24 Nov

Mortgages and Paperwork

General

Posted by: Rodney Kasunich

Paperwork-it’s a fact of life. You need it and we as mortgage professionals also need it. Below is a list of must have documentation BEFORE you start going through the mortgage approval process.

Personal Information
This will be the basic information we require to start your mortgage process. It will include your age, marital status, and number and age of kids. For this first step, a divorce/separation agreement if you are going through a divorce or were previously divorced will also be required.

Employment Details
Your employment details will require more paperwork than your basic details. This will include:

  • Proof of income (T4 slips, job letter, paystubs, and/or personal income tax returns – T1 Generals)
  • Notice of Assessments from the last two years

If you are self-employed then you will also need to provide any incorporation documents, financial statements and submit full personal tax returns (T1 Generals) as well as a CRA Notice of Assessment (NOA) for both the corporation as well as you personally. If you don’t have these documents on hand or can’t find them, we highly recommend using a document service like Easy NOA. We have had clients use them with fantastic results and no hassle on your end. Check them out by visiting their website – easynoa.ca.

Other Income Sources

  • Typically, this is a statement on your part but the lender might ask for back-up documentation. This may include:
  • Pension documentation and information
  • Rental income property income documentation
  • Part time work paystub with job letter
  • Child Tax Benefit documentation
  • Child/Spousal support documentation
  • Investment Income documentation
  • Disability income documentation

Documentation of current property
If you already own a property, you will need to have a copy of your current mortgage statement on your current property and a copy of last year’s property tax statement. You may also be asked to provide this year’s up to date property tax statement.

Keep in mind that every person’s situation is unique and this list only outlines the traditional documents required to pursue your mortgage. For example, if you receive child support you will need to have proof of that (i.e. copy of your separation/divorce agreement and the last three months bank statements showing the payment of the child support to you) or if you have experienced bankruptcy you will need to provide a list of debts paid off with a copy of your bankruptcies discharge papers.

Again, we know that sometimes things get lost or misplaced (we have been there too!). If you find yourself scrambling to find one of these documents or another document that your mortgage broker has requested, a service like Easy NOA can have it delivered to your inbox within 24 hours. Having these documents on hand in preparation for going through the mortgage approval process will make the entire experience run much smoother—and make it an enjoyable one! If you have any questions, give me a call at 704-691-7646!

22 Nov

Documents you need to qualify for a mortgage

General

Posted by: Rodney Kasunich

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.

20 Nov

10 things NOT to do when applying for a mortgage – buying a home or refinancing

General

Posted by: Rodney Kasunich

Have you been approved for a mortgage and waiting for the completion date to come? Well, it is not smooth sailing until AFTER the solicitor has registered the new mortgage. Be sure to avoid these 10 things below or your approval status can risk being reversed!

1. Don’t change employers or job positions
Any career changes can affect qualifying for a mortgage. Banks like to see a long tenure with your employer as it shows stability. When applying for a mortgage, it is not the time to become self employed!

2. Don’t apply for any other loans
This will drastically affect how much you qualify for and also jeopardize your credit rating. Save the new car shopping until after your mortgage funds.

3. Don’t decide to furnish your new home or renovations on credit before the completion date of your mortgage
This, as well, will affect how much you qualify for. Even if you are already approved for a mortgage, a bank or mortgage insurance company can, and in many cases do, run a new credit report before completion to confirm your financial status and debts have not changed.

4. Do not go over limit or miss any re-payments on your credit cards or line of credits
This will affect your credit score, and the bank will be concerned with the ability to be responsible with credit. Showing the ability to be responsible with credit and re-payment is critical for a mortgage approval

5. Don’t deposit “mattress” money into your bank account
Banks require a three-month history of all down payment being used when purchasing a property. Any deposits outside of your employment or pension income, will need to be verified with a paper trail. If you sell a vehicle, keep a bill of sale, if you receive an income tax credit, you will be expected to provide the proof. Any unexplained deposits into your banking will be questioned.

6. Don’t co-sign for someone else’s loan
Although you may want to do someone else a favour, this debt will be 100% your responsibility when you go to apply for a mortgage. Even as a co-signor you are just as a responsible for the loan, and since it shows up on your credit report, it is a liability on your application, and therefore lowering your qualifying amount.

7. Don’t try to beef up your application, tell it how it is!
Be honest on your mortgage application, your mortgage broker is trying to assist you so it is critical the information is accurate. Income details, properties owned, debts, assets and your financial past. IF you have been through a foreclosure, bankruptcy, consumer proposal, please disclose this info right away.

8. Don’t close out existing credit cards
Although this sounds like something a bank would favour, an application with less debt available to use, however credit scores actually increase the longer a card is open and in good standing. If you lower the level of your available credit, your debt to credit ratio could increase and lowering the credit score. Having the unused available credit, and cards open for a long duration with good re-payment is GOOD!

9. Don’t Marry someone with poor credit (or at lease be prepared for the consequences that may come from it)

So you’re getting married, have you had the financial talk yet? Your partner’s credit can affect your ability to get approved for a mortgage. If there are unexpected financial history issues with your partner’s credit, make sure to have a discussion with your mortgage broker before you start shopping for a new home.

10. Don’t forget to get a pre-approval!
With all the changes in mortgage qualifying, assuming you would be approved is a HUGE mistake. There could also be unknown changes to your credit report, mortgage product or rate changes, all which influence how much you qualify for. Thinking a pre-approval from several months ago or longer is valid now, would also be a mistake. Most banks allow a pre-approval to be valid for 4 months, be sure to communicate with your mortgage broker if you need an extension on a pre-approval.

15 Nov

I’ve never heard of that lender before

General

Posted by: Rodney Kasunich

One of the benefits of working with an independent mortgage professional; compared to getting your mortgage through a single institution, is choice. And as there are even more mortgage rules coming into place January 1st 2018, now more than ever, having access to a wide variety of mortgage products is going to ensure you get the mortgage that best suits your needs.

Working with an independent mortgage professional will give you access to varying products from many different lenders, some of these lender you may have never even heard of, but that’s okay. Sure, RBC, BMO, and CIBC, are more household names compared to say, MCAP, RMG, or Merix Financial, but as each lender has a different appetite for risk (there is always a risk when lending money) how do you know which lender is going to have the products that are going to be the best fit for you?

Typically the conversation develops into something like this: “I’ve never heard of this lender before, are they safe, I mean… I have no idea who they are”? And although that is a valid question, there is a simple answer. Yes. Yes they are safe. All the lenders we work with are reputable and governed by the same regulator as the big banks. Ultimately, you have their money, they don’t have yours!
But let’s answer a few of the common questions often asked about these lenders accessed only through an independent mortgage professional.

Why haven’t I heard of any of these lenders?
Instead of spending all their money on huge marketing campaigns (like the Canadian big banks) which drives up the cost of their product, broker channel lenders rely on competitive products and independent mortgage professionals to secure new clients.

What happens if my lender gets purchased by another lender?
This actually happens quite a bit, however, it’s business as usual for you. Even if your mortgage contract gets sold, the terms of your mortgage stay intact and nothing changes for you.

What happens if my lender goes bankrupt or is no longer lending at the end of my term?
This would be the same as if the lender was purchased by another lender. The only difference is, at the end of your term, we would have to find another lender to place your next term. And as this is already good practice, it’s business as usual. Again, you have their money, they don’t have yours. The contract would stay in force.

Why don’t these lenders have physical locations?
Much like why you haven’t heard of these lenders, they save the money on advertising and infrastructure, and instead focus on creating unique products to give their clients more choice. These lenders rely on independent mortgage professionals for awareness and compete on product not public awareness.

Do they really have better products?
Yes. Well, I guess we have to define what is meant by better products. If by better products you mean a variety of products that suit different individuals differently, then yes. Across the board, each lender has a different appetite for a different kind of risk. For example, while one lender might not include child tax income as part of your regular income, another might. While one lender might look favourably on a certain condo development, another might not. Each lender sees things a little differently. Knowing the products and preferences at each lender is what we do!

When it comes to mortgage qualification, some broker channel lenders are more flexible than others (or the banks) and offer different programs that cater to self-employed, people who are retired, own multiple properties, or rely on disability income. While as it relates to the features of the mortgage, different lenders offer many different features.

Some mortgages can be paid off at an accelerated pace with little to no penalty, some accommodate different payment structure, some products are set at lower rate, but sacrifice flexibility.

At the end of the day, the goal should be to qualify for a mortgage that has the features that suit your individual needs. Regardless of which lender that is. If you would like to talk about your financial situation, and see which lender best suits your needs, please don’t hesitate to contact me at 705-691-7646.

14 Nov

Understanding how Bridge Financing Works

General

Posted by: Rodney Kasunich

Sometimes in life, things don’t always go as planned. This could not be truer than in the world of Real Estate. For instance, let’s say that you have just sold your home and purchased a new home. The thought was to use the proceeds of the sale of your house as the down payment for the new purchase. However, your new purchase closes on June 30th and the sale of your existing house doesn’t close until July 15th—Uh-Oh! This is where Bridge Financing can be used to ‘bridge the gap’.

Bridge Financing is a short-term financing on the down payment that assists purchases to ‘bridge’ the gap between an old mortgage and a new mortgage. It helps to get you out of a sticky situation like the one above and has a few minimal fees associated with it.

The cost of a Bridge Loan is comprised of two parts. The first is the interest rate that you will be charged on the amount of funds that you are borrowing. This will be based on the Prime Rate and will vary from lender to lender. As a rule, you can expect to pay Prime plus 2.5%. The second cost to consider is an administration fee. Again, this will vary depending on the lender and can range from $200-$695.

The amount that you are able to borrow is easily calculated. The calculation looks like this:

Sale price
(less) estimated closing costs of 7%
(less) new mortgage of the purchase property

=Bridge Financing.

*Note: the closing costs included the expense of realtor commissions, property transfer tax, title insurance, legal fees and appraisal costs if applicable*

So that’s the cost side of things, now the next question is: how long? The length of time that you can have Bridge Financing is going to vary again from lender to lender as well as with what province you are in. For most, it is in the range of 30-90 days but there are some lenders that will go up to 120 days in certain cases.

Before applying for Bridge Financing, you must also have certain documents at the ready to present. These documents include the following:

1. A firm contract of purchase and sale with a copy of the signed and dated subject removal on the property that you are selling and the property that you are purchasing.
2. An MLS listing of the property being sold and purchased.
3. A copy of your current mortgage statement.
4. All other lender requested docs to satisfy the new mortgage of the upcoming purchase.

Once you have those documents, you can work with a qualified mortgage broker to apply for bridge financing. It is an important tool to understand and a great one to have in your back pocket for when life throws you one of those ‘curve balls’. You can have peace of mind knowing that if/when that situation arises, you are not without a strong option that can provide you with interim financing for minimal cost.

As always, if you have any questions about Bridge Financing, or any questions about your mortgage (be it new or old) contact a Dominion Lending Centres mortgage broker. We are well-versed in all things mortgage related and can help come up with creative, cost effective solutions for you.

9 Nov

You just got a mortgage. Now what?

General

Posted by: Rodney Kasunich

Mortgages are a funny thing. On the one hand they allow you to become a home owner without saving up enough money to purchase the home outright, which is a really good thing. On the other hand, even at today’s really low interest rates, as they are amortized over a really long time (most of the time 25 years), they can cost you a lot more money in the long run. With the government tightening mortgage qualification, chances are securing your most recent mortgage wasn’t a painless process.
So now that you finally have a mortgage, and you’re a home owner, the first thing you should do is figure out how to get rid of your mortgage! Here are 4 ways you can do that!

ACCELERATE YOUR PAYMENT FREQUENCY
Making the change from monthly payments to accelerated bi-weekly payments is one of the easiest ways you can make a difference to the bottom line of your mortgage. Most people don’t even notice the difference.
A traditional mortgage splits the amount owing into 12 equal monthly payments. Accelerated biweekly is simply taking a regular monthly payment and dividing it in two, but instead of making 24 payments, you make 26. The extra two payments really accelerate the pay down of your mortgage.

INCREASE YOUR MORTGAGE PAYMENT AMOUNT
Unless you opted for a “no-frills” mortgage, chances are you have the ability to increase your regular mortgage payment by 10-25%. This is a great option if you have some extra cash flow to spend in your budget. This money will go directly towards paying down the principal amount owing on your mortgage, and isn’t a prepayment of interest. The more money you can pay down when you first get your mortgage the better, as it has a compound effect, meaning you will pay less interest over the life of your mortgage.
Also, by voluntarily increasing your mortgage payment, it’s kinda like signing up for a long term forced savings plan where equity builds in your house rather than your bank account.

MAKE A LUMP SUM PAYMENT
Again, unless you have a “no-frills” mortgage, you should be able to make bulk payments to your mortgage. Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance. Some lenders are particular about when you can make these payments, however if you haven’t taken advantage of a lump sum payment yet this year, you will be eligible.

REVIEW YOUR OPTIONS REGULARLY
As your mortgage payments are withdrawn from your account regularly, it’s easy to simply put your mortgage payments on auto-pilot, especially if you have opted for a 5 year fixed term. Regardless of the terms of your mortgage, it’s a good idea to give your mortgage an annual review. There may be opportunities to refinance and lower your interest rate, or maybe not, but the point of reviewing your mortgage annually, is that you are conscious about making decisions regarding your mortgage.

If you have any questions about your mortgage, how to get a mortgage, or how to get rid of the mortgage you have, please don’t hesitate to contact a Dominion Lending Centres mortgage specialist.