Mortgage Protection Plan

Mortgage InsuranceInsurance coverage is something that everyone is “pitched” at some point or another in their life. Unfortunately, a lot of us have a negative attitude towards insurance or warranty as it is perceived as being a cash grab. Yes, if you are purchasing a flat screen T.V., that extra 2-year warranty for $100 might be a little excessive. However, when it comes to covering monthly mortgage payments or the outstanding balance of your mortgage upon death or injury, yes, it is important to have.

Every single person is offered life and disability insurance when applying for a new mortgage. As a mortgage broker, it is my obligation to offer you Manulife’s Mortgage Protection Plan. Even if it is something you do not want or do not have a need for- I still require a signature confirming it was offered. Reason being, is when John Smith breaks his foot two years down the road and can’t work to cover his mortgage payments, Manulife needs to confirm that the client passed on the opportunity to have their payments covered.

Now, is Manulife’s mortgage Protection Plan, or, MPP as it is known, the most comprehensive coverage out there? No.

Is MPP better than any coverage you are ever going to receive from a bank directly? Yes.

Manulife’s MPP is a 60-day money back guarantee, with coverage that follows you lender to lender. It will cover disability injuries preventing you from work, and is underwritten before your coverage begins, not when a claim is made.

Most banks do not allow you to take their mortgage insurance to another lender. So, if after 10-years of paying your premiums you decide to leave your bank and go to a credit union, your coverage is no longer in affect and all that money you spent on your monthly premiums is now worth nothing. Scariest part about bank coverage, is the health evaluation is done when a claim is made, not when you sign up. Can you imagine not making a claim for 20-years and then being declined on coverage because you have developed health issues not relevant when you signed up in your 20’s?

If Manulife Mortgage Protection Plan is not for you, there are insurance brokers out there I have access to who can offer alternative solutions. The biggest thing though is to make sure you have SOME coverage, because you won’t know you need it until you do. If you have any questions, contact Ryan Majeau.

*Contributed by Ryan of Dominion Lending Centres

All About Pre-Approvals

Pre-approvals

Are you in the market for a new home? That’s great – but if you’re not already pre-approved from your mortgage broker, be sure to read on.

Pre-approvals are very important for two reasons.

They give you confidence in knowing that a specific amount of financing is available for you.
A pre-approval can put you in a positive negotiating position against other home buyers who aren’t pre-approved.

Not all pre-approvals are the same, though. There are essentially three different kinds.

  • The first occurs when you meet with a mortgage professional and tell them how much you make. They’ll say something along the lines of “Great, you’re pre-approved.” The mortgage professional has only looked at your income. There is no real pre-approval.
  • The second kind is when a mortgage professional asks you how much you make and then pulls your credit bureau. This allows a mortgage professional to lock in your mortgage rate for up to four months. This pre-approval still isn’t a sure thing.
  • The third kind of pre-approval – and the one that we do – is a lot more encompassing. We get all of your papers prepared right off the bat, which allows us to eliminate any unforeseen issues with your approval. Sure, it’s more work up front – but we do this because it’s the right thing to do.

If you’d like to get a pre-approval, contact Ryan Majeau today!

*Contributed by Eitan of Dominion Lending Centres

7 things every self-employed individual should know — Before you apply for a mortgage

Self Employed MortgageSelf-employed individuals are quickly becoming one of the most common clients that we handle. Daily we have successful business owners come into our offices who enjoy the perks of being an entrepreneur. One of these includes fantastic write-offs that allow them to bring their income down to a low tax bracket.

However, this benefit can also mean that the same business owner may have a hard time qualifying for a mortgage all because their income is significantly reduced on paper… how frustrating ‘eh? But these savvy business owners know that there is advanced planning that is involved in being able to qualify for conventional financing. Back in 2015, Statistics Canada reported that there were about 2.7 million people self-employed in Canada… which is an astounding 14% of the total population of Canada! What does that stat mean? Two things:

1. That being self-employed is a more than viable way of earning income in today’s world.
2. That 14% may not fit into the conventional lending “box”

The Conventional Lending Box
To fit into this box, self-employed individuals must meet certain qualifications. For example, they must be able to provide:
>Two most recent years of personal tax returns
>Two most current years Notice of Assessments
>Two most current years financial statements
>Statement of Bank Account Activity
>Investment Income Statement
>Photo ID

Now, the one area that raises a red flag in the above is the tax returns. As we previously mentioned, their income claimed on the return itself might be significantly different than their actual income. Tax deductions related to business often reflect meals, rental spaces, credit card interest etc. The result is that the income the self-employed business owner shows on their tax return is a significantly lower figure than what their actual take home pay is. However, the conventional lending box requires income to justify the mortgage. So how do we pull this off?

The Unconventional Lending Box
Now please keep in mind that “unconventional” in this box just means that as a self-employed individua,l you are going to work with a Mortgage Broker to find an alternative to allow you to show that you can justify the mortgage. There are several well-known and consistently used pieces of advice that we would like to pass along to you:

1. If you are organized and planning (think 2 years out) you can plan to write off fewer expenses in the two years leading up to the property purchase. Yes, you will pay more personal taxes. However, your income will be higher, and it will be easier to qualify you for the mortgage amount you are seeking.
2. Set up your finances through a certified accountant. Many lenders want to see self-employed income submitted through a professional rather than doing it yourself. The truth is that the time you spend doing your own taxes will not be nearly as efficient both financially and time-wise as a professional. Make sure that you discuss with them what your goals are so that they can set up your taxes properly for you!
3. Choose your timing carefully. If you are leaving for an extended holiday within the two years before purchasing, your two-year average income may fluctuate. Plan your vacations and extended trips away with income in mind.
4. Consider using Stated Income. You have the option to state your income. This is based on you being in the same profession for 2+ years before being self-employed. The lender looks at the industry and researches the mean income of someone in that profession and with your experience. You will be required to provide additional documents such as bank statements, showing consistent deposits and other documentation may be asked of you to show your income.
5. Avoid Bankruptcy at all cost…. or if you do declare bankruptcy have all your discharge papers on hand to present to the lender and ensure you have two years of re-established your credit.
6. Mortgage Brokers can state income with lenders at the best discounted rates. But if you do not qualify with A lenders using stated income, then a broker will work with you to utilize a B Lender who are more lenient but may come with higher interest rates and applicable lending and broker fees.
7. Last but not least, if A or B lenders don’t fit, private financing can be looked at as an alternative option in order to get you into the market and offer a short-term solution to improve credit or top up your reporting income. Then you and your broker can refinance into an A or B lender at that time. Just keep in mind that private lending will have a higher rate associated with it , with lender and broker fees added on as well, if you choose to go with this option.

So, to all of our self-employed, hard-working, determined individuals, take heart! You can qualify for the mortgage you want, it just takes a little more planning to get everything in order. Keep in mind to that every lender has different guidelines as to how they view self-employment. Working with Ryan Majeau leading up to your property purchase can help you ensure you get the mortgage you want.

*Contributed by Geoff of Dominion Lending Centres

Are you behind on your CRA Taxes?

Income TaxNothing weighs heavy on one’s shoulders than owning a home and getting behind on your Canada Revenue taxes. Most banks will not be able to help you refinance your home to pay them off as CRA has first dibs on your house and assets. We have clients owing anywhere from $5,000- $300,000 in back taxes and have threatening letters from CRA that would keep anyone up at night.

There are options and strategies we can assist with financing your CRA debts:

1: We use alternative lenders that charge higher fees/rates for a 1-year term

2: Short term 2nd mortgage to pay off your CRA debts and then refinance back with your lender.

Find out how we can help with a no-obligation application. Let a Ryan Majeau help get you back on track!

Some CRA notes on penalties for filing late:

The first time you file late you’ll pay:

  • a late-filing penalty –5% of the amount of tax you owe, plus 1% for every month that your return is late, for up to 12 months. That adds up to a maximum of 17% of the tax you owe.
  • interest – at the prescribed interest rate on the amount you owe, beginning on May 1. You’ll also be charged interest on any late-filing penalties. Interest is compounded daily, not monthly or annually. The prescribed interest rate can change every 3 months.
  • If you miss the deadline again, the late-filing penalties are doubled. For example, if the CRA charged you late-filing penalties for any of the 3 previous years, you would pay a penalty of up to 50% made up of 10% of the taxes you owe, plus 2% of the taxes you owe for each full month that your return is late, to a maximum of 20 months.

*Contributed by Kiki of Dominion Lending Centres

What To Look For In A Mortgage Broker

Best Mortgage BrokerAre you on the hunt for a mortgage broker? Or you need a mortgage broker but just don’t know it yet! Either way, this article is for you!

First up, where do you find a Mortgage Broker?

The easiest (and one of the best places to start) is with referrals from a realtor, family, friends, or co-workers. But this is just the start! There are thousands of independent mortgage brokers out there for you to partner with. So, what should you look for? That’s part 2.

What to look for in a Mortgage Broker?

When you are looking for a mortgage broker AND looking to buy a home that can lead to a very stressful time in your life. To make it easy, here are a few things that a broker should be doing for you:

1. Rates Don’t Tell the Whole Story. Getting a mortgage, refinancing your home or consolidating debts should not be seen as a quick and effortless task. There are brokers that make borrowing all about the rate; and that is just not the case. Be wary about Brokers who guarantee you a mortgage without asking for any documentation. Over the years personal lending has changed and continues to. With stricter than ever documentation requirements, lending policies and tougher credit checks, it’s important to be working with a broker who is educated. It is also important to work with a broker who asks to see the FULL picture. That means a little more work on your end to get all the proper documentation, but it can make a world of difference when it comes to selecting the right mortgage product for you.

2. Experience Really Matters. Maybe you have bad credit—or a larger car loan—or maybe you are self-employed. Whatever your unique situation is, you want to work with a broker who knows how to help you navigate through it to get you the best mortgage product. Yes, someone who is new to the world of home and personal finance may be smart, fully versed in policy and products and able to offer a great rate, but that doesn’t necessarily mean they are prepared to handle your situation. Try to find someone who has worked on a wide variety of deals in a wide variety of situations. A few questions to ask:
Have they had to work through someone’s debt in order to make a deal viable?
Do they know what to do when a deal doesn’t go as planned? Are they experienced in handling your unique situation? (ex. Working with someone who is self-employed, etc.)

3. Think Big Picture. There are many different pieces to your personal finance picture. From credit cards to student loans, they all fit together to create a picture that is unique to you and only you. With that in mind, a good mortgage broker should take time to find out about your goals—both long term and short term. They should ask you if:

  • This is a starter home or long-term home?
  • Are you planning on expanding your family (ex. having kids soon)?
  • Do you have kids who are heading off to university and may have tuition payments to make soon?
  • Do you have a parent who may need long-term care in the future?

All of these things can directly impact your finances, and in turn give direction to the mortgage broker on what you will need in a mortgage product. Asking these questions and others gives the mortgage broker a broad financial picture which gives them the perspective and knowledge to make an informed recommendation.

4. More than a Number. It’s no secret—mortgage brokers often will have sales/volume goals that they want to meet to take advantage of incentives. However, a good broker will set you up with the right product, rate, term and conditions that work for YOU…not them. They should be able to see past their own targets and goals and work with you to not only reach your goals but surpass them.

A satisfied, happy customer can turn into a life-long customer (and they bring friends and family with them too!) This is what a good mortgage broker should be able to see and portray to you. You should never feel rushed or like you are “just another number”. If your mortgage broker is focused on only one product or simply puts you into a 5-year rate without asking about your goals, it may be time to ask some questions.. You should never be given a mortgage without full explanation, details, and understanding of why that product is right for you.

5. Save Time—don’t shop. Over the past few years the idea that you can “shop” your mortgage around to different brokers to get a better rate has been made quite popular. The reality? 95% of the time every broker will end up offering the same rate for the same product. That’s not to say that there are not special rate offers out there—but they do typically have a specific requirement such as quick closings, shorter amortizations, higher down payments, limited repayment options, and smaller lenders. These are sometimes used, but for the vast majority of the population do not fit their needs. A general rule of thumb is that if a mortgage offer appears too good to be true, then it is.

A Final Note

With all that said, we find that borrowers who:

  • take the time to seek out an experienced broker
  • give an in-depth picture of their financial goals to their broker
  • look for a broker who has a background in handling cases similar to theirs
  • keep themselves financially in a good situation through debt repayment and budgeting
  • avoid “shopping” for rates

Are the ones who breeze through the mortgage process. It’s important to look at your mortgage as not just a singular deal all on its own; it’s a part of a much larger picture. A mortgage should allow for you to live your life comfortably but realistically—making sure that other needs and obligations (vacations, healthcare, emergency savings, education, etc) are all considered and balanced with their mortgage/loan requirements. Finding a broker who understands what BALANCE looks like is the key to making the home-buying process as simple as possible. If you have any questions, contact Ryan Majeau today!

*Contributed by Geoff of Dominion Lending Centres

5 Tips on how to get out of debt and into your own home

debtTo get out of debt, you need a plan and you need to execute that plan. That’s why I’ve created this simple, five-step, get-out-of-debt checklist that can help you leave that financial burden behind you.

As you work on your plan, you’ll need to make all necessary adjustments to your budget along the way so you don’t overspend and slide back into debt. Plus, if you don’t have an emergency fund, consider setting some money aside in savings beforehand.

Keep this checklist someplace where you’ll see it often (like your refrigerator door ), and make it your goal to check a task off the list each day (or each week), depending on how quickly you want to become debt-free.

 

1. Make a list

Take all your bills and put them in a chart that includes: the name of creditor, interest rate, balance, minimum monthly payment. Figure out how long it will take you to pay the balance down to zero. Many credit card statements now feature this.

 

2. Lower your rates

This is easier than you think. Call up each of your credit card companies starting with the ones with the highest interest rates and ASK them to lower your interest rate. You can tell them that other credit cards are offering lower rates and you wanted to let them keep your business. They won’t give you an answer on the phone but you should receive a letter with a new lower rate within a couple of weeks. Another possible solution is a balance transfer. Often a credit card company will allow you to transfer your balance from another card to theirs and they charge you 0% for 6 months. They assume that you will see zero being added and will spend more. Show them that you are disciplined and keep paying the balance down as if it was still at 19%. Consider getting a debt consolidation loan. If you have a home with equity you can often get a very good rate and clear up all your debts. Often you can get these loans at considerably less than your credit cards. Once again, keep your monthly payments up as if you were still paying a credit card of 19% interest and your balance will go down quickly.
Next contact your car loan company. If you have been paying your loan on time they may lower your rates. Now you are ready to tackle the utility companies. In Alberta the gas/electric companies really want your business. You can often get a better rate just by threatening to switch. This also works with cellphone companies. They often have better plans than the one you are on but will only offer it when you say you are going to leave.

 

3. Get your Number

What is the amount you need to pay off all your debts? Now that you have a number in mind you can set a goal. Can you pay this off in six months? 12 months? two years?
Get your credit score number. How much does it have to improve before you can qualify to buy a house? Check with your Dominion Lending Centres mortgage broker for help getting this.

 

4. Make a plan

What will be your target debt? Is it the credit card balance with the highest interest rate? The lowest balance? Set a short term goal to pay one card off in a manageable amount of time. One down and three to go sounds better than tackling all the debt at once. Pay each debt off one by one. Does your community library offer debt counselling financing planning courses? Consider signing up for one.

 

5. Monitor your progress

How quickly are the debts coming down? Is your credit score going up? It should if the debts are coming down.
Do you have to adjust your plan to make your deadlines? Don’t be discouraged. Large companies make plans and set budgets and then adjust them quarterly based on how the previous three months performance was.
Stick with your plan and if you show some self-discipline you can achieve your goals in time. Finally, let Ryan help you with your goal. He will be happy to help you along the way.

*Contributed by David of Dominion Lending Centres

Four-Month Home Sales Gain Ends in September

Canada Home Affordability

Canadian home sales declined for the first time in five months led downward by weakening activity in Vancouver and Toronto. Statistics released today by The Canadian Real Estate Association (CREA) show national home sales fell by 0.4% from August to September. While housing activity has picked up since the first half of this year, it remains well below the boom levels of 2014 to early-2017.

The September slowdown was reported in just over half of all local markets, led by Vancouver Island and Edmonton, along with several markets in Ontario’s Greater Golden Horseshoe (GGH) Region. The Real Estate Board of Greater Vancouver reported a 17.3% decrease in sales in Metro Vancouver from August to September, while y/y sales dropped a whopping 43.5%. Last month’s sales in Metro Vancouver were 36.1% below the 10-year September sales average. Newly listed homes have been rising providing more choice for potential buyers. But with tepid demand, home prices in Metro Vancouver are under downward pressure.

Monthly sales gains were most evident in the Fraser Valley and Montreal. The Montreal housing market has been strong for well over a year.

On a year-over-year basis, national sales declined 8.9% last month. About 70% of local markets were down on a y/y basis, let primarily by declines in major urban centres in British Columbia, along with Calgary, Edmonton and Winnipeg.

As interest rates are rising, the new mortgage stress tests are becoming more restrictive.

Home Sales

 

New Listings

The number of newly listed homes rose 3% between August and September, led by the Lower Mainland and the Greater Toronto Area (GTA). More than half of all local markets posted a monthly increase in new listings, which was offset by declines of more than 3% in more than half of the remaining local markets.

With sales down slightly and new listings up, the national sales-to-new listings ratio eased to 54.4% in September compared to 56.2% in July and August. The long-term average for this measure of market balance is 53.4%.

Based on a comparison of the sales-to-new listings ratio with the long-term average, about three-quarters of all local markets were in balanced market territory in September 2018.

There were 5.3 months of inventory on a national basis at the end of August 2018. While this is in line with the measure’s long-term average nationally, the number of months of inventory is well above its long-term average in all Prairie provinces and in Newfoundland & Labrador.

 

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) was up 2.3% y/y in September 2018. The increase was in line with those posted in each of the two previous months. Benchmark home prices fell by 0.26% from August to September (see Table below). Downward price pressure in much of B.C. continues.

Following a well-established pattern, condo apartment units posted the most substantial y/y price gains in September (+8.4%), followed by townhouse/row units (+4.5%). Meanwhile, one-story and two-story single-family home prices were little changed on a y/y basis in September (-0.3% and -0.3% respectively).

Trends continue to vary widely among the 17 housing markets tracked by the MLS® HPI. In British Columbia, home price gains are diminishing on a y/y basis in the Lower Mainland (Greater Vancouver (GVA): +2.2%; Fraser Valley: +8.5%). Meanwhile, prices in Victoria were up 8.7% y/y in September. Elsewhere on Vancouver Island, they climbed 13.2%.

Among the housing markets in the Greater Golden Horseshoe region that are tracked by the index, home prices were up from year-ago levels in Guelph (+8%), Hamilton-Burlington (+6.1%), the Niagara Region (+5.9%), the GTA (+2%), and Oakville-Milton (+1.4%). By contrast, home prices slipped lower in Barrie and District (-3.6%).

Across the Prairies, benchmark home prices remained below year-ago levels in Calgary (-2.6%), Edmonton (-2.6%), Regina (-4.7%) and Saskatoon (-1.9%).

Home prices rose by 6.9% y/y in Ottawa (led by a 7.9% increase in two-story single-family home prices), by 6.1% in Greater Montreal (driven by a 7% increase in townhouse/row unit prices) and by 3.4% in Greater Moncton (led by a 10.3% increase in apartment unit prices).

 

Bottom Line

Housing markets continue to adjust to regulatory and government tightening as well as to higher mortgage rates. The speculative frenzy has cooled, and multiple bidding situations are no longer commonplace in Toronto and surrounding areas. The housing markets in the GGH appear to have bottomed, and supply constraints may well stem the decline in home prices in coming months. The slowdown in housing markets in the Lower Mainland of B.C. accelerated last month as the sector continues to reverberate from provincial actions to dampen activity, as well as the broader regulatory changes and higher interest rates.

The cost of owning a home in Canada is at its highest level in 28 years and likely to get only more expensive as interest rates continue to rise (see chart below). Home ownership costs, including a mortgage, property taxes and utilities, took up 54% of a typical household’s pre-tax income in the second quarter, according to the Royal Bank, compared to 43% three years ago.

While rising prices was the culprit behind the loss of affordability between 2015 and 2017, mortgage-rate increases accounted for the entire rise in carrying costs over the past year. The country’s central bank has hiked interest rates four times since July 2017 which has filtered through to higher borrowing costs for homeowners.

I expect the Bank of Canada to proceed with further rate hikes taking the overnight rate up from 1.5% to 2.25% in the first half of 2019. This will keep upward pressure on mortgage rates and increase the cost of home ownership even more across Canada.

Higher housing costs cannot be blamed on speculators. Recent analysis by Bloomberg using Teranet Inc.’s land and housing registry shows that condo flipping was never pervasive in the Vancouver and Toronto housing booms and that condo-flipping has diminished since late 2016. This suggests that stricter measures to curb speculators will not make those cities more affordable.

Household Income Needed

 

Rents Rising in GTA

Recent data have also shown that Toronto’s rental market continues to tighten as demand for housing in the city soars from millennials, down-sizing baby boomers and an influx of new tech and financial-services workers. High home prices, rising mortgage rates and new government regulations have priced out many buyers, pushing them into the rental market.

Rents in the GTA have risen sharply over the past two years as vacancy rates decline. More upward momentum in purpose-built rental construction is required to meet overall demand.
The total inventory of purpose-built rentals coming under construction rose to 11,172 units, according to Urbanation, a real estate consulting firm that specializes in the condo market. That’s the highest level in more than 30 years and 56% more than last year. Just 60 such buildings have been completed since 2005.

At the same time, construction starts of rental buildings slowed to 826 units in the third quarter, dropping from a recent high of 2,635 starts in the second quarter. The Ontario government’s broadening of rent controls to all newly constructed units is a deterrent to the volume of new supply necessary to meet the city’s rental housing demand.

Home Price Index

 

*Contributed by Dr. Sherry Cooper of Dominion Lending Centres

What should come first, the house or the car?

House or Car

 

So you just got a shiny new car, and now you want a shiny new house to go with it. Will that new car payment affect your mortgage pre- approval? The short answer… absolutely it will.

 

Recently, I have encountered many people looking to pre-approve for a home purchase that do not qualify. While it may be in part because of the mortgage “Stress Test” rules, a good portion is due to large debt obligations such as car loans. I have witnessed applicants that have brand new car loans/leases with huge payments and not one gave thought as to whether it would affect their ability to qualify for a mortgage.
Unless you have already done your home work with your mortgage broker by getting a mortgage pre-approval that factors the new car payment into it and your budget, you may be in for disappointment.

However, it doesn’t necessarily have to be one or the other. Here are some tips to get set for mortgage approval success.

Continue reading “What should come first, the house or the car?”

Cash Back and Decorating Allowances on New Build or Pre-sale Purchases

Cash Back

As the market shifts, developers will increase their incentives to buyers with cash back and decorating allowances on new build or pre-sale purchases. It is very important to review those options with your real estate agent representative and vital to consult with your Dominion Lending Centres mortgage broker. Although these offers may seem attractive, they can impact your financing and could cost you thousands of dollars.

Before you write a contract on a new build or pre-sale, ensure you have set up your team including a real estate agent and mortgage broker. Always consult with them to ensure you have sound advice. Do not rely solely on the developer’s sales representative.

 

What happens when you sign a contract on a pre-sale?

When you visit the sales centre for the pre-sale and decide to write a contract you have a rescission period where you can back out of the purchase. The contract you sign is drafted by the sales centre and once you remove any conditions, you are locked into the purchase. Therefore it is essential you have your real estate agent with you at the time of signing or at a minimum, they review the contract. It is in your best interest you fully understand the terms, the disclosure statement, what you are buying, schedule to build, GST, deposit schedule and any incentives.

Once you remove any conditions, the deposit is paid to the developer and a schedule set for all other deposits till the building is complete. Those total deposits are typically 20% of the purchase price. That is money you will not receive back if for any reason you are unable to proceed with the purchase. Some contracts allow assignment to another buyer, but those must be approved by the developer and may come with restrictions. Your realtor can guide you on these matters.

 

How Will Cash Back or Decorating Allowances Impact Your Purchase?

When the market slows, developers will use incentives such as cash back and decorating allowances on new build or pre-sale purchases as a strategy to increase sales. Regardless if this is a cash back or a rebate for decorating, it will have an impact on the purchase price for the lender on the financing. This is a common misconception among buyers and even realtors who do not understand the process from a financing perspective.

For example: A purchase price plus GST is $800,000. The developer is offering a $20,000 decorating allowance. The lender will automatically deduct the $20,000 from the purchase price. Your new purchase price will be $780,000 for financing purposes. This does not change the actual purchase price. You still have to pay the developer $800,000 for the home. The lender will lend on the $780,000 only. Therefore you must pay in cash at the time of funding the $20,000 difference.

The developer has sold you the idea you are receiving decorating upgrades of $20,000. You are receiving the value of that allowance BUT make no mistake you are paying for it.

If the incentive is a cash back amount in the above example, you will receive the cash back from the developer at the time of completion. However, the lender will still only offer financing on the lower value minus the cash back amount.

To learn more, check out my website or contact Ryan today!

*Contributed by Pauline of Dominion Lending Centres

The Pros and Cons of Co-Signing for a Mortgage

Mortgage co-signing

If you keep up on the news you know that qualifying for a mortgage is getting tougher and tougher. Someone who would have sailed through the application process 10 years ago could find themselves declined for a mortgage today.
Often I find applicants can afford the monthly payments but they can’t prove that their income is stable. If they waited another 6 months to a year, they could but they would miss out on a great opportunity to buy a home now. Buyers who have recently switched jobs, receive overtime or get a portion of their income from tips are the people who need co-signers to make the deal work. A strong co-signer can be more persuasive to a lender than offering to put more money down.

I also have found that people with “thin” credit are being asked for co-signers. These are applicants who have one credit card but no car loans or other credit facilities showing on their credit bureau report. Often they are recent university graduates who recently started work.
Rick Bossom, an accredited mortgage professional with Bayfield Mortgage Professionals in Courtenay, British Columbia, says that it’s an alternative to lenders just turning the deal down in cases where the borrowers are just on the edge of qualifying.

“They’re close but they just need a little bit more and that’s why the co-signing thing would come up. It’s not like they’re really, really bad, they’re just not quite there.”

What does a co-signer do? Their job is to continue payments in the event that the main applicant(s) default on the mortgage. In essence, they are saying that if you skip out on the payments, they will take up the slack.
As a result, lenders want to have co-signers on the application just as if they would be living in the home and making the mortgage payments. If they have mortgage payments of their own, they have to show that they can financially afford to pay both mortgages and any other monthly obligations that they may have like car payments.

One thing that surprises primary applicants as well as their co-signers is the amount of information required from the co-signers. They will have to provide an employment letter, recent pay stub, a credit bureau report at a minimum. If they are self-employed company income documents will also be required.
It’s always best for the primary applicant to have a conversation with the co-signer or co-signers to inform them of this in advance. The co-signers should also be aware that this will tie up their credit for the term of the mortgage. If they are planning on buying a vacation home or making a large purchase, they may be declined based on their financial obligation to your mortgage.

Contributed by David of Dominion Lending Centres

As always, you can contact Ryan Majeau to discuss what a co-signer might do for you!