Can I get pre-approved for a home purchase loan before I’ve found my property?

Absolutely. However, you should note that a pre-approval differs from a commitment letter. The pre-approval states the amount you will qualify for based on the information provided to us. In some cases, the information that you deem to be true may not be accurate. This can cause a conflict when it comes time to secure the mortgage. The pre-approval should help when purchasing a home by providing an accurate range of pricing for the home that you wish to purchase. To have a solid pre-approval and ensure that there are no surprises, it’s best to provide all the required documents upfront with your application. You should also note that a pre-approval creates purchasing power by showing the buyer that you have your financing in order and ready to go. This makes you just like a cash buyer and can save thousands of dollars by putting you in a better negotiating position. Make note, you should never waive the financing condition on your purchase until the commitment has been fully satisfied.

Can I make changes to my application?

Yes, you can make changes anytime before we submit the application to lock in your rate. Keep in mind that any changes you make may increase the cost of closing, affect your interest rate and possibly extend the time that it takes to close your loan. We recommend that you complete your original loan application accurately and completely prior to submitting to Safe Mortgages for final approval. Once you receive confirmation of your rate lock, you should review the terms carefully and contact your mortgage advisor immediately if any corrections are needed.

Do I have to finish filling out my application at one time?

No. But we as a brokerage would not want to submit anything that is not complete as it prevents us from doing a full analysis on your financial goals and needs, which can affect the mortgage product that we are obtaining for you. It’s best to get it done correctly the first time. With a clear picture and everything being disclosed, a we will find ways to leverage all your assets to get you an excellent rate, but more importantly, find a product that will save you money while meeting your long and short term financial needs and goals.

How do I increase and protect my credit rating?

Here are a few general tips to assist you in maintaining and raising your personal credit score:

-Maintain two to three revolving charge accounts such as Visa or MasterCard and keep them in good standing at all times.

-Have a couple of other credit card accounts, such as department stores or gas cards and keep in good standing at all times.

-Avoid “finance” company credit card offers such as BestBuy. If you require credit, get it from a major player in the industry.

-Avoid credit inquiries. Each inquiry will lower your credit score.

-Do not max out your credit cards. The ratio of available credit to your total credit balances is very important. Try to keep this ratio between 4%-12% of total available balance for the best results

-Do not apply for multiple credit lines at the same time. This triggers an inquiry of your credit, which lowers your credit score substantially.

-Never co-sign a loan for someone else as your credit could be tarnished by their inability or unwillingness to pay the debts.

-How long will it be before we will know if the loan is approved or not?
The turnaround for a commitment letter can be received anywhere between 4 hours and 8 days. The loan can be approved with the lender as early as a few hours after all the necessary documentation has been received and filed with them. If the paperwork is not satisfactory to the lender it could take as long as a couple of weeks or until the lender is completely satisfied that all the conditions of the commitment have been met.

How long will it take to close the loan?

If everything goes smoothly and all documentation can be provided in a timely manner, we have closed mortgages in as little as a few of days. This is truly dependent on how quickly supporting documentation can be provided by the client.

How will my credit score affect my loan application?

Credit scores play a significant role when applying for a mortgage. Higher credit scores help you to be eligible for more mortgage product options and provide you with more competitive rates. If you’ve had credit difficulties in the past, we have an array of mortgage programs available for you, but they usually come at a higher interest rate and will vary depending on the severity of your credit problems.

Should I refinance?

The significant and most common reason for refinancing is to save you money. This can be obtained through a lower interest rate on your current mortgage or packaging all your higher interest debts directly into your mortgage. You can save a lot of money every month by combining all your high interest debts into your current loan. How much you can save depends quite a few factors. You have to consider how much it will cost in fees (interest penalty, lawyers fee’s, charging/discharging the loan) in order to realize the savings in your payments.

You may also save money by changing your rate from a variable to a fixed. The main reason for this is to obtain stability and security offered by a fixed loan rate over the term of the loan. Adjustable rates are popular when interest rates are higher but when interest rates are low most people tend to lock in for a fixed rate mortgage.

If your intentions are to consolidate debts and replace high interest loans with one low rate mortgage than you may want to consider refinancing. The loans being consolidated may include second mortgages, credit lines, student loans, credit cards, credit cards, outstanding property taxes or other debt you may have. In many cases, debt consolidation saves you money by avoiding paying high interest rates.

What are points?

A point is a term used to reflect 1%. If someone says that they charge 2 points on the loan that would be 2% of the total loan amount. These terms are normally used when speaking of private financing or brokerage fee’s.

What does it mean to “lock a rate”?

“Locking in a rate” is a way of protecting from a possible rise in interest rates during the processing of you finding your home or thinking of refinancing. With some lenders, you can lock a rate up to 120 days. If rates improve during the processing of your loan, you will still get the best available interest rate as most lenders will take the lower of the two interest rates.

What if I have little or no credit?

Use your good payment history on rent and utilities, as well as credit obtained through family members or friends. Provide a year’s worth of cancelled checks to validate consistent monthly payments. This information will become part of your application for the mortgage loan. You may also be able to provide 3 months of statements signed and stamped from your bank to provide proof of payments and/or proof of income. We have programs available that are specialized and tailored for these specific situations.

What if I have a credit problem because of an unusual situation?

If you normally pay your bills on time but failed to pay because unusual or temporary situation, the lender may accept a detailed letter explaining your circumstances. Also provide supporting documentation with your letter such as a doctor’s letter that will add credibility to your case. The information will become part of your loan application. Your lender will be able to overlook a credit problem if you can provide a good reason for neglecting your obligation.

What is Annual Percentage Rate (APR)?

The total finance charges for a loan that is expressed as a percentage is the APR. APR takes into account the total cost of a mortgage, including interest, closing fees, lender fees, and other charges over the life of a loan and re-adjusts the interest rate to reflect those additional costs.

What is a Conventional Loan?

A mortgage or deed of trust that is not insured or guaranteed under a government insured program. In order for you to avoid insurance costs on your mortgage/loan it must be 80% Loan To Value (LTV) otherwise stated as 20% down. Any property being purchased or refinanced with 20%+ equity in the property will be considered a conventional loan and does not require to be insured through Canada Mortgage & Housing Corporation (CMHC) against default.

What is a Balloon Payment?

Periodic lump sum payments which are usually applied to the loan without any penalties. This can be on the anniversary date of the mortgage or at any time that you deem fit. You must carefully review your mortgage commitment, before signing, to ensure that you are allowed to submit a balloon payment during the life of your loan.

What is a FICO score?

A FICO score is a credit score developed by Fair Isaac & Company. It is the American version to our Candian beacon score which is reported through Equifax Canada. It is a credit scoring method to determine the likelihood of credit users paying their bills in the U.S. Since the 1950s, Fair Isaac & Co were pioneers in setting credit scoring standards and even today their method has become the most widely accepted and reliable scoring method used by lenders in credit evaluation.

A credit score attempts to condense your credit history into a single number. Credit scores analyze your credit history by considering numerous factors such as:

-Late payments
-The amount of time credit has been established
-The amount of credit used versus the amount of credit available
-Length of time at present residence
-Employment history
-Negative credit information such as bankruptcies, charge-offs, collections, liens, etc.

Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance.

What is a Variable Rate Mortgage (VRM) and how does an VRM work?

A Variable Rate Mortgage (VRM) is a mortgage or deed of trust, which allows the lender to adjust the interest rate periodically as agreed to at the inception of the loan. A variable rate mortgage usually is tied to the mortgage lenders prime rate, which is tied to the Bank of Canada’s overnight lending rate. If you are interested in an variable-rate mortgage, it is important to discuss all of the features and options of an VRM with your mortgage specialist so they can help you make an assessment of whether or not a variable rate mortgage meets your specific needs.

What is Hazard Insurance?

Hazard insurance is an insurance policy to protect homeowners against property damage. This premium prepayment is for insurance protection for you and the lender against loss due to fire, windstorm and natural hazards. If a catastrophe does happen, hazard insurance should cover the costs to rebuild your home. Most Lenders often require you to get a policy before you buy or refinance a home and provide a copy of that policy to the lender upon closing.

What is an Origination Fee or Brokers Fee?

A fee or charge for work involved in evaluating, preparing and submitting a proposed mortgage loan. Usually charged for hard to place loans or loans that require a great deal of work. These are common in cases for clients that do not meet the normal requirements from a traditional banking institution. A fee is charged on a case by case basis by the brokerage and the amounts vary depending on the file and the amount of productivity required to close the file.

What is P.I.T.H?

Principal, Interest, Taxes, and Heat. The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and heat refer to the amounts that are paid on a monthly basis for property taxes and heating the home.

What kind of documentation will I need to provide the lender for verification?

As each loan has different variables, there is no single list of documents needed for all applicants. You should be prepared to provide copies of the following documents to your lender.

Employment & Income Data

-T4’s/NOA’s for the past two years

-Letter of employment from your work on a company letterhead, dated, signed by an authorized individual at that company with their title and extension so that they may be contacted to verify the information

-Pay stub showing current year-to-date earnings (three most recent stubs)

-Your job history and any explanation of a job change within the past three years

-If self employed (defined as owning 25% of a business or more), you will require business and personal federal tax returns for the past two years. This may include your T1 Generals along with a copy of your companies monthly expenses that are being written off

Assets

-Bank account statements for the past three months. They must be dated, stamped by your branch, have your account number and your name on it

-Investment account statements

-Retirement account statements

-Signed gift letter and transfer of funds verification

Liabilities

-Credit Cards – include balances and monthly minimum payments

-Auto loans and leases – value of car when purchased, estimated value today, term remaining on the lease

-Explanation and paperwork of any derogatory credit in the past seven years

-Explanation letter of any derogatory credit (bankruptcy, collection, foreclosure or default)

-Student and personal loans – include account numbers, monthly payments and balances

-Landlord address(s) for past two years and rental amounts

Property, Realtor and Solicitor Information

-Name and contact information of your Realtor (business card)

-Homeowner’s insurance information

-Rental or lease agreements

-Residence and address information for past three years

-Solicitor information (lawyer’s contact information)

What kind of things do I need to be aware of as a 1st time home buyer?

Buying a home can be your largest purchase in your life. Remember that you are in control of purchasing your home; so don’t allow anyone to pressure you into making a purchase you are not comfortable with. Take your time and evaluate all your options before committing to a contract or a loan. Here are some tips and questions to ask yourself as you start on your first steps to home ownership!

-Know how much you can afford first.

-Yourself, as well as the Realtor and Seller need to know if your can obtain financing.

-You need to know about available financing and special programs

– Be aware of how much you need for closing costs and down payment

-Are there any state sponsored programs available?

– Will the lender allow you to borrow the down payment and what are their requirements?

– Can I be gifted the down payment and how much am I allowed?

– Nothing is more important to real estate than location. So, focus more on the neighbourhood than the interior – you can always change that. Get a city house on transit or a suburban one with arterial access. Check out the neighbours – the population mix, the quality of cars in the driveways, the graffiti, the condition of yards, mean dogs. Find the nearest shopping and learn the school catchment.

– Get the property’s background, how many owners in the last decade, for example, and successive sales prices. Too much flipping is not a positive, nor is a big price jump since the last guy bought 14 months ago. Your agent can dig this up.

– Speaking of which, always have your own agent. No exceptions. Never use the guy the sellers engaged to flog the place, since you need your own advocate to negotiate the best deal and represent your interests, as well as ferret out information on comparables and history.

– Your first visit should be lengthy. Go with a notepad, and a camera. Shoot every room, the panel box, the furnace, the yard, the street. Find out if it has 100 amps or better, gas or oil or heat pump, water or forced air, block or poured foundation. Look for basement damp (don’t forget the flashlight), settling on the driveway or swales on the lot line.

– If it’s a tract house on a subdivision street, check out other properties for external basement cracks, sagging porches, dried-up window caulking or cement crumbles. Better yet, knock on a few doors and ask the guys who bought there if they’d do it again. Amazing what you can learn in an hour.

– Is there a survey? If not, stipulate the owners provide one. If they balk, move on.

– Never, ever, ever buy a house without an inspection as a condition of the offer. If you’re in a bidding war situation, shame on you. Walk. But if you have to compete, then get the inspection done first, so the offer can be clean. Spend some time finding a good inspector with recommendations and creds, not the cheapest one or your cousin who’s a part-time drywaller. Go with the inspector and plan on spending four or five hours crawling around.

– Buy the worst house on the best street, no matter what your spouse says. Stay away from corner lots. In a complex, get the end unit.

– Learn the current property taxes, as well as local tax history. Ask for copies of electric, water and heating bills. Find out the condo or strata fees. Ask about any zoning restrictions, like parking your 60-foot Winnebago in the driveway or having your motorcycle gang over for tea regularly.

– And, price. Seek motivated sellers, which usually means a stale listing or something with a little hair on it. Find out the DOM, and whether or not the place has been relisted. Get pre-approved for a mortgage. Try to have 20% down to avoid costly insurance. Make a big deposit, so you can pay less (it actually works).

When should I choose a fixed-rate loan?

A fixed-rate loan offers a borrower the comfort of knowing exactly what their payments will be, month after month, for the life of the loan. Loan terms can range from 10,15, 20, 25, and up to 37 years. In a low-rate environment, borrowers tend to prefer a fixed-rate product that can protect them from possible interest-rate increases. So you should choose a fixed rate loan when you don’t have room for your payments to fluctuate up and down or when you just want the stability of knowing what your monthly debts will be every month without any suprises.

When should I choose an Adjustable Rate Mortgage or Variable Rate Mortgage?

Generally speaking, an ARM/VRM enables borrowers to secure a loan at an initially lower interest than a fixed-rate loan. This means a borrower has lower monthly payments for a specific period of time when compared to other loan options. An ARM/VRM is not for everyone. There are many factors that you must pay attention to when obtaining a loan like this including knowing when to lock in and always watching interest rates to see when a good time to lock in is available. I recommend this for the more savvy buyers or for someone who better understands mortgages and financing overall.

What should I do if I continually struggle to pay my bills?

The best thing to do is seek professional debt counselling to help you with your credit situation. Our team helps with credit counseling free or can arrange for you to meet with a credit counselor. They can help you develop a solid plan for regaining control of your finances but the first step is to make that call and let us help you assess exactly where you are financially.

What should I do to help financially prepare for a mortgage?

Here are a few tips to assist you when it comes to applying for a loan:

-Use cash instead of credit for your purchases this will keep your GDS and TDS down

-Avoid making any large credit purchases—the added debt could impact your ability to qualify for a loan.

-Contact creditors immediately if you have a problem or concern about your ability to make payments on time.

-Put money aside into savings so you’ll have a financial cushion in case of an emergency.