that much, you may find that soaring prices more than offset the savings on mortgage insurance.

This insurance got a little more expensive in some cases this summer, so it’s time for a fresh look at the case for avoiding the cost of buying it.

Background for housing rookies: If you have a down payment of less than 20 per cent, you have to pay a hefty premium to insure your lender in case you default on your payments. The amount is usually added to your mortgage principal, which means it’s out of sight and out of mind. But it still costs you.

To get a full scope of expense continue reading…..

Costs to expect when buying & selling a house

The purchase price you negotiate when buying or selling a home is just one part of the ultimate cost for a home. In addition to the purchase price there are a number of other fees—known as closing fees—that need to be factored in to any purchase or sale price. To help you plan the purchase or sale of your property, here’s a snapshot of the extra fees you can expect to pay out of pocket once you’ve settled on the home sale price.

Buyer’s Closing Costs

→ Land Transfer Tax

Most provinces and some major cities impose a land transfer tax that is calculated as a percentage of the home’s purchase price. The formula varies from province to province (and from city to city) so it’s best to use an online calculator. For this example, we’ll assume the purchase of a $350,000 home in Toronto, Ontario. Based on the calculator, a buyer would have to pay a provincial and a city land transfer tax that equates to $6,950. If, however, you were a first-time home buyer, you’d get $5,225 in rebates on those fees.

→ Mortgage Costs

Most banks won’t charge a fee to set-up a mortgage or to do a mortgage-related appraisal, but some still do. If your bank does charge you, expect to pay between $250 and $500 for a mortgage-related appraisal. Also, if you’re putting less than 20% down on the home you’re buying, you will need to pay mortgage default insurance—and the less money you use to purchase the home, the more money you’ll be charged in default insurance fees. To help you calculate here is the sliding scale fee charged by Canada Mortgage Housing Corporation and Genworth—the two largest mortgage default loan insurance providers.

80% to 85% of purchase price: 1.80% of mortgage + PST

85% to 90% of purchase price: 2.40% of mortgage + PST

90% to 95% of purchase price: 3.60% of mortgage + PST

over 95%: 3.85% of purchase price + PST

Keep in mind, too, that mortgage default insurance fees will also be charged on amortization that is longer than 25 years, even if you put more than 20% down on a home. According to one mortgage broker, for every extra five years (above 25 year amortization), the premium increases by 0.2%. Also, some high-risk borrowers, such as self-employed or those with large debt loads, may end up being charged a mortgage broker fee—a finder’s fee that can add an extra $1,000 up to $9,000 on your mortgage closing costs.

Visit MoneySenseWeek.ca for more great money tips »

→ Adjustment Costs

Once a sale is finalized, your lawyer will need to calculate the adjustment costs. These are costs the seller prepaid and can include property taxes, utility bills, heating oil, lawn care or property maintenance services as well as other annual contracts. For metered services, such as hydro, gas or water, the meters are read on closing day (the day the house changes ownership), to verify down to the last cent what the seller and buyer owes. For other annual charges, an adjustment—which looks like a credit—is given to the seller, meaning they will get reimbursed for the expenses they have already paid to maintain the home.

→ Home Insurance

If you’re buying a home and getting a mortgage, you will be required to get home insurance coverage. While the cost varies widely depending on the home you buy, where it’s located and the type of coverage you require, expect to pay at least $800 per year for coverage.

→ Legal Costs

A lawyer will do a series of searches and generate a slew of documents when processing a home sale transaction. This includes: a title search (which verifies that a seller legally owns the property and searches utility and tax departments to make sure there are no liens against the property), registering the title deed and mortgage, where applicable septic tank and potable water searches. In most cases, lawyers will charge anywhere from $500 to $1,500 for this portion of the work. But on top of these fees there are also disbursement costs, fax/phone and mail costs and other costs of doing business.

→ Title Insurance

While title insurance is not mandatory it is a very good idea. It protects you against mortgage fraud, identity theft and forgery and can protect you against fees and costs that were not caught in the searches your lawyer conducted prior to the sale (and this happens!). The typical cost is about $300 on a $500,000 home.

Seller’s Closing Costs

→ Realtor’s Commission

The biggest fee sellers will have to pay are the commission fees of the realtors involved with the sale of the property. Generally speaking, the total commission cost is 5%—2.5% for each agent (although, this split is different in the province of B.C.). That said, you can always try and negotiate a lower commission rate, but this needs to be agreed upon prior to the listing and sale of your home. Remember, too, that GST is added to these fees.

→ Lawyer’s Fees

You will need a lawyer to discharge the title for the property and the mortgage and to verify that all prepaid expenses are returned to you and that utility and other services are up to date in payments. Expect to pay $500 to $1,500 for an uncomplicated transaction (although, most lawyers charge less for a sale than a purchase), plus disbursements.

→ Mortgage Discharge

If you ended your mortgage—known as a “closed” mortgage—before you mortgage matures you will need to pay penalties and discharge fees. For a variable rate mortgage, the penalties equate to three months worth of mortgage payments, plus a discharge fee of $200 to $600, depending on the lender. For a fixed rate mortgage, the penalties can be much, much higher so it’s a good idea to call your lender and ask what you will need to pay to break your mortgage. Keep in mind, if you’re looking at a high penalty to break your mortgage you may be able to transfer it to a new property for a significantly smaller fee.

More changes to the mortgage industry

Recently I have received info proposing that CAAMP (Canadian Association of Accredited Mortgage Professionals) is pushing the “transparency” envelope even further. The prospective changes would require brokers to disclose the exact amount of commission we receive from each deal, residential and commercial.  It has caused a bit of a stir within my circle, not because we don’t want to share, but more because, why should we have to share? My job, is to walk my clients through the mortgage process from start to finish. I make it clear from the start, that my services are free to them and that the lender (whichever one we choose to use) pays me a commission to bring them great peeps, like themselves…. Clients are aware that my compensation is paid by the lender to save in overhead costs and IS NOT a fee for the borrower.

The idea poses a minor problem, this potential change has come about through FICOM, without  adequate market research from brokers & consumers like you. It will cause confusion for the average mortgage shopper and potentially impede brokers from competing directly with bank employees , who by the way, wouldn’t have to disclose.

Now don’t get me wrong…. I like FICOM as much as the next mortgage broker. They hold brokers to a high standard, protect borrowers & generally are referred to as the “mortgage police” (all good things) Since I like market research just as much as the next guy, I’m asking…would it be attractive to YOU, to find a broker to do it for less, even though your not paying? Do you want to know/or do you care how much we make? I have no problem telling you, after all you tell me all your financial details on your mortgage application….

Should the door swing both ways?

Send me your thoughts 🙂

 

Getting YOU the best mortgage not just the lowest rate.

One VERY important thing to remember when you  are starting to mortgage shop is the unexpected TOUGH fine print that can come if you have to break your terms early!

TRUTH: Mortgage rates are near record lows, but brokers (including myself) say those shopping around for a loan should look beyond the rates you’re being offered and pay close attention to how much it will cost to break their mortgages.

Because the simple TRUTH is: Life happens…. Divorce, a desire for a new and bigger home or an opportunity to move to another city for a new job, all may prompt people to want out of a five-year mortgage early, and the penalties vary depending on the type of mortgage they have and the lender involved.

Focusing on the rate may save you a few bucks on your monthly payment, but if don’t pay attention to the penalty fees, it could cost thousands more if you have to get out of the mortgage early…..

The penalty for breaking a closed mortgage is generally the greater of three months interest on the remaining balance or the interest for the remainder of the term on the remaining balance – all calculated using something called the interest-rate differential- To read more click here 🙂

As always, if yo have any questions, never hesitate to get in touch.

 

What happens to your credit rating when you miss a mortgage payment?

I would just like to lead by saying, your mortgage payment doesn’t always show up on your credit report, but where it is going to bite you (if you are late on multiple payments), is at renewal time & it will hit you right in the pocket……

If you miss three consecutive payments or more in a row, it will lead to foreclosure proceedings (yuck), which is when the bank or lender starts the process of legally taking ownership of your property due to the lack of payments. Believe it or not, banks or lenders don’t want to own your home, but if the lender isn’t getting paid, it will try and sell the property in order to reduce its losses. Foreclosure shows up under the public record portion of your credit report……

You may assume that bankruptcy is the worst thing you can do for your credit; however, if you are applying for mortgage financing, going through a foreclosure is the absolute worst thing you can do for your credit. Bad consumer credit can be rebuilt fairly quickly, but very few lenders will look at providing financing for you if you have a previous foreclosure showing up on your credit report, regardless how strong your current credit is.

If you find yourself in a situation where you may not be able to make your mortgage payments, contact your mortgage lender or mortgage broker to find out what can be done. In all my years in the mortgage biz, I’ve never seen the attitude of pretending it will all go away actually work for anyone.

As always, if you have any questions about the mortgage industry, never hesitate to get in touch 🙂