Mortgage
Articles & Tips
On
this page you will find useful articles and tips to help make the mortgage
process smoother and hassle-free. Keep watching this page as we will be
adding to it on a regular basis.
Financing
a Home
Renewing
a Mortgage
Refinancing
Self-Employed?
Credit Issues? Unique Income Situation
Buyer
and Seller Info
Financing
a Home
Get
A Pre-Approved Mortgage
Be
prepared
Don't
miss out on the home of your dreams because you can't arrange financing
quickly enough. Avoid disappointment. Apply for a pre-approved mortgage
with us now!
What
is it?
A pre-approved
mortgage puts your financing in place before you make an offer on a home.
Usually, the sale of a home is contingent upon the buyer securing the required
financing within an agreed-upon time frame. If you are unable to do so,
the sale could fall through. With a pre-approved mortgage you'll be able
to make a firm offer for the home of your choice. And as most Realtors
will tell you, a firm offer adds an awful lot of leverage to price negotiations!
Who
is eligible?
Any
qualified borrower.
How
it works
Apply
with us now and start enjoying the convenience and negotiating leverage
that Invis provides. All information you supply is completely secure and
will be held in the strictest confidence.
Once
you have received your pre-qualification from us, we'll help you find a
lender with the most competitive rates who will issue your prequalification
certificate. After a brief telephone contact from the mortgage lender discussing
options, and requesting you to send proof of income and employment, you
can be "pre-qualified" — quickly and easily.
After
you purchase your home, simply contact us to provide property and offer
details, along with any other information requested, and your actual mortgage
can be approved within hours.
Buy
With "0" or 5% Down
Don't
have the usual 25% down payment?
No
worries — Increase your leverage with a high ratio mortgage! This consumer-oriented
program makes the dream of home ownership a reality for more Canadians
than ever before. Even with zero down payment.
What
is it?
5%
Down: Two programs are available that let you buy a home for as little
as a 5% down payment. One is administered by Genworth Financial Mortgage
Insurance Co., a private sector insurer, and the other by CMHC, a Federal
Crown Corporation. Read carefully; the small print could create unexpected
hitches! Use us to guide you through the process.
"0"
Down: There are also two programs where you can buy with "0" down:
Free-Down
Payment: Some of the lenders in the Invis network have programs which
are referred to as "Free-Down-Payment" Programs. In these scenarios, the
rate is higher than the discounted rate, and is closer to - if not the
actual - posted rate. The lender essentially provides you with a cashback
of 5% which is the downpayment. The higher rate of interest paid over the
mortgage term compensates for the downpayment covered by the lender.
"0"
Down - A few of our lenders will actually do a "0" down mortgage, however
the catch is that there is an insurance fee that has to be paid to the
lender who self-insures the mortgage. The fee is added to the mortgage
amount.
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of page
Who
is eligible?
For
5% down, anyone who meets the following lending criteria:
A first
time buyer who wishes to purchase a home whose value is above the "ceiling"
established in that area for the First Home Loan Insurance Program.
OR
A non-first
time home buyer who has 10% or more as a down payment
For
0% down, any qualified borrower who meets the underwriting guidelines of
the specific lenders.
How
it works
Both
5% programs allow you to obtain a mortgage of up to 95% of the purchase
price. Depending upon the percentage of down payment to be used, CMHC and
Genworth Financial charge the following one-time insurance premium to you,
the borrower. This premium can be added to the mortgage without affecting
the Loan To Value ratio (LTV).
| Down
Payment = |
%
Financing
(as
% of mortgage amount) |
Insurance
Premium
(calc.
from mortgage amount) |
| 5-9.9% |
90.1%
- 95% |
2.75% |
| 10-14.9% |
85.1%
- - 90% |
2.00% |
| 15
- 19.9% |
80.1%
- 85% |
1.75% |
| 20
- 24.9% |
75.1%
- 80% |
1.00% |
| 25
- 34.9% |
65.0%
- 75% |
0.65% |
| 35%
plus |
Up
to 65% |
(special
circumstances ) |
In
the example given above, the mortgage of $178,000 would be subject to a
2.0% Insurance fee because it is 89% of the purchase price. The fee would
be $3,560, and the total mortgage amount $181,560. To qualify for a CMHC
insured mortgage:
-
your monthly
payments for "shelter costs" (mortgage principal and interest plus taxes
and heating) must be no greater than 32% of your gross pre-tax family income.
-
your monthly
payments for all obligations — shelter costs plus loan, lease and credit
card payments, plus alimony etc. — must not exceed 40% of your gross pre-tax
family income.
-
the payments
on your mortgage must be calculated using the 3 year rate (5 year rate
for the 5% down program).
Example:
1.
If the best 3-year rate you can get is 6.5%, the monthly payment on the
$182,450 mortgage shown above — at a standard 25 year amortization — is
$1,216.13 (see Mortgage Analyzer calculator). If your annual taxes are
$2,000 and annual heating $1,200, then your annual shelter costs would
total $17,794.Assuming no other payments, an income of $55,605 ($17,794/32%)
would qualify you for this mortgage.
2.
If you have monthly car and credit card payments of $475.00, this would
add $5,700 to your annual debt servicing, for a total of $23,565. Dividing
this figure by 40% (see above) gives a required qualifying income of $58,900.
What
else should you know?
In
general, the credit status of an applicant must meet the lending criteria
of the particular mortgage lender. An Invis Mortgage Consultant can help
you meet the required criteria and assist you with the entire mortgage
process. Plus we deal with many lenders and therefore have a greater chance
of matching you with a lender.
Also,
while CMHC will qualify an ex-bankrupt applicant for insurance two years
after discharge with subsequent re-established credit, many lenders' own
rules over-ride this feature, and they will decline the application.
On
the other hand there are a number of lenders who specialize in granting
and administering mortgages to the full extent of the National Housing
Act at competitive interest rates.
In
addition to the slight differences described above in mortgage terms and
qualifying ratios (Total Debt Service ratio cannot exceed 40%) there are
a few important conditions which apply to eligibility under this program:
The
downpayment must be 5% of the purchase price.
The
applicant must be able to prove that their down payment comes from their
own resources — savings, sale of investments, etc., the exception being
a family gift that never has to be repaid, and which is in the borrower's
possession before the application for Mortgage Loan Insurance is sent to
CMHC.
Using
Your RRSP
First
Time Home Buyer? Don't forget about the RRSP Home Buyers' Plan. It can
be all or part of your down payment. The rules have changed in recent years,
so if you think you know them, double check here!
What
is the Home Buyers' Plan?
The
HBP is a federally instituted government program that allows you to withdraw
up to $20,000 from your registered retirement savings plans (RRSPs) to
buy or build a qualifying home. The home can be for yourself or it can
be for a related disabled person if it is more accessible to that person
than his or her current home, or is better suited to that person's needs.
You
do not have to include eligible withdrawals in your income, and your RRSP
issuer will not withhold tax on these amounts. You can withdraw a single
amount or make a series of withdrawals throughout the same year, provided
the total of your withdrawals is not more than $20,000. If you buy the
qualifying home together with your spouse or common-law partner, or other
individuals, each of you can withdraw up to $20,000.
You
have to repay all withdrawals to your RRSPs within a period of no more
than 15 years. Generally, you will have to repay an amount to your RRSPs
each year until you have repaid all the amount you withdrew. If you do
not repay the amount due for a year, it will be included in your income
for that year.
Keep
reading to learn more! And remember, whether you have RRSP savings or no
RRSP savings, the HBP can be applied to you!
Benefits
from using the Home Buyers' Plan.
The
utilization of your RRSP's within the guidelines of the HBP results in
benefits that are quantifiable immediately and extend over the long-term:
-
ncreased
down payment
-
Decreased
principal owing
-
Avoidance
of substantial interest costs over that accrue over long periods
Who
can participate in the HBP? And how many times?
You
can participate in the HBP more than once in your lifetime if:
-
your HBP
balance for your previous participation is fully repaid at the beginning
of the year you want your participation in the HBP to occur; and
-
you met
all the other HBP conditions that apply to your situation.
If you
are disabled you may be able to participate in the Home Buyers' Plan to
buy or build a more accessible home. You may also be able to participate
in the HBP for someone else if:
-
you acquire
a home under the HBP for a related disabled person that is more accessible
to or better suited to the needs of that person; or
-
you withdraw
funds from your RRSP under the HBP and provide those funds to a related
disabled person that is more accessible to or better suited to the needs
of that person.
How
does it work? — No penalties
Under
the "HBP", Revenue Canada permits you to use your RRSP funds towards the
purchase of a new home. The default insurance companies support this program
(when your down payment is less than 25%) in allotting the RRSP funds as
a source of down payment.
a.
No penalty for withdrawal
-
There
are no negative effects from removing funds from the RRSP —in short, individuals
are able to withdraw monies from their fund without penalty:
-
No tax
is owed on the monies withdrawn
-
No interest
is paid on the monies while it is outside of your RRSP
-
There
is no monitoring of the monies while outside your Plan (see Tax Management
below)
b.
Subject to restrictions
-
Regardless
of no penalties for withdrawing funds, there are certain guidelines that
must be followed in order to remain protected under the HBP' umbrella:
-
There
is a maximum of $20,000 that can be withdrawn from one individual's RRSP.
-
There
can be a maximum of two first-time buyers in the purchase of a new home,
and each individual can withdraw up to $20,000 for a total of $40,000.
-
The purchased
home must be owner occupied.
-
The RRSP
must be repaid within 15 years with minimum annual payments of 1/15th of
the withdrawn amount — failure to do so will result in 1/15th of the
-
RRSP initially
withdrawn having to be added back to taxable income in any year the minimum
re-deposit is not made.
-
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page
Summary
of conditions for participating in the HBP.
A number
of conditions have to be met to participate in the HBP. While some conditions
have to be met before you can withdraw funds from your RRSPs, others apply
when or after you receive the funds.
The
following chart lists all the HBP conditions and who has to meet them in
different situations.
Situation
1 -
You
buy or build a qualifying home for yourself.
Situation
2 -
You,
a disabled person, buy or build a qualifying home for yourself.
Situation
3 -
You
buy or build a qualifying home for yourself for a related disabled person.
Situation
4 -
You
help a related disabled person buy or build a qualifying home.
| Situation |
1 |
2 |
3 |
|
4 |
|
| Person
responsible for meeting conditions |
Y |
Y |
Y |
RDP |
Y |
RDP |
| Conditions
to meet before applying to withdraw funds |
|
|
|
|
|
|
| Enter
into agreement to buy or build qualifying home |
Y |
Y |
Y |
N/A |
N/A |
Y |
| Intend
to occupy qualifying home as principal place of residence |
Y |
Y |
N/A |
Y |
N/A |
Y |
| Be
considered a first-time buyer** |
Y |
N/A |
N/A |
- |
N/A |
- |
| HBP
balance on Jan. 1 of year of withdrawal is $0 |
- |
- |
- |
- |
- |
- |
| Conditions
to meet when a withdrawal is made |
|
|
|
|
|
|
| You
or your spouse can't have owned the qualifying home more than 30 days before
withdrawal is made |
Y |
Y |
Y |
N/A |
N/A |
Y |
| Resident
of Canada |
Y |
Y |
Y |
N/A |
N/A |
Y |
| Completion
of Form T1036 |
Y |
Y |
Y |
N/A |
Y |
N/A |
| Receipt
of all withdrawals in same year |
Y |
Y |
Y |
N/A |
Y |
N/A |
| You
cannot withdraw more than $20,000 |
Y |
Y |
Y |
N/A |
Y |
N/A |
| Conditions
to meet after your withdrawals have been made |
|
|
|
|
|
|
| Buy
or build the qualifying home before Oct. 1 of the year after the year of
withdrawal |
Y |
Y |
Y |
N/A |
N/A |
Y |
**
NB.
You
are not considered to be a first time homebuyer if, at any time during
the period beginning January 1 of the fourth year before the year of withdrawal
and ending 31 days before your withdrawal, you or your spouse owned a home
that you occupied as your principal place of residence.
Establishing
an RRSP with borrowed funds for a tax refund.
The
"HBP" permits an individual to establish an RRSP with borrowed funds, and
then use the resultant tax refund for a down payment. In this scenario:
-
The individual
borrows funds that are contributed to an RRSP.
-
After
a 90-day period, the RRSP is collapsed to repay the loan.
-
The client
receives a tax refund that can be applied to the purchase of a home.
These
funds re considered as an acceptable source of down payment provided that:
The
tax refund is in the individual's hands at the time of closing.
The
lender can verify that the borrower has proven liquidable assets equal
to a minimum equity of 5% of the purchase price.
We
will:
-
set up
a meeting to determine each client's approximate refund amount
-
arrange
the RRSP loan
-
provide
a mortgage pre-approval based on the information provided
The client
must supply their most recent Notice of Assessment and their last pay stub
for the previous year showing year-to-date earnings and taxes paid.
Managing
Tax Refunds
The
government does not monitor the funds that are withdrawn from RRSP's for
the purposes of the HBP. Therefore, providing that an individual has qualified
as a buyer and has purchased a qualifying home, they may do whatever they
desire with the money. Furthermore, the income tax refund received may
be used in whatever manner decided, such as:
-
Clearing
the balance on credit cards
-
Reducing,
or retiring, personal loans
-
Making
lump sum payments on a mortgage
-
Purchasing
household necessities — appliances, furniture, accessories etc.
-
Increasing
the down payment to reduce/avoid default insurance premiums
-
Paying
for legal fees and or tax adjustments
The more
debt you are able to pay off, the less in monthly expense obligations you
will have. This will ultimately put you in a much better financial position.
What
else should you know?
The
Home Buyers' Plan enables you to borrow money to top up your RRSP plan
using accumulated RRSP eligibility limits. If your tax assessment notice
indicates you are eligible for $18,000 in contributions in the current
year, and you already have $4,000 in a self-directed plan, you are allowed
to borrow — subject to credit approval — the $16,000 to buy the RRSP required
to bring you up to the $20,000 Home Buyers' Plan limit.
Then
you can claim the eligible deduction against your current year's income
in order to get a large tax rebate. You can use the rebate to pay down
the loan or apply it to the cost of buying the home. Here, of course, the
amount of tax you're paying each year is an important factor. If the $16,000
deduction in this example results in a $5,000 tax rebate, it can be used
as you see fit. If, on the other hand two partners each earning $80,000
per year take their maximum RRSP of $20,000 each in the current year, they
could net a total of $15,000 or more in a tax rebate.
You
are then allowed to withdraw up to the $20,000 maximum from the RRSP 90
days after topping up or creating the plan, subject to the re-deposit requirements
described above.
Be
Careful — If you're planning to borrow the money for the maximum RRSP,
you could end up disqualifying yourself for a mortgage because your monthly
payments will be too high. Your "total debt servicing ratio" — the proportion
of your gross income required to service both the home related costs and
other monthly obligations — may exceed the usually acceptable monthly maximum
of 42%. Another $600 per month could well make the difference in whether
or not you'll qualify for a mortgage. Your Invis Mortgage Consultant is
the best person to advise you on this process.
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Renewing
a Mortgage
The
Dynamics of Switching
What
happens legally when you switch?
Most
people are unaware of the legal effect of switching lenders. When you renew
a mortgage you are essentially starting the process again — discharging
the existing mortgage, taking out a new one, and beginning the whole payment
process, albeit at a lower principal amount. As such, you should treat
this as just as important a process as the first time you arranged the
mortgage. Remember your situation will most likely have changed since then,
and you will require a different product with different terms attached
to suit your situation.
In
most Provinces a switch of the current or lower balance requires only a
simple assignment of interest in the mortgage to be executed by all parties
and registered on title. This assignment also attaches the specific terms
that will have legal effect, and replaces those of the transferring institution.
So even though the old mortgage is still registered on title, all those
old terms and conditions registered by your previous lender will be completely
replaced by those of your new lender under the assignment of interest.
Moreover,
the form that you are holding in your hand from the lender who did your
previous mortgage financing, has a rate that probably is not as competitive
as it could be. Don't let the hassle from the first time you negotiated
dictate you just signing the form and sending it back to the lender — it
will most probably cost you in the form of higher rates.
The
lenders count on 70% of renewers just signing the form and mailing it in
— they are not forcing you — but they are preying on human nature to embrace
convenience. However, let us the work for you — the same convenience, at
a much lower cost to you and a product and terms that will suit your current
situation. The fact is that it is likely another lender will give you what
you want at a rate you want — there are no legal implications to you switching.
Choosing
a Mortgage
Financing
strategy for renewing/switching
As
an experienced homeowner and borrower, you are probably already very familiar
with the mortgage products and services of your current lender. It could
be to your advantage to use another lender. Contact us today to help you
make the switch. As well, here's some important information to keep in
mind:
What
type of mortgage should you choose?
Today,
more than ever, there are numerous mortgage options available.
Don't
be confused
We
can help you find the best product for your needs and negotiate you the
best rate. They do the research for you, enabling you to avoid the frustration
and confusion of having to do it yourself, and explain the available options.
Mortgage
categories
Fixed-rate:
6
month, 1, 2 & 3 year (open, closed and closed-convertible)4, 5, 7 &
10 year closed
Variable-rate:
3,
4 and 5 year (open, closed, closed-convertible and capped)
Split-term:
Combination
of all possible terms (6 month through 10 years)
Self-directed
RRSP:
A
specialty mortgage rate — term optional — within CMHC guidelines. Invest
your own RRSP funds into all or part of your home mortgage.
What
terms & payment options should you choose?
It
all depends on what you want. We will assess your personal situation and
needs to find the best mortgage for you at the best rate.
Short-term
risk & variable
If
rates are low and stable, and/or you are prepared to take a risk, you can
generally pay a lower rate with a short-term mortgage. You simply roll
over your term every 6 months, or float your rate against prime, with the
option of locking in to a longer term at a later date. This is not for
everyone, however, as sudden upward rate movements can have a significant
impact on your payments. You may want to discuss this with us.
Long-term
Any
term 3 years or longer is considered "long term" in today's economy. Because
long-term rates are usually higher than short-term rates, you may not want
to choose this option. On the other hand, by locking in you will avoid
exposure to rate increases. You'll have the comfort of knowing exactly
what you payments will be and you'll be able to manage your budget accordingly.
Split-term
A mortgage
which allows you to minimize — or hedge — your interest rate risk by splitting
your mortgage into 5 parts. For example: A $150,000 mortgage could be split
into five $30,000 segments with terms of 6 months, 1, 2, 3 and 5 year terms
negotiated at today's best rates. The average rate would rise or fall much
more slowly than changes in the market, however, as only the shorter terms
are affected by even the most volatile rate movements over the first few
years. Confused? Talk with us.
Prepayment
options
Many
lenders allow you to make a lump sum payment — usually 10% to 20% of the
original principal balance. In addition, many mortgage products now include
a "double-up and skip-a-payment" feature. This lets you "bank" extra mortgage
payments for a rainy day, at which time you can "skip" them if you need
to. Ask us to advise you on your options today!
Payment
changes
Most
mortgages now allow the amortization to be adjusted by increasing the payment
on closed terms by 10% — 20% per year, once annually.
Payment
frequency
Most
mortgages now come with the option to pay your mortgage at a frequency
that matches your cash flow — weekly, bi-weekly or semi-monthly. The added
benefit of the "accelerated" weekly and bi-weekly payments is that by dividing
a regular monthly payment into two or four respectively, and deducting
it at the new interval, an extra payment a year is made directly against
principal. The surprising effect of this one extra payment a year is to
reduce the amortization of the average mortgage by approximately 5 years,
with cash savings at the end of the mortgage term.
Accelerating
Your Freedom
One
of the highest financial priorities of Canadian homeowners is to pay off
their mortgage as quickly as possible. Most are aware that paying down
extra principal in the early years by whatever means possible can shorten
the life of your mortgage — and dramatically lower the interest you'll
pay over the long haul. The "Pay-Off Tips" below describe some of the most
effective methods of achieving this.
TIP
#1: Mortgage payments made with after tax cash
More
Canadians are becoming aware that, since mortgage interest is not tax-deductible
in Canada you are making mortgage payments of both principal and interest
with money that you've already paid tax on — "after tax dollars". This
makes it even more important to eliminate the drainage of disposable income
as soon as possible!
TIP
#2: Prepayments give great return on investment
If
you pay an average of 6.5% in mortgage interest, for each $1,000 by which
you reduce your mortgage principal, you will save $65 in after tax cash
every year. If you are paying taxes at a marginal rate of 40%, you have
to earn $108.33 each year to pay the interest on every $1,000 of principal
outstanding...a heavy burden, but also a tremendous implied benefit to
reducing this balance. In fact, the example shows that the "return on investment"
for making prepayments on your mortgage is 10.833% before tax and 6.5%
after tax — far better than most fixed return investments (bonds, GIC's
etc.).
TIP
#3: Increase your payment annually to the most you can afford
The
upside is that most lenders will allow you to reduce it again to the previous
level if it turns out to be too great a burden or your circumstances change.
TIP
#4: Utilize your RRSP-driven tax rebate as a mortgage prepayment method
Even
if you can only prepay annually, make sure these funds are set aside for
that purpose. Many Canadians will borrow (at prime) to buy an RRSP to ensure
the maximum rebate. When applied to the mortgage principal, this refund
is a "gift that keeps on giving". Combining the refund with the tax-free
interest earned on the RRSP over the subsequent years will quickly outpace
the short-term interest costs of the RRSP loan.
TIP
#5: Increase the frequency of your payments
Make
accelerated bi-weekly payments to get a "free" principal reduction equivalent
to one full mortgage payment every year — painlessly. Unless you are paid
weekly it makes little sense to make weekly payments. All you'd be doing
is making a smaller payment, and deferring the difference for a week.
TIP
#6: Make use of double-up privileges wherever possible
Tell
yourself that you will "skip-a-payment" whenever necessary... then skip
only when you absolutely must.
TIP
#7: Round your payments up
By
adding even a nominal amount of say, $10 per payment, the amount of interest
you are saving will be unbelievable, and the extra money relatively painless
to part with.
TIP
#8: Pay a lump sum whenever possible
By
decreasing the principal of the mortgage, your payments will not be allocated
as much to interest in the future, thereby accelerating your freedom to
mortgage-free life.
TIP
#9: Keep payments the same when mortgage rates have fallen
If
the payment amount has not been a problem so far, then keep it the same
thus paying down the principal faster.
TIP
#10: Raise payments in line with increased income on an after-tax basis
If
your income increases, don't keep your mortgage payments the same. Although
the disposable income may be fun to spend on unnecessary luxuries in the
short-term, the long-term benefits of being mortgage free faster and saving
those interest payments will far outweigh the short-term curtailing — just
pretend that your income did not increase and maintain our usual lifestyle.
DON'T
WASTE YOUR HARD-EARNED MONEY ON INTEREST!
These
methods have allowed many people to shorten their mortgage life by years
within a very short period and enjoy a greater lifestyle for a longer period.
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to top
Refinancing
Refinancing,
whether it be a relatively straight forward refinance of your existing
mortgage balance, or utilizing your Home Equity for any other purpose desired,
is a strategic financial decision that requires the assistance of a mortgage
expert to get you the best deal from the hundreds of options available.
Whether you want to:
-
lower
your monthly payment
-
consolidate
debt
-
renovate
-
pull cash
out of your home
-
increase
your flexibility with a credit line
-
break
your mortgage
Invis
can
point you in the right direction and connect you with your desired end
result!
Tip:
Did you know that when refinancing, your prepayment options may figure
in to your advantage whether you have exercised them or not? It pays to
inquire from the experts at Invis.
Consolidate
Other Debt
Most
unsecured debt is priced by your bank at a higher rate than your mortgage
in order to compensate them for the higher risk of loss if you default.
For many people it only makes sense to use available home equity to pay
out this debt, as it typically reduces interest costs significantly. If
the total of the existing mortgage and the debt to be refinanced is less
than 75% of the value of your home, and you qualify in terms of income
and credit standing, refinancing your first mortgage should be a breeze.
In
fact, using uss the perfect way to achieve this consolidation. Get us working
for you now.
If
you want to spend a significant amount of money on improving your home,
you may be able to take out a lot more equity than you realize! We can
advise you through this process. Both insurers — Genworth Financial and
CMHC - will insure new mortgages which are "topped up" for this purpose,
if the total of your current mortgage and the new funds exceeds 75% of
the current home value. Not all improvements are eligible, however. Pools
and spas are typical "over-improvements" which may not qualify for a high-ratio
equity take-out. Of course, if the total requirement is less than 75% of
your home's current value, you should have little trouble getting the "top
up" you need — regardless of the degree of luxury you plan to add.
Combining
Mortgages
Where
the combined mortgages result in one "high ratio" mortgage:
If
neither (or none) of the mortgages you're combining was ever insured, but
combining them results in a high-ratio situation, you'll be required to
pay an insurance premium. You need to look closely at the total savings
the combination will give you, in order to determine whether this is worthwhile
financially.
Where
the combined mortgages result in a new "conventional" mortgage:
High
ratio insurance is not required. As long as you qualify with your income
and credit standing, we will help you achieve this quickly and conveniently.
In
both cases there is one critical consideration which causes the failure
of many such fefinances. The new mortgage often requires a fraction of
the cash flow previously needed to service the now consolidated debt. Many
who go through this process not only absorb the cash flow savings into
an improved lifestyle — they either re-incur debt that they paid out, or
incur debt for which they now qualify — or both. It is important to approach
such a consolidation/re-combination of obligations with the clear and focused
goal of applying all savings toward paying down the mortgage. Otherwise,
the new mortgage will be a burden, rather than a solution.
Breaking
a Mortgage and Transferring
Many
closed mortgages have the feature that allows the balance to be paid out
with a penalty after a certain time has elapsed on the mortgage. Check
the "prepayment" clause in your mortgage to determine your own situation,
or better still, call your institution and ask them the cost of paying
out in full.
Refinancing
and Home Equity Considerations
Aside
from considering the different options when refinancing your mortgage or
looking to utilize the equity in your home, you as a homeowner need to
understand how lenders look at your “financial situation” when deciding
whether to grant mortgage financing. By understanding what lenders
look for, you will be better prepared to work with your mortgage consultant
and make the whole process as smooth and efficient as possible.
There
are two main areas to examine:
1.
Understanding credit. What factors about applicants do financial
institutions consider? Lenders look at the 5 C’s of Credit: Capacity,
Capital, Collateral, Character and Credit.
2.
What type of borrower are you? Common borrower profiles are risk
averse, risk tolerant, and those with flexible borrowing requirements.
In this section, we offer some guidance to help you determine what type
of borrower you are. We look at some key questions for prospective
borrowers to ask themselves.
1.
Understanding Credit
Remember,
lenders run a business to make money, not lose it. Those with good/better
credit receive lower rates, and those with spotty credit receive slightly
higher rates – the higher the risk, the higher the return for the financial
institution. As part of the application process, lenders examine
prospective borrowers according to varying requirements, however central
to all decisions are the 5 C’s of credit: Capacity, Capital, Collateral,
Character and Credit.
Capacity
Capacity
to repay the loan is the most critical of the 5 C’s. Is your income
sufficient to support the repayment of the requested loan amount?
This is where lenders look at your Gross and Total Debt Service Ratios.
Do the monthly carrying costs of the loan represent less than or equal
to 32% of your total monthly income? Including other loans outstanding,
do your loan obligations and carrying costs represent less than or equal
to 40% of your total monthly income? Prospective lenders will also
want to know about any other sources of income you may have to repay the
loan, in case your steady income stream is interrupted.
Capital
Capital
is the money you have personally invested in the property, typically equity
in the home or, in the case of home buyers, a down payment. The amount
of your own money put into the home portrays a message of confidence and
trust. The more money you contribute, the less risk for the lender of losing
money if default occurs, and the more likely it is that you will do all
you can to maintain your payment obligations. Capital also reflects
your ability and willingness to save money and accumulate assets, confirming
that you can manage your financial affairs adequately within your income.
The higher your net worth, the more you have as a cushion for repayment
in the event you run into a financial setback.
Collateral
Collateral
is additional security you can provide the lender should you for some reason
not be able to provide repayment. In real estate transactions, collateral
is generally the property, and the lender will want to ensure that the
property for which they are providing mortgage financing is marketable
real estate. An appraisal will determine whether the subject property
has sufficient value to support the requested mortgage amount, taking into
consideration any deficiencies that may affect the ability to resell.
Collateral may also include such things as investments, other real estate,
stocks, etc.
Character
Character
is your reputation and reliability – the general impression you make on
the potential lender. Are you trustworthy enough to repay the loan?
Factors associated with your character can include your educational background,
business experience, length of time at your current employment and current
residence.
Credit
Credit
is the evaluation of your habits in meeting credit obligations. Information
about your credit history is stored at the credit agency, or “credit bureau,"
and indicates how well you have paid your bills over the last six years.
All major credit cards, auto loans, leases, etc. are reported to the credit
bureau. A lender will evaluate your ability to maintain your obligations
and try and determine how well you live within your means. Some individuals
make the mistake of not paying the minimum monthly obligations on loans
and credit cards with the expectation of making a larger payment the following
month. These missed payments appear on their credit report, branding them
as chronic "late-payers" for the next six years. If there are any
problems with your credit bureau, you will need to provide a full and satisfactory
explanation to the lender.
2.
What Type of Borrower Are You?
We
will guide you through the myriad of options that are available and get
you the mortgage product that best suits your individual needs. In
order to get the ball rolling, it is helpful to begin thinking about what
mortgage product options you would feel comfortable with. By having
an understanding of who you are, the mortgage process becomes more efficient
and your satisfaction over the term of your mortgage increases.
Here
are some questions that you should mull over and speak about with any of
your fellow purchasers. Although this is not an exhaustive list,
it provides a good start.
Consideration
#1:
Is
some fluctuation and change in payments acceptable?
Consideration
#2:
Do
I want the comfort of knowing what my payment is every month and of knowing
it will not change for the whole term?
Consideration
#3:
Do
I want the lowest payment possible?
Consideration
#4:
Do
I want to pay down my mortgage as soon as possible?
Consideration
#5:
How
much down payment am I comfortable with, while not putting myself and my
family into financial difficulty?
Consideration
#6:
Are
there any credit issues about which I will need to provide documentation?
There
are numerous other considerations that your mortgage consultant will cover
with you, however this will be on a case by case basis and will depend
on your own personal situation.
Other
issues that may also have to be addressed and require special consideration
are:
5.
Nature of income – self-employed, commission based, or salary, for example.
6.
Status of applicant – new immigrant, foreign investor, etc.
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Self-Employed/Special
Circumstances Considerations
Self-Employed?
Credit Issues? Unique Income Situation?
Financing
Considerations for Non-Traditional Borrowers/Situations
Invis
can get you a mortgage in most situations regardless of your circumstances.
Where traditional financial institutions have given the answer “No”, Invis
routinely says “Yes” and gets you a product that suits your needs at an
extremely competitive rate.
Below
we have provided a list of the most common non-traditional situations,
however, please note, that not all situations are listed and each is looked
at on a case-by-case basis to fit with the appropriate lender – each situation
is unique and looked at accordingly. This is where the expertise and knowledge
of an Invis Mortgage Consultant is essential in taking care of you and
your family.
| Employment
- Self-employed |
-
Recent job start/change
-
Work experience outside Canada |
-
Lack of work history
-
Part-time |
| Income |
-
Income - Non-verifiable
-
Salary + commission
-
Seasonal |
-
Commission
-
Salary + OT and/or bonus |
| Credit |
-
Spotty/bad credit
-
No credit |
-
Good, but a lot of credit
-
Previously bankrupt |
| Property |
-
Rental
-
Construction
-
Cottages/vacation homes
-
Multiplex - Investment |
-
Rural/acreage
-
Mobile homes |
| Status |
-
Non-resident |
-
New immigrant |
| Financial |
-
Zero-down |
-
Purchase plus improvement |
If
you fall into one of the categories above, or if you have a different situation,
Invis’ expert mortgage consultants know where to go and how to structure
the deal. Contact Invis immediately and have peace-of-mind that your mortgage
needs are being well taken care of.
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Buyer
& Seller Info
Programs
Available To First Time Buyers
There
are a number of programs available to first time buyers, that aid their
ability to become homeowners. One such program is the ability to buy a
home with as little as 5% down. In some instances you may qualify to purchase
a home with No Money Down. For more information about this program, contact
Tim. These programs give people an incentive to purchase by creating an
opportunity to own their own home without having to accumulate a large
down payment. There are special terms and conditions attached to many of
these programs. For instance, insurance fees apply if the down payment
is below 25%, and at the highest end equals approximately 3.75% of the
mortgage amount. Please click here for more information.
There
is also the federally instituted Home Buyers' Plan which allow individuals
to take advantage of their RRSP without being penalized. Of course there
are conditions that have to be met by the individual or individuals over
time, and the property has to be a qualifying property, but nonetheless,
this program is a great incentive for individuals to own their own home.
There
are also numerous mortgage products available from lenders that an Invis
Mortgage Consultant can explain to you. You should take into account that
the first year of owning a home is when individuals have the most difficulty
in making payments since they have apportioned large amounts of funds to
the down payment. A lot of lenders also have cash back mortgages which
give the consumer a percentage of the mortgage back in cash for their own
use – closing costs, mortgage payments, furniture, incidentals arising
from moving and so forth.
Buyers
Tip: Winning the Bidding Wars
by
Marcie Geffner
Hot
real estate markets bring out the worst in everyone. Sellers become greedy
and demanding. Buyers become desperate, frustrated and disillusioned. And
real estate agents get caught in the middle as they try to negotiate purchase
contracts that are acceptable to both sides of the transaction.
Along
with frayed nerves, hot markets mean multiple offers will be received for
just about every for-sale home. These bidding wars are great for sellers,
but they add to the "freaked out" factor for buyers. How can you buy the
home of your dreams when several other people are also bidding on it? Here
are five tips:
-
Make your
best offer. Let's face it, the bottom line is the most important consideration
for most sellers. They're naturally looking to sell their home for the
highest possible price. If you want to win a bidding war, offering the
highest price – something attractively above the asking amount – is a sure
way to get the seller's attention. Most sellers who receive multiple offers
only seriously consider those at the top of the price heap.
-
Cover
the seller's costs. Of course, price is only part of the equation when
it comes to the seller's net proceeds from the sale. An offer with a slightly
lower price can triumph if the buyer agrees to incur more of the transaction
costs, like the penalty on discharging the seller's mortgage.
-
Show you're
serious. Offer to make a large money deposit and as large a down payment
as you can. Putting more money on the table up-front shows the seller you're
serious about the transaction and willing to put your money behind your
intentions.
-
Get pre-approved.
Attach a copy of your mortgage pre-approval letter to your purchase offer.
A pre-qualification letter is helpful, but a full approval, subject only
to an appraisal of the property, is even better. Sellers favor buyers who
demonstrate that they're financially able to close the transaction. Agents
advise getting your pre-approval letter from a local mortgage broker or
lender who has a good reputation among the local agents.
-
Don't
add unusual or unnecessary contingencies or requests to your offer. Sellers
know extra contingencies (e.g., the approval of in-laws, the sale of another
residence) can delay the transaction or create a loophole for the buyer
to bow out of the agreement. Special requests (e.g., the right to purchase
appliances or move in early) complicate the offer and distract both sides
from more important elements. On the other hand, don't waive standard inspection
and financing contingencies unless you thoroughly understand the considerable
risks.
An
Easy Guide to Buying Your First Home
A lot
of prospective homebuyers do not know where to start or what to look for
when buying a new home. Here is a basic step by step guide that will help
you on your way:
-
Decide
what you want – depending on your situation and lifestyle different amenities
will reflect the areas which will be of the most benefit. However, this
has to be balanced against the price range in which you can qualify or
feel comfortable being in.
-
Get a
pre-qualification – nothing feels worse than finding the ideal home in
the perfect area, and then not being able to get the financing to close
the deal. A pre-qualification will provide as a reality check prior to
mapping out your life in a home that you cannot afford.
-
Find a
realtor – although not imperative, a realtor knows the process inside out,
knows how to negotiate a deal, and possesses a wealth of information and
contacts that can answer your questions and put you at ease. Tim can recommend
a realtor to you, as well as any other related professional you need –
lawyer, appraiser, insurer etc.
-
Get a
written pre-approval – by calling, filling out an online application, or
speaking to one of our mortgage consultants you can be pre-approved by
any one of our numerous lending partners. After that, there is no more
worry about the ability to complete your home transaction.
-
Go out
& get that house – it's now time to go out and find the home that fits
all of your criteria. Remember, use your realtor or any other information
source as much as possible to ensure that you are getting what you are
bargaining for.
-
Negotiate
an offer on the property – if you are not using a realtor, or you want
to have a better understanding of the negotiation that is taken place,
read "Negotiating Tactics and Strategies Can Make or Break The Home Sale".
-
Finalize
an offer on the property – After a successful negotiation, you now have
your home. To finalize the deal you need to have the home inspected by
a professional home inspector, and you need to get a lawyer. We can provide
you with all these contacts, and can help you take care of the details.
Our association with the Canadian Lawyers Network, a national association
of law firms that specialize in real estate and mortgage transactions,
ensures that you receive top quality service at extremely competitive pricing.
-
Be prepared
– As your closing day comes closer and closer, don't forget all the other
things that need to be done – i.e. fire insurance. At Invis we help you
to ensure that the mortgage transaction goes smoothly and with as little
stress as possible.
Negotiating
Tactics & Strategies Can Make or Break the Home Sale
In
a perfect world, real estate closings would occur over night, sellers would
keep every promise made, and both buyers and sellers would negotiate openly
and fairly. Unfortunately, welcome to the real world where buyers whittle
at the purchase price, closings are postponed, and both sets of players
use negotiating gambits to win advantage.
No
matter which side of the transaction you're on, it's vital to learn to
identify various negotiating techniques and their respective antidotes
to achieve a win/win real estate transaction.
Negotiating
Tactic #1: Nickel-and-diming
Antidotes:
As
the seller, it's not necessarily price but net proceeds that you should
focus on. Some lower-price sales can actually put more money in your pocket
than a higher offer that asks for various terms and conditions that you
are not prepared to deliver. As the buyer, remember that everything is
give and take; and in tough seller markets, you stand to lose the property
to a higher offer if you play the nickel-and-dime game too long. If you
really want the property (and can financially afford it) play the cheap
card in moderation and give the seller a fair offer.
Negotiating
Tactic #2: Good guy/bad buy
This
gambit occurs when a party wants time before making a decision (often on
a counter offer) and/or wants to sway the direction of the sale.
Antidotes:
If
you're working through a real estate agent, he/she will probably try to
present the offer to both spouses simultaneously. If you're working alone
as a for-sale-by-owner, make the appointment to present for a time when
both spouses are present. If only one of the parties shows up, ask if joint
consensus is needed to make the final decision or if s/he is empowered
to speak for both parties. Get signatures on all paperwork as soon as possible.
Negotiating
Strategy #1: Higher authority
One
or both of the players must defer to a third party for answers and/or approval.
The higher authority could be a lender, an appraiser, a relative, and even
a boss.
Antidote:
If
you're making an offer that requires a response, set short time frames
for the other party to respond back unless unreasonable (i.e. out of town
buyer). Communicating to the buyer that you know s/he is capable of making
sound decisions, with or without a third party, will quickly tell you if
a higher authority is needed. If so, consider it a necessary roadblock
with a timeframe that you'll have to deal with.
Negotiating
Strategy #2: The stall
The
stall is a decision not to make a decision.
Antidote:
Ask
the stalling party to isolate their concerns about the offer. While you
need to build the party's desire to accept the offer, don't forget that
you have a powerful negotiating tool – revocation of the offer before acceptance.
While this may seem like a dire measure, there's no harm in communicating
to the party that you understand this option – This may be just the nudge
needed to precipitate a decision.
Negotiating
Strategy #3: Reduce-it-to-the-ridiculous
The
idea is to make something you're negotiating for seem so insignificant,
that the other party would appear a fool to say no!
Antidote:
As
the seller, turn the table and show the ridiculousness of a buyers comments
without insulting them – i.e. equate a sum of money into cost in cents
per day to buy the house.
The
bottom line is that neither buyer nor seller gets to win all of the marbles;
contrarily, no one should lose them all. Identifying negotiating gambits
and more importantly, their antidotes, can help you structure a win/win
transaction where all parties feel as though they've compromised, but won.
Good luck with productive and fair negotiating!
Multiple
Offers: How Can You Compete?
by
Blanche Evans
In
a hot market, there are more buyers than homes for sale. Prices may rise,
and the days a home is on the market may shorten to a week or even less
than a day. Some homes will sell before they are even registered in the
local MLS. That means that sellers are often presented with multiple offers.
How can you position your offer to be the one the seller accepts?
The
best way is to gain an understanding of how multiple offers work and how
they benefit the seller. Multiple offers mean that the seller has his/her
pick of offers, but that doesn't necessarily mean a disadvantage for you
as a buyer. You just have to determine how badly do you want this particular
home. If you want to compete in a multiple offer situation here is what
you will need to know:
Price
& Terms
There
are two things that matter to the seller – price and terms. They want the
highest price possible, and the best terms available. Both of these areas
leave room for negotiation. Just because a seller is entertaining multiple
offers doesn't mean you don't have a chance. You just have to hit the right
note with the seller that the other contracts don't.
Just
to give you an idea of how important terms are to the seller, let's look
at a hypothetical situation. You offer a seller the highest price for his/her
home, but you put in the contract a contingency that you must sell your
home first before you close on the seller's home. It may seem reasonable
to you, but these are terms that the seller has no reason to accept. Why
would s/he wait for you to sell your home first?
The
seller will only accept terms which meet his/her own needs, so keep contingencies
to a minimum. Ask your agent to find out from the seller's agent what terms
will be most favorably viewed by the seller.
If
you can't get there first, get there the best way you know how
In
a multiple offer situation, the seller is not under any obligation to negotiate
with the first buyer who submits an offer. So, if your offer is not the
first offer, don't panic. Because the seller has the liberty of choosing
the best offer to negotiate, your offer stands a chance of being noticed.
As
you already have learned, the seller will accept the offer that best reflects
his/her needs. They not only consider price, they also look at such things
as financing and possession dates. That means room to negotiate for you.
Believe
it or not, the highest price doesn't always buy the home. Sellers have
a number of needs aside from price; they want a quick closing, or a delayed
possession, or they may wish to exclude items in the home, and so on. Any
offer which puts any of these goals at risk will not be accepted.
A buyer
may make the highest offer, but perhaps has not been qualified by a lender.
A seller who accepts an offer from an unqualified buyer is taking a substantial
risk. Should the offer fall through because the buyer fails to qualify,
the home will lose valuable marketing exposure and advantage. In a hot
market, many sellers won't even entertain offers presented by unqualified
buyers. (Hint: Get pre-approved for a loan. Not only will you know exactly
what you can spend, you will demonstrate your seriousness to the seller.)
Your
seller may have a special need that is more important to them than price.
For example, your seller may have a need to sell quickly, but remain in
the home for a period of time until school is out or until a transfer takes
place. Your ability to negotiate on this point may be more important than
coming up with the highest dollar amount. You can offer a short-term lease
post-closing or offer to delay possession to accommodate your seller.
You
can do a number of things to get the seller's attention – offer to pay
full price, or a little above the asking price. Work with your agent to
determine the seller's "hot" buttons, and act accordingly within your budget
and your own needs.
Deadlines
can be deadly
Don't
assume that the seller has to respond to your offer by your deadline. Deadlines
are only important to the seller if s/he plans to either accept your offer
or wants to keep the negotiations going.
By
the same token, if the seller counters your offer and gives you a deadline
for accepting, and another offer comes in that is more attractive than
yours, the seller can withdraw his/her counter offer to you in writing
and accept the other offer.
Don't
falter in the negotiations
Don't
assume that because your seller is negotiating with you that s/he can't
entertain other offers. All it takes is for one party to make a change
that the other party doesn't accept and negotiations are over.
In
fact the seller's agent is under no obligation to let your agent or you
know if there are other contracts on the table or not. The seller may be
waiting to see your best offer before accepting another offer that may
already be on the table. Multiple offers are often used by sellers to improve
upon the asking price or terms. The sellers agent may be instructed by
the seller to ask the buyers to "submit improved offers."
This
is the time another offer can slip in and take your momentum away.
Answer
promptly and with as much generosity as you can muster. Don't nickel-and-dime
the seller with requests for small repairs, or complicate the contract
with contingencies. Just ask for a repair allowance and take care of the
problems yourself.
Hot
markets don't stay hot forever
Hot
markets may be hot for a while, but there may come a time when they will
cool. The home you are so anxious to get now may level off in value very
shortly. Make sure that this is the home you want no matter what the market
conditions say. The home's history may be helpful here. Ask your agent
to provide you with the home's history or a history of comparables in the
area. If a home has been sold several times in the last few years, the
history can tell you why and how much was gained or lost by the sellers
involved.
Also
look at the affordability of the home. Are the extra considerations you
are offering to stay in the contract really worth it? Do they price the
home out of your range? Will you be able to afford the other costs associated
with move-in such as furniture and updates?
Know
when to throw in the towel
There
may come in a time when it is wise to simply give up and move on to another
home. Some sellers, in a multiple offer frenzy, will simply make unreasonable
demands. Some will even demand offers beyond those which can be justified
by comparables or local lender guidelines. Lenders have a ceiling on what
they will lend on homes in a given area and it can be broken down by square
foot, age, history, and other factors. If the comparables don't justify
the price, the lender may refuse to take a chance on being the first to
raise the loan limits on a certain neighborhood or home. You might as well
throw in the towel. Sometimes a lender's refusal can be the kick in the
pants a seller needs, however, and s/he may agree to your price when confronted
by the voice of reality.
The
best way to position yourself as the buyer whose offer is accepted is to
work closely with an agent who can help you step by step from getting pre-qualified
for a loan, to helping you find homes in your pre-approved price range,
to helping you negotiate the home of your dreams.
Buyer
Tips for Negotiating Price
by
Julie Garton-Good
You
want to make every dollar count in the purchase of your home. And one way
to make it happen is to employ sound negotiating tactics that make a difference
between small cents and dynamic dollars.
So
let's cover steps you can take to negotiate a fair price with sellers and
not leave money on the table. It's perceived that price is often a major
concern with sellers. In fact, a common seller's lament is "We have to
get our price because..." (I'm sure you can fill in the blank with statements
you've heard).
But
it's really not the highest price sellers are after – it's the greatest
net proceeds from the sale. "Net" is determined by subtracting the seller's
closing costs and any outstanding loans, liens and other financial encumbrances
from the sales price. A second way home buyers lose out when negotiating
the purchase price is to make a low, often ridiculous first offer. Yes,
I know, sellers sometimes do take less (even though it's done far less
often in the today's strong seller's market.) Put yourself in the seller's
position. How happy would you be in continuing negotiations with a buyer
who had just insulted you and your property?
First
offers set the stage for all other negotiations that follow. In fact, the
seller may become enraged and refuse to make any counter offer back to
you. Or if there is a counter offer, the seller might turn the tables and
insult you by asking for a price higher than what the property's listed
for. (Yes, this does happen in a hot sellers' market!) If you do make a
lesser offer, be prepared to defend why such as repairs to be made, etc.
Sellers will be more willing to listen to a price cut if it's rationale
and fair.
One
last tip – earnest money does talk. When evaluating two offers side-by-side,
the one bearing the heftiest amount of deposit gives the perception that
the buyer is more serious about the property and is perhaps a better financial
risk (even if it isn't true!) This is an important tactic in a seller's
market where many buyers are vying for relatively few properties with multiple
offers to the seller simultaneously.
When
it comes to negotiating the purchase price of your home, neither buyer
nor seller get to win all of the marbles! Decide how important purchase
price is to you and negotiate with that priority in mind.
Can
I Relax Now That My Loan is Approved?
by
Dena Amoruso
When
the question, "Is it safe?" is posed, somehow Dustin Hoffman in the movie
Marathon Man comes to mind. If you recall, Olivier's ill gotten fortune
was indeed not safe after all.
When
new homebuyers begin feeling rather smug and complacent after their loan
is pre-approved, they somehow think they can go on "autopilot" while their
house is being built. The truth is, a solid loan pre-approval with no conditions
is a fairly safe bet that everything will sail smoothly, but it certainly
is no guarantee.
During
the months a new home is being built, varying factors can enter into the
"picture" the loan officer painted of the homebuyer and his ability to
re-pay a mortgage loan to the lender in question. Most of these factors
and responsibilities sit squarely on the shoulders of the homebuyer himself.
Safeguards for buyers (borrowers) to observe after the loan pre-approval
and before the home's completion may include the following:
Changing
jobs:
Buyers
represent themselves as being employed in a particular line of work at
a particular rate of pay, and may offer the lender promises of salary bonuses
or future commissions during the escrow process. This may all look great
to the lender, with verifications received from the homebuyer's employer
of all of the above. The danger here is in making a change after the fact.
Many lenders agree that borrowers must have at least one years' stable
employment history with their employer, and if they must change jobs, they
should stay in the same line of work, have no gaps in employment whatsoever,
and leave only for a higher rate of pay. If bonuses and predicted overtime
are forfeited (they were not guaranteed) due to a change of this kind in
employment history, the lender must be notified that qualifying conditions
may have been altered since the original pre-approval was issued.
For
that reason, many lenders would advise buyers to fight the urge to make
a change in employment until after close, just to be completely safe.
Credit
worthiness:
During
the "feel good" stage, anticipating the completion of their new home, buyers
oftentimes go crazy purchasing high ticket items and racking up major charges
on credit cards. Buying furniture, deciding they want a newer car in the
driveway, and arranging for thousands of dollars in new appliances have
a way of adding up and kicking many homebuyers where they least expect
it, suddenly affecting their credit scores and loan ratios. The rule of
thumb here is: make every payment due on mortgages, cars, etc. and try
not to take on any more or it may preclude you from qualifying when fresh
credit reports may be reviewed prior to closing.
Communication:
Homebuyers,
after a pleasant meeting with their loan officer and a subsequent pre-approval
is issued, tend to believe that no news is good news. In theory this may
be true, but only from the lender's side of the desk. After all, your loan
officer does not have the obligation of calling you weekly to see if any
material changes have taken place in your employment status, your money
reserves or your credit worthiness. He or she will also not check weekly
or monthly with you to see if money has since been removed from some of
the accounts already verified. It is therefore incumbent upon you, the
buyer, to communicate any changes of this sort on a regular basis directly
to the loan officer. Communication is definitely the key here, and the
responsibility rests primarily with the borrower to maintain his approval
status.
The
scary thing for homebuilders is the risk they take in banking on the loan
pre-approvals, using them as a green light to build and personalize homes
based on the premise that nothing basically will change. The hard truth
is, some pre-approvals can fall apart due to buyer neglect and mismanagement
of their assets and credit-worthiness. In these cases, builders must try
to re-market the homes that lose their original buyers to others who may
not be willing to pay for items already ordered and installed, and the
builder loses money.
Homebuyers
may want to think of themselves as posing for a portrait at the time of
pre-approval. Nothing should basically change within that portrait until
after they close on their new home. No flinching, changing outfits, or
background landscape alterations should take place, with the pre-approval
photo "frozen in time." With that posture in mind, they may at last be
able to breathe easier and look forward with confidence to moving day.
No
News from the Seller? – Not Necessarily Good News
by
Julie Garton-Good
What's
the standard time frame for a seller to accept an offer? There's no such
thing as a standard time frame, it depends on how active the market is,
how many other offers (if any) the seller is considering as well as the
seller's individual situation and availability (i.e. one of the spouses
being out of town, etc.)
It
can vary based on the buyer's needs, the seller's needs – even customs
in a local real estate market. Timeframes are initially specified by what
the buyer or his/her agent specifies on the purchase agreement. Once the
seller sees the offer, he has the opportunity to amend the timeframe specified
by the buyer; but to do so constitutes a counter-offer, a brand-new offer
that the buyer doesn't have to accept.