5 Reasons why you don’t qualify for a mortgage

General Krishna Menon 14 May

5 REASONS WHY YOU DON’T QUALIFY FOR A MORTGAGE
It’s not just because of finances.

As a mortgage broker I receive calls from people who want to know how to qualify for a mortgage. Most of the time it comes down to finances but there are other reasons as well.
Here are the 5 most common reasons why your home mortgage loan application could be denied:

1. Too Much Debt

When home buyers seek a mortgage, the words “debt-to-income ratio” quickly enters into the vocabulary, and it’s not without reason. Too much debt is a red flag to lenders, signifying you may not be able to handle credit responsibly.
Lenders will analyze how much debt you carry and what percentage of your income it takes to pay your debt. Debt ration is just as important as your credit score and payment history.
Two affordability ratios you need to be aware of:
• Rule #1 – GROSS DEBT SERVICE (GDS) Your monthly housing costs are generally not supposed to exceed 32% of your gross monthly income.
• Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42% of your gross monthly income.

If you don’t have a good debt to income ratio, don’t give up hope. You have options available including lowering your current debt levels and working with your Dominion Lending Centres Mortgage Broker.

2. Poor Credit History

Some people don’t realize if they are late on their credit card/loan/mortgage payments the lender sends that information to the credit bureaus.
• Late/non payments on your credit report will make your score drop like a rock
• Exceeding your credit card limit, applying for more credit cards/loans will lower your score.
• Bankruptcy or Consumer Proposal will significantly impact your score, and stay on your credit report for up to 7 years.
Your credit history is a great way for a lender to tell whether you’re a risky investment or not. Lenders look not only at your minimum credit score, but also at whether you have a significant amount of late payments on your credit report.
Your Mortgage Broker will run your credit bureau to see if there are any challenges you need to be aware of.

3. Insufficient Income and Assets

With the high price of homes in the Vancouver & Toronto area, sometimes people simply don’t earn enough money to afford: mortgage payments, property taxes and strata fees along with their existing debt (credit cards, loans, lines of credit etc.).
You need to prove your previous 2 years’ income on your taxes with your Notice of Assessments (NOA). This is the summary form that the Federal Government sends back to you after you file your taxes, showing how much you filed for income and if you either owe money or received a refund.
If you can’t provide documentation to prove your income, then you will likely get denied for a home mortgage loan.
Some home buyers will need to provide more money for a down payment (perhaps a gift from their family) or try to purchase a home with suite income. In some cases, home buyers will need to add someone else on title of the home, in order to add their income to the mortgage application.

4. Down Payment is Too Small

A lender looks at the down payment as how much of an investment a buyer will be putting in their future home. Therefore, bigger is always better when it comes a down payment to satisfy your home mortgage loan application. Start saving now.
To qualify for a mortgage in Canada the minimum down payment is 5% for the purchase of an owner-occupied home and 20% for a rental property.
In Canada if you have less than 20% down payment, the federal government dictates that the home buyer must purchase CMHC Mortgage Default Insurance which is calculated as a percentage of the loan and is based on the size of your down payment. The more you borrow the higher percentage you will pay in insurance premiums.
For those with less than 20% down payment, the maximum amortization is 25 years, with more than 20% down payment 30-35 years (depending on the lender).

5. Inadequate Employment History

Most lenders will want to see a consistent employment history of 2 years when applying for a mortgage, because they want to know you’re able to hold down a job long enough to pay back the money they’ve loaned you.
To prove your employment, you will need to prove a Job Letter with salary details.

If you’ve been denied a mortgage, chances are it was because of one of the above five reasons. Don’t be deterred, with a little patience and some work on your end, you can put yourself in a position to get approved the next time you apply.

Kelly Hudson
KELLY HUDSON
Dominion Lending Centres – Accredited Mortgage Professional
Kelly is part of DLC Canadian Mortgage Experts based in Richmond, BC.

5 Things to Look For In A Mortgage Agent

General Krishna Menon 9 Jul

A mortgage agent could help you change the way your current plan and rates look. Better rates, better plans, better terms. Everything is better with a mortgage agent. If you are buying a mortgage for the first time or the tenth time, it is still going to be a complex process which requires a lot of your time. So how can you make it easy? By hiring a mortgage agent. Here is a list of what they should have to make them the right fit for you:

Reputation: Reputation of a mortgage broker is like their shadow. It follows them around and acquires clients for them. Hiring a person who has a good reputation can work in your favor. It can guarantee you good rates and a variety of choices. Reputation is built over time and hence this could also show that your selected person has experience.
Knowledge: The second thing your mortgage agent needs to have is knowledge. Knowledge of the market is important as this can help you get the best rates. If they are well aware of the ever-changing trends and the ups and downs of the mortgage market, you can definitely be sure that you can get good rates and better plans with them. It is also crucial that they can predict some changes, so you are prepared.
Response time: If your mortgage agent is well reputed and has vast and current knowledge of the markets, he becomes the perfect choice. But another factor to consider is how much time does he have for your case. If he has the highest qualifications, he will have a calendar full of clients. Make sure they can take time out and give you the importance you deserve.
Wit: The mortgage market has only one constant: change. The mortgage agent you choose must have the capability of quickly adapting themselves to the new rules and changes and hence be able to provide you with the best rates even in different situations. This requires the mortgage agent to have their wits about them and be quick on their feet.
Connections: The mortgage agent of Milton that is seemingly the best choice has one more test to go through connections. They should have accessibility to a variety of lenders in and outside of Milton so that, as mortgage agents, they can get you the best rates. Connectivity ensures more options for you.
Rates: The reason you are choosing to work with a mortgage agent in Milton in the first place is for the rates. It is of utmost importance that the concerned person can get you the best rates. Work with them to help them understand what you are looking for and also be prepared with the best rates in the market, so you have a foundation you can work on. This can help you get the best rates from a lender with ease.

How Is Home Equity A Double Edged Sword

General Krishna Menon 15 Apr

Home equity is the value of your property in which you have the only interest and none else is a part of the home’s that market value. So, you can come to the conclusion that home equity is the market value of your property subtracted from the total value of your property on which a lien exists. The lien so existed by a third party on your property could be for the reason of mortgage, home loan, creditor or any such. Home equity is the value of your property that you shall get in your hands if tomorrow you decide to sell your house property. Home equity has varied uses and you can use it effectively to plan out your finances and optimize them.

In Canada, at any point of time, the minimum value of home equity any homeowner should possess is 20% of the value of the property. Which means it is only up to the size of 80% of the value of your property that you can borrow a loan of. We can bring out from the above that one can gain home equity in his property through two ways

If the market value of the respective property increase
If the homeowner pays back the principal or clears the obligation towards the lien that exists upon the property

How To Utilize Your Home Equity

-Take it out and invest it

If you have home equity higher than 20% of the property value, and you have investment opportunities knocking on your door that shall give you a better rate of return than the net cost of borrowing on your home equity, then you must opt for a mortgage against the home equity available to you.

-Take a loan against it

If your finances are tight and you still want to purchase a house property, then go for a home loan against the equity that you would be so receiving after the house purchase.

-To cover planned expenses or save for planned expenses

If you have planned expenses that are important, or you have pre-planned future expenses, then home equity can be a good source of finance for such expenses.

How beneficial is Home Equity Line of Credit

General Krishna Menon 18 Mar

A home equity line of credit (frequently called HELOC) is a loan in which the bank consents to loan the greatest sum inside a concurred period (called a term), where the security is the borrower’s equity in his/her home (similar to a second mortgage). Since a home regularly is a shopper’s most important resource, numerous homeowners utilize home equity credit lines just for real things, for example, instruction, home upgrades, or doctor’s visit expenses, and pick not to utilize them for everyday costs.

A home equity line of credit varies from a regular home equity loan in that the borrower isn’t propelled the whole total in advance, however, utilizes a credit extension to obtain aggregates that aggregate close to as far as possible, like a credit card. HELOC assets can be acquired amid the “draw period” (normally 5 to 25 years). Reimbursement is of the sum drawn in addition to intrigue. A HELOC may have a base regularly scheduled installment prerequisite (frequently “intrigue just”); in any case, the indebted person may make a reimbursement of any sum insofar as it is more noteworthy than the base installment (yet not as much as the aggregate remarkable). The full central sum is expected toward the finish of the draw time frame, either as a single amount expand installment or as per a loan amortization schedule.

Another vital distinction from a customary home equity loan is that the financing cost on a home equity line of credit is variable. The loan cost is by and large in view of a list, for example, the prime rate. This implies the financing cost can change after some time. Homeowners looking for a HELOC must know that not all banks ascertain the edge a similar way. The edge is the distinction between the prime rate and the loan fee the borrower will really pay.

the home equity line of credit loans turned out to be exceptionally prominent, to some extent since intrigue paid is commonly deductible under government and numerous state salary impose laws.[citation needed] This adequately lessened the cost of getting stores and offered an appealing expense impetus over conventional strategies for acquiring, for example, credit cards. Another explanation behind the prominence of HELOCs is their adaptability, both as far as acquiring and reimbursing on a calendar controlled by the borrower. Moreover, HELOC loans’ ubiquity may likewise originate from their having a superior picture than a “second mortgage,” a term which would more be able to straightforwardly infer a bothersome level of debt. However, inside the loaning business itself, a HELOC is sorted as a second mortgage.

Since the fundamental insurance of a home equity credit extension is the home, inability to reimburse the loan or meet loan prerequisites may bring about abandonment. Therefore, loan specialists, for the most part, require that the borrower keep up a specific level of equity in the home as a state of giving a home equity line.

Mortgages in Canada are for the most part response loans. Nonrecourse obligation or a nonrecourse loan is a secured loan (obligation) that is secured by a vow of guarantee, regularly genuine property, however for which the borrower isn’t by and by at risk. A home equity line of credit might be a plan of action loan for which the borrower is actually at risk. This refinement ends up essential in dispossession since the borrower may remain by and by at risk for a plan of action obligation on an abandoned property.

Home Buying in Canada

General Krishna Menon 9 Feb

Before you begin your search for a new home, you need to plan ahead. There are lots of costs associated with homeownership, including:

Household repairs
Land or property taxes
Household utility bills

Make use of online calculators and other worksheets to help you figure out how these costs add up and what you can and should expect.

Looking for a home in never easy, check out online realtor website, drive around to look for new housing developments or speak to a mortgage broker. All of these real estate professionals are experienced to answer your questions and provide you with the guidance you need and deserve.

How Can a Mortgage Agent Help?

A mortgage agent can be quite helpful during the buying process. They’ll:

Assess your needs
Make arrangements for your home viewing visits
Setup a home inspection
Take care of your negotiations
Assist with your mortgage application

Word-of-mouth goes a long way, ask your banker, family, friends, or relative, they may be able to provide you with a referral. When all else fails to make use of the very accessible world-wide-web

Your “Offer to Purchase”

Once you find the home you’d like to buy and live in, it will now be time to draft your “Offer to Purchase.” If you have a Realtor, then they can help you with it. When your offer is accepted, you’ll then need to seek out a real estate lawyer to help you in transferring the property title. Your mortgage broker can probably refer you to some of their connections if you don’t already have one lined up.

Home Financing

Since you’re buying a home, you probably need a mortgage too. With banks becoming stricter due to changes in mortgage rules, you may have better luck going with a mortgage brokerage firm. They have access to a pool of lenders and mortgage products that can be customized to suit your needs.

Your Down Payment & Mortgage Loan Insurance

When you pay down on a home, this amount is subtracted from the amount of your mortgage. However, if your down payment isn’t at least 20 percent, then you’ll have to get mortgage loan insurance on your new home. This will protect your lender if you cannot afford to pay back your mortgage loan. Mortgage loan insurance makes it possible for you to secure a mortgage with a smaller down payment at a lower interest rate. If you want to learn more about insurance for your mortgage loan, speak with a licensed mortgage broker today.

Credit History & Score

As a Canadian newcomer, you won’t have any credit history. This can prevent you from qualifying for a mortgage. You first need to start building your credit, create some history for lenders to look at, preferably positive. Your broker can advise you on how to get started.

The Home Inspection

Never make an offer with a home inspection or at least a condition within the offer for the home to have a home inspection done by a qualified inspector. It’s not uncommon for inspectors to uncover serious problems with a home, so this will allow you to change your offer or cancel it altogether. If it needs repairs you can consider how much these repairs will cost and reduce your offering price. The seller can accept or decline.

The 8-Step Mortgage Process

General Krishna Menon 18 Jan

Step #1: Start the Mortgage Process

First, you’ll want to determine your new mortgage budget, before you purchase your new home. Are you able to meet your repayment requirements? How much can you afford to pay each month? These are crucial questions to ask before you start, as they’ll be the determining factors of whether or not your lender says yes or no.

Step #2: Start Your Mortgage Application

To get your mortgage application started, it’s highly advisable that you hire an experienced, licensed mortgage professional to help you throughout the entire process. Only they know the ins and outs of the entire process. There are options to begin your application online, and after you submit your application, it’s reviewed and verified by a mortgage agent, who will quickly help you to get your approval. But it’s also highly advisable that you start with a pre-approval first. This will give you a good idea of what you can afford.

Step #3: Choose the Right Mortgage Product

Since there are so many mortgage products out there, it’s extremely important to pick the right one that matches up with your specific needs. Here are a few of the options that are available:

Fixed-rate mortgage. Choose an amortization period between 5 and 25 years, with the same fixed-rate mortgage interest rate and monthly payment amounts for the entire selected term.
Variable-rate mortgage. Get an amortization period between 3 and 5 years, but keep in mind that there is a chance your monthly payment amounts will likely increase, depending on the Bank of Canada and their lending rate.
Combination-rate mortgage. A combination of both fixed-rates and variable-rates. This will enable you manage the risk of your interest rate, taking advantage of long-term and short-term interest rates. It’s also provides you with the stability you might be looking for in regards to having a fixed principal amount, interest rate, and monthly payment amount.
HELOC (Home Equity Line of Credit). Get a HELOC up to 80 percent LTV Canada-wide, grant you more flexibility and convenience, with access to extra cash for whatever you need, when you need it. It’s a great way to finance the purchase of a new home, and you can repay it without any penalties.

Step # 4: Gather your Documents

The type of documentation you may need to gather will all depend on your mortgage product of choice, and whether or not you are self-employed and/or incorporated. Less will be required if you are an employee of another business.

Step # 5: Submit Your Mortgage Application

Once you’ve completed your mortgage application, and gathered the necessary documentation your mortgage broker can go over the mortgage solutions available for your circumstances. Once the product is selected, then can submit your mortgage pre-approval or approval application. Your mortgage broker could receive an update on your application status within the same business day, and then they will notify you.

Step # 6: Mortgage Commitment Review

Once you’ve been notified of your approval, your broker will ask you to come in to discuss your lender’s response and mortgage commitment with you, address your concerns and answers your questions.

Step # 7: Additional Mortgage Documentation

If your lender has requested additional documentation, you must ensure that you send the requested documents within 10 days of your mortgage approval.

Step # 8: Final Loan Documents

Your lender will forward your final loan documents to your lawyer. Your lawyer will help you in reviewing and understand all documents before you sign on the dotted line to ensure all information is accurate and acceptable to you. You need to sign your final loan documents in the presence of a lawyer or notary public. Also, this is the time when you pay your closing costs, so be prepared with a bank draft, as your closing will happen shortly thereafter all documents have been signed.

How New Strict Mortgage Rules Will Affect Uninsured Home Buyers in 2018

General Krishna Menon 15 Dec

A few months ago, the OSFI (Office of the Superintendent of Financial Institutions) introduced some new strict mortgage rules. In less than a month, they’ll be coming into effect. So, if you are a home buyer applying for a new mortgage, with a down payment of 20 percent or more, than it’s not mandatory for you to insure your mortgage. However, what will be mandatory is the requirement to undergo and pass the same stress test that insured mortgage holders must also complete.

To put it simply, what this means, is that even though you may be in a better financial position that insured borrowers, you still have to still have to get qualified for a mortgage loan at the BoC (Bank of Canada) current 4.89% higher rate, or 2 percent points higher than what your mortgage lender is offering you. Are you prepared?

The Canadian Real Estate Market & Other New Rule Changes

Here are a few of the other changes that have already happened in the last year:

The stress test for insured borrowers with a down payment of less than 20 percent
Mortgage insurance restrictions for dwellings that are owner-occupied, mortgages with shorter terms, mortgages under 1 million dollars and individuals with a credit score minimum of 600
Gross Debt Service ratio maximum of 39 percent, and a Total Debt Service ratio maximum of 44%
Increase mortgage default insurance premiums for insured mortgage (up to 4 percent and control measures)
Stress tests for mortgage refinancing and those switching lenders
For BC residents, they must now also disclose their Canadian residency status to ensure they pay taxes on any capital gains, as a result of property sales for a principal residence

All of these changes were brought on because of the growing amount of Canadian household debt, raising in housing sale prices, and the level of risk all of these issues pose to the economy in general.

With the stress test, this will ensure that all borrowers, insured and uninsured would still be able to afford their mortgages, even if rates rise. This has already happened twice this year, and is bound to happen again with economy improvements.

Possible Impacts

In the short term, these new rules will yield a predictable outcome, resulting in:

Increased demand and more home sales in December, as those with pre-approved uninsured mortgages will be hoping to close before the new rules come into effect
More home buyers looking to buy cheaper homes as opposed to pricier ones, since there will be less first-time buyers qualifying for higher mortgage loans when these changes take effect
House price growth rates will slow down in Toronto, and the surrounding area
Increased support of non-regulated lenders (i.e. credit unions)

If you are a home buyer, a seller or a realtor, then it’s likely you won’t be a big fan of these soon-to-come changes. Although it will create a healthier, more stable economy, first-time buyers and new immigrants will face an increased challenge when buying their first home. However, as the housing market and growth rates slow down, new buyers and immigrants that do qualify will definitely benefit.

2018 Forecast: New Mortgage Rules Beginning January 1st

The Most Important Questions to Ask When Looking for The Best Mortgage Rate

General Krishna Menon 16 Oct

You’re probably asking yourself what is the best mortgage rate, right? Although it may seem like a pretty straightforward question, it’s quite complex. It can open the door to a number of other questions, making it almost impossible to respond to due to recent federal rule changes early this year.

Due to these changes, lenders’ costs have increased, along with the lowest mortgage rates. This specifically applies to refinancing amortizations:

Over 25 years
Million-dollar real estate properties
Single-unit rental properties
Mortgages (loan-to-value/LTV between 65.1 and 80 percent)

As a result of these changes, you need to prepare yourself with a list of questions to ask in order to secure the “best” rate in today’s mortgage market. Here are the questions that you need to ask:

What is a mortgage term?
1. Your mortgage term (or contract length) and your fixed or variable rate are the two factors that have the biggest impact on your mortgage rate. An example of this would be a five-year fixed rate, which costs 50 bps (basis points) – more than the cheapest five-year variable rate.

What type of property do I want to buy?
1. You may be looking to purchase a primary residence, a second home or a rental property. If you buy a property that you’re going to be renting out instead of residing in, than you’ll pay up to 25 bps more. The best and cheapest rates are usually found for second homes.

Do I have adequate proof of my income to meet the requirements for a mortgage loan?
1. If you can’t provide enough proof of your income, it’s unlikely that you’ll secure the lowest rate and more likely that you’ll pay at least 150 bps more.

Which province and city is the property located in?
1. No matter what anyone tells you, the province where the property is located matters. For instance, In provinces such as PEI, New Brunswick and Newfoundland the bps is nearly 30 more when compared to Ontario. City of the property also plays a role. If it’s located in a rural area then you could be looking at a minimum of 10 bps over the lowest rate due to the fact that if you don’t pay, it can be harder for your lender to sell if they have to foreclose.

When is the closing date for my home purchase?
1. For a typical 90 – 120 day rate hold you’d be looking at approximately 10 bps more, as opposed to a 30-day hold. So, the longer you want, the more you’ll have to pay.

Do you need prepayment options or can you live without them?
1. If you want to prepay on your mortgage by an additional 5 to 10 percent, lenders will charge 10 bps above the lowest rate. Currently, one of the lowest rates doesn’t allow prepayments.

Can you accept refinancing restrictions?
1. There is always the option to refinance early but your lender may charge to 10 bps more. You could be looking at 15 bps more if you’re cashing out more than $200,000 in equity.

Can you pay a large penalty?
1. Penalty stipulations for more than ¾ of fixed mortgage are far from fair. You’ll incur these if you break your mortgage before the term is up. Find out if your lender offers high or low penalty options. For lower penalty options you’ll be looking at around 10 bps more. This is much less than breaking it a high-penalty lender (i.e. a major financial institution).

This is not an exhaustive question list by any means, but it’s a great place for you to start. Of course they’re always exceptions such as asking for a renewal rate from your current lender. Just speak to your mortgage broker and ask them to send along your competitor rates. Then you won’t have to dive into all of these questions to secure the best mortgage rate.

For more information on mortgages, industry and other trending topics. Send us your feedback. We’d love to hear from you.

3 Ways to Save a Down Payment for a Home or Any Other Big Purchase

General Krishna Menon 3 Oct

What are the best ways to save a down payment for a home? Well, we’ve concocted this list just for you! Not only can you apply them to your new home down payment saving plan, but you can also apply them to any other big money purpose in the foreseeable future. This could include:

A vehicle/RV
A vacation
Extra money to pay off your debts
Retirement savings

This is the starting step to achieving all of your financial goals. Here are ways that you can save, save, save.

Prioritize

If you often eat out, like to travel, keep up with modern technology and expensive brands, saving may not be so easy. You have to set your priorities and decide on what’s most important to you. If you really want to buy a home, then you may have to limit your spending.

Once you putting your home purchase on the top of your priority list, think of other ways you can cut back on spending. This will enable you to keep adding the buck to your savings account. To determine where cutbacks can be made, create a budget or seek financial expertise, maybe from a mortgage broker.

Decrease Your Debt and Interest Payments

It can be quite difficult to save if you’re paying many debts or a lot of interest on your debt. You’ll want to pay off all debts, starting with the smallest high-interest first. With the money you’ll save from your minimum monthly payment on the paid off debt, put this toward the next small, high-interest debt until it’s paid off. Then you’ll have two minimum payment amounts you can use to payoff the third, and so on.

You will not qualify for a mortgage if you have too much consumer debt, so this is an essential step in the process that shouldn’t be overlooked.

Find Cheaper Ways to Do Things

You can still have fun, just find a cheaper way to do it. For example:

Borrow books from the library instead of buying new ones all the time
Rent movies and watch them at home instead of going out to a movie theatre
Stop spending money dining at expensive restaurants, and either find cheaper restaurants, deals or simply dine more at home.
Adopt cheaper hobbies
Cut back on your clothes shopping habits. Look for sales and clearance items or find happiness in your current wardrobe.
Limit your expensive travels and think or travel ideas that an less expensive and closer to home
If you’re out with the family buy less drinks and snacks on the road. Eat at home before you go and when you return. Find fun, family community activities that are inexpensive or free.

With even adopting one or maybe two of these lifestyle changes, you can begin to save for your purchase in no time. The key is to resist the temptation to spend, and consider alternatives that may be cheaper.

At the end of the day, if a home is really want you want you need to be willing to make some sacrifices in order to put your achievement plan into action. Need help getting started? Speak to My Milton Mortgage today.

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