7 STEPS TO BUYING A HOME

It’s important to understand the home buying process, so here’s a 7-step checklist.

Step 1: Down Payment
The hardest part to buying a home is saving the down payment (a gift from the Bank of Mom & Dad also works).
• For purchases under $500,000 minimum down payment is 5%.
• Buying between $501-999,000 you need 5% on first $500,000-PLUS 10% down payment for anything over $500,000.
• Buying a home over $1 million you need 20% down payment.

For any home purchases with less than 20% down payment, you are also required to purchase Mortgage Default Insurance.

Step 2: Strategize, Define Your Budget and get Pre-Qualified
Unless you can afford to buy a home, cash in hand, you are going to need a mortgage.
You need to get pre-qualified, which should not be confused with the term pre-approved.
The big difference is that no approval is ever given by a lender until they have an opportunity to examine the property that you wish to purchase. The bank may love you… but they also must love the property you want to buy.
Pre-qualifying will focus on gathering documentation to prove the information on your mortgage application including credit, debt load, income/employment, down payment etc.

Mortgage brokers will make sure you get a great mortgage rate. Just as important as rates are the terms of your mortgage which should include:
• prepayment options (10-20%)
• penalties
• portability
We also discuss what type of mortgage fits your current situation
• fixed vs variable?
• life of the mortgage (amortization) 25 or 30 years etc.
• payments – monthly, semi monthly, accelerated bi-weekly

Step 3: Set Your Budget
Keep in mind that just because you’re pre-qualified for a certain amount of mortgage, doesn’t mean you can actually afford that amount. Prepare your own monthly budget to be sure.
Typically, your total home payments (including mortgage, property taxes, strata fees & heat) should not exceed 32-39% of your gross (pre-tax) income.

Step 4: Find the Right Property – Time to Engage a Realtor
Once you have been prequalified for a mortgage, based on your budget… you need to find a realtor.
Selecting the right real estate agent is a very important step in the home buying process. When you work with an agent, you can expect them to help you with many things, including:
· Finding a home
· Scheduling tours of homes
· Researching the market, neighbourhood and home itself
· Making and negotiating your offer to purchase, and counter-offers
· Providing expert advice on home buying
· Handling the offer, gathering documentation and closing paperwork
I recommend interviewing at least three realtors. You will quickly decide who has your best interests in mind. Do you want to deal directly with a realtor who’s going to work with directly when you go home hunting, or do you want to deal with a BIG name realtor, who has buyers & sellers realtors working under them? There are advantages to each – you need to decide what is the best fit for your situation.
Get referrals for realtors from friends and family… OR ask me, I have a group of realtors that I know and trust.

Step 5: Mortgage Approval
Once you have found the property you would like to call home, your mortgage broker will send your mortgage application and property information to the lender who is the best fit for your situation, based on your input.
If the lender likes your financial situation and the property, they will issue a “commitment” letter outlining the terms of the mortgage. The lender will send you a list of documents, so they can verify and validate all the information you told them on the mortgage application.

Step 6: Time for the Solicitor (Lawyer or Notary)
Once the lender has reviewed and approved all your mortgage documentation and the property documentation, your file will be sent to your solicitor (in B.C. you can use a lawyer or notary). They will process all the necessary title changes and set up a time for you to meet, review mortgage documents and sign.

Step 7: Get the Keys
On the closing day the documentation for your home purchase will be filed at the land titles office by your solicitor. Typically, the possession date is 1 or 2 days later, giving time for the money (down payment & mortgage) to get to the home seller. On possession day you set up a time to meet with your realtor to get the keys.
Congratulations you’re done – you now own your home!!

Mortgages are complicated, but they don’t have to be… speak to a Dominion Lending Centres mortgage broker!

Written by Kelly Hudson

Some home improvements provide more of a payback when you sell the house down the road.

Here’s a list of the four home improvements which will provide the biggest payback when you sell.

1.  Adding square footage – while this can be a very expensive project, adding to the size of a house can re-coup between 50-83% of your initial investment. Putting a bonus room on top of your front facing garage increases the square footage without having to enlarge the foundation.
2. A deck addition – adding a deck makes a house feel larger and allows you to enjoy your backyard during the warmer months. Typically you can get between 65-90% of your investment back .
3. Re-modeling the kitchen – one of the most important rooms in the house is the kitchen. A well done project will get you between 50-120% back when you sell the house but remember not to over-do the project. A million dollar kitchen in a $500,000 home won’t be fully appreciated by future buyers.
4. A bathroom addition – the second room buyers check out is the bathroom. While re-modeling a bathroom will recoup a lot of the renovation costs adding a second bathroom to a one bathroom home is huge. Many home owners find that they get between 80-130% of the cost of the project.

If you are thinking about buying a home or renovating your present home, speak to your Dominion Lending Centres mortgage professional about how they can help you to finance any of these projects in your mortgage and pay low interest rates.

Written by David Cooke

A recent article in the Huffington Post addressed the pricing strategy for the Big Six Banks, BMO, CIBC, National Bank, RBC, Scotia and TD and who really sets interest rates.  RBC announcing a rate drop in January and the other banks soon followed.  For consumers the banks are seen as leaders of the pack and everyone waits to see what else they will do.  The reality is the bank rates were higher than the market for some time.

The Huffington article states “Canadians pay attention to the big guys, however, because they’re either too comfortable to make a change or simply not aware they’re being taken for a ride. The banks have a 90-per-cent stranglehold on the Canadian mortgage market and we’ve been slow to start paying attention to the alternative — often cheaper — options out there.”

The drop in rates was a measure to bring bank rates in line with the non-bank lenders who have already been offering lower pricing. The only difference is the banks have high market share of the business and more profit each year so they can afford to spend money on media and other forms of advertising. The media attention helps them to capture more business with a rate drop after a lag time of passing on higher rates to consumers. The informed consumer working with an independent mortgage broker will already know the market and what mortgage product is best for their needs.

However, interest rates are not the only consideration when choosing a mortgage. Each time you make a purchase, renew your mortgage or take equity out to renovate, invest or other reasons, it is always best to consult with your mortgage broker for a review.

One of the big factors is the cost to exit that mortgage before maturity. Life happens. There are costs to breaking the contract early in the event of sale, marital break-up, death or need to consolidate other debts. Bank penalties for early payout are higher than non-bank penalties by a factor of 4 times. By reviewing your needs with your Dominion Lending Centres mortgage broker, we can discuss all of the options available from lenders including bank and non-bank, to ensure you are making an informed decision.

Written by Pauline Tonkin

The following is a summary of the choices available for clients when looking at the four different types of lending groups.

So what exactly is a lender? By simple definition, a mortgage lender provides financing for a real estate purchase hence the word lend.

Which lender is best for you will all depend on who you are as a borrower, what your current situation is and what your situation will look like in the future.

Big Banks

Currently, mortgage brokers have access to TD Canada Trust and Scotiabank. Big banks are especially appealing to first-time home buyers as it offers a sense of comfort knowing your mortgage is being dealt with a nationally recognized financial institution.

TD offers very fast review of documents with the ability for collateral charges, multiple branch locations and competitive privileges such as pre-payment abilities.

Scotiabank is also an advantageous option for homeowners as they have one of the most comprehensive and easy-to-use home equity lines of credit, referred to as their Scotia-Step.

Being able to access a Home Equity Line Of Credit (HELOC) and roll it into your mortgage offers simplicity and efficient methods of borrowing for homeowners. The drawback with both banks is that they are chartered banks. When a client decides to use them for fixed rate mortgages, specifically the 5-year terms, they can potentially be on the hook for penalties north of $10,000 due to breaking their mortgage early. Career changes, moving from different neighbourhoods or cities, upgrading or downgrading home sizes, marital issues – these are all reasons why someone may need to break their mortgage early. Being in a long term fixed rate mortgage with a chartered bank can be unpleasant.

Credit Unions

One of the biggest benefits of credit unions such as Westminster Savings or Coast Capital is that they are not federally regulated, they are provincially regulated. They are not required to adopt federal mortgage rule changes unless they want to. This can be an extreme benefit to those considering rental properties, those with unique income/employment situations or complex transactions that chartered banks do not or cannot work with.

Some of the negative attributes are, however, a reputation for slow review times of documents and mortgage applications, as well as portability. If you work for a company or in an industry that is known for relocation and re-assignment across provinces, you will pay a penalty to a credit union every time. This is something that is likely not to happen when working with charted banks or monoline lenders as they will have more flexibility in allowing you to port your mortgage to a new property in other provinces.

Monoline Lenders

Monoline Lenders are supported by mortgage brokers, and in turn, mortgage brokers are supported by monoline lenders. You cannot access mortgage products that a monoline lender offers without using a broker as they typically do not have physical branches or locations. They are funded by private investors dealing only in mortgage transactions, allowing their products to be more customized based on the investors’ risk tolerance. The benefits? – Extremely low-interest rates, very competitive privileges with pre-payment and portability, fast turnaround-times, and the best part, significantly lower penalties for breaking a mortgage.

With a big bank, a $10,000 penalty for breaking mortgage early may only cost you $3,000 with a monoline lender. This is highly advantageous to someone who wants the security of a long term fixed rate but isn’t 100% certain they will be carrying out their mortgage at that property for the full five years. The disadvantage is the almost blind trust a client must have. These monoline lenders do not have much brand recognition with the public, limited direct access with clients and usually do not have any physical locations to visit. This makes it hard for some people to feel comfortable using them as their mortgage provider.

Private Lenders

The benefit of a private lender is that anyone who has inconsistent income, unique properties, poor credit history or any type of severe risk in their application can get an approval. When a chartered bank says no, a credit union says no and a monoline lender says no, a private lender can say yes. The disadvantage? – your interest rate is going to be significantly higher and the privileges such as prepayment and portability are going to be significantly less. As well, with most lenders, they will pay the mortgage brokers commission themselves. In this case, you the borrower will be paying a fee to the broker.

This information is extremely powerful to you as a homebuyer and even as a current homeowner. As always, please contact a Dominion Lending Centres Mortgage Professional if you wish to discuss any of these options further!

Written by Chris Cabel

If you want to buy a home and don’t have a bucket load of cash – you are going to need a mortgage.

In order to get a mortgage, you are going to need credit…

When you get a mortgage, banks lend you “their” money and secure the loan against the property you are buying.  Therefore they want to know how you’ve handled credit in the past.

• Bad credit = high interest rates
• Really bad credit = NO mortgage

If you have bad credit, you need to improve your credit to get a mortgage/better interest rates.

When you have had credit challenges – you are going to be limited with the number of credit card companies willing to offer you credit.

In order to buy something on credit, most lenders follow the Rule of 2:

• 2 lines of credit (credit card, line of credit, loan etc.)
• Minimum credit limit $2000
• 2+ years (24+ months) history

One of the quickest ways to rebuild your credit is to get 2 credit cards.

Since you’ve had credit blemishes in the past, many credit card companies aren’t interested in giving you more credit.

• If you have had any files that have gone to collections, you MUST pay those off ASAP.

One way to get a credit card for the credit challenged, is to get a secured credit card.

DEFINITION of Secured Credit Card

• A secured credit card is a credit card that requires a security deposit. Secured credit cards are generally for individuals whose credit is damaged or who have no credit history at all.
• A secured credit card works just like a traditional credit card. A secured credit card can help you establish or rebuild your credit.
• The security deposit will depend on your previous credit history and the amount deposited in the account.
• Security deposits for secured credit cards tend to range between 50% and 100%.
• The security deposit cannot be used to pay off the balance on the credit card.
• Typically, secured credit card companies will increase the limit on your card once you have proved you are a good credit risk. This takes time. With continued good credit history over a few years, they will refund your security deposit and issue you a regular credit card.

Five Tips for Wisely Using a Secured Credit Card

1. Use for small purchases you can pay off each month.

The point of using a secured credit card is to show your ability to responsibly charge and then pay off your balance.  To do this, make a few purchases each month and pay your bill in full.  By NOT carrying a balance you avoid paying interest & build your credit.

2. Pay on time, and more than the minimum payment.

To get a healthy credit score – it is essential that you pay on time.  Ideally you want to pay off your balance in full.  If you can’t pay the full amount, pay down as much as you can, so you are reducing your credit utilization (the amount you owe compared to your credit limit).

3. Make Multiple Payments every month.

Making more than one monthly payment can help keep your balance low.  A large balance reduces your overall credit which can negatively affect your credit score.  If you make a large purchase, pay it off quickly to keep your credit utilization low.

4. Set Payment Alerts.

Even the most organized person misses a payment now and then… That’s OK for people with good credit… if you have credit blemishes you’ve lost your “get out of jail free” privilege.  One missed payment is one time too many!  Set up payment reminders 1 week before your payment is due.

5. Enroll in Autopay.

If you are concerned about making your payments on time?  The easiest plan is to enroll in autopay, which allows your credit issuer to automatically deduct the monthly balance form your bank account, so you don’t have to keep track of bills. This assumes you have the money in the account to pay off the credit card.

Please note: Prepaid Credit Cards do NOT help you build credit.  You’ve prepaid the amount on the card, so no one is actually offering you any credit.

If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Written by Kelly Hudson

While many people will go to their bank to obtain a mortgage or line of credit, they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.
A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.
This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs. Do they prefer emails or phone calls?

When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification. I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.
I then list the areas I want to highlight: Income, credit, property, down payment and start with their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As a result, underwriters trust me and have given my clients a second look or asked for an exception. Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file.

I never yell or give my underwriters a blast if they decline a file. I will, however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation. Just as a FYI, a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation. Now who do you think mortgage clients should deal with? A bank or a broker?

Written by David Cooke