Thursday, April 28, 2011

Mortgage Pre-approval

A mortgage pre-approval is the very first step in buying a home. It is also the most important step; it can save you thousands of dollars if you chose the right broker. This is the point where you find out how much purchasing power you have and what it will actually cost you to buy a home. If you decide you want to do this at a bank make it absolutely certain that you receive a pre-approval certificate. Often banks only do a pre-qualification which can cause you a lot of headaches if they are not thorough enough. (Pre-qualification does not include a credit check.)

With a pre-approval certificate it is almost like buying with cash and can give you more bargaining power because your Realtor may present it during an offer presentation to show your ability to purchase the home. Even more so if it is from a reputable mortgage broker such as Butler Mortgages.

First Time Home Buyers

For first timers you want to be certain your broker is really taking the time to explain the process, if you do this in person you want to make sure you are able to spend at least an hour with your broker. It really only takes 10 minutes to do the application, but your broker should take the time to explain the process in detail and answer all your questions.

Buying and Selling, Upgrading?

It is just as important to get a pre-approval in this case. Imagine if you sold your home and went and put in an offer on another home and your lender has told you there is a problem with your credit. Now what? Basically you are screwed!!! Your credit could be damaged from something you had nothing to do with, you could have a common name and something was accidently put on your bureau that should have gone on someone else’s. Creditors do make mistakes and quite often. We are known to save deals like this if you are currently experiencing this problem.

The Pre-approval Advantage

When you find a home and put in an offer, you usually have 5 business days to secure your financing. That does not give you a lot of time to shop around and decide which type of mortgage you want. If you are pre-approved ahead of time, you have already secured the best financing with the terms you want. Remember one lender may have the best fixed rate but their variable may not be that good. So a broker will find which lender suites your needs and offers the best terms for you. Keep in mind if you have a pre-approval, the 5 business days to secure financing is usually to secure financing against the home, the property is being approved not you. However, if your down payment is less than 20% and you need default insurance. CMHC and Genworth (mortgage default insurers) do not do pre-approvals, only the lenders do. This is another reason you make your offer conditional on financing especially if your credit is fairly new or a little rough.

Finding a Realtor

Once you have your pre-approval it is time to find your Realtor. If you do not have a Realtor we can definitely help you find one or refer one to you. It is a good idea to use one who is very familiar with the area you are planning to move to. Also the type of property you are looking at buying. Some Realtors concentrate on condos and know everything about them; others are more into the single family homes or investment properties. Maybe you want a farm? You may not want to use a condo Realtor for a farm purchase. The knowledge of a Realtor in a specific area and/or type of property can be a huge benefit to you.

Basically a pre-approval by a good broker gives you the edge as well as knowledge. Knowledge gives you confidence and piece of mind. If you would like to recieve a pre-approval certificate or need help finding a Realtor, feel confident in calling us.

You can fill out the application online by clicking here and request it be sent to me by selecting my name at the bottom of the application. Still, it is best to come into one of our offices and discuss it further.

Ron Miller
Butler Mortgages
905-667-0699
ron.miller@butlermortgages.com

Tuesday, April 26, 2011

Rent To Own

A rent-to-own can be beneficial to some people and it can also be a complete disaster for others. If you are considering a RTO you really need to do some research and if you are not aware of what you are supposed to be researching I will give you a few ideas. Also it can be pretty hard to properly qualify for a RTO, although some people holding these properties will tell you no credit needed, income doesn’t matter, down payment not required, whatever; in these situations you are almost guaranteed to lose your money.

What is a Rent To Own?

A RTO is basically a purchase agreement. This means you agree to buy the house at a certain date. It is a contract. If you do not fulfill the requirements of the contract you risk losing all your deposit and your purchase credits.

Who is a RTO for?

The majority of people who should only be considering a RTO are people with money and income, with bad credit that is fixable within two years. Possibly you may have a large insurance settlement coming within two years.

How does a RTO work?

Generally you put a 5% deposit down and agree to buy the home at a pre-determined price at the end of the RTO term. You will pay monthly rent plus an extra amount called purchase credits that will go towards closing costs and your down payment.

Do I qualify for a RTO?

If you are considering a RTO chances are you credit is not the prettiest. You need to see your credit rating and consult with a professional to see if it can be fixed within the RTO term. Also will you qualify for a mortgage at the pre-determined price at the end of the term? Take this into consideration; you make 40k a year, the RTO property is 200k and you agree to buy it in two years at $210k with 5% down, most likely your credit score is under 680. You will not qualify! You will lose your 5%! You will lose all your purchase credits! You will be on the street!!!

Most investors who offer RTO’s are stand up people and really want to help you. It makes them feel good that they are helping someone. They will have you sit down with a mortgage broker before you sign any papers. There are a few who want to see you fail so they can say next and get another sucker into their home and take another 5% and charge them an inflated rent with so called purchase credits. Only 35% of RTO’s actually end up in a purchase. Why? Mostly, the others were not properly qualified.

I am a fan of the RTO program but only if it works for both the purchaser and the investor. We have investors available that you can trust. Don’t be a sucker, find out where you stand and what you’re best options are.

If you are a Realtor with a client who you feel the RTO program will work with, you will be the agent who handles the purchase of the property for the investor.

Ron Miller
Butler Mortgages
905-667-0699
ron.miller@butlermortgages.com

Wednesday, April 20, 2011

Mortgage Life Insurance vs. Term Life Insurance

The purpose of this post is simply to engage awareness regarding life insurance options. By no stretch of the imagination is this expert advice. I do not have a license in the insurance industry and I strongly recommend you speak to an experienced licensed professional.

When you are asked to sign mortgage papers, your mortgage broker or banker will ask you about mortgage life insurance. You then have to decide if you want it or not. The other option is life insurance, which is not connected to the home.

With mortgage life insurance you pay a monthly premium and if you perish the balance of your mortgage is paid off. With term life insurance you have a set policy amount and that does not change for the length of the term. If you have a $200,000 mortgage and you have mortgage life insurance in 10 years you may have a mortgage balance of $160,000, which will be the amount that is paid out. With term life insurance if you took out a $200,000 policy that will be the amount that is paid out. Usually the premium payments are about the same, you just need to decide what is the best value is for you.

One thing I want to make VERY clear. If you purchase mortgage life insurance with the lender that is holding your mortgage and you decide to switch lenders at your renewal for a better rate you will also have to re-apply for insurance as well. Now you are five years older, you may have had a minor or major health issue. Now what? How much will your new premium be? Maybe you can’t even get insurance. You are stuck with whatever rate your lender offers you because you can no longer get insurance. Most of the time if you bought your insurance from your mortgage broker it is transferable to a different lender. As well sometimes a bank will sell you transferable insurance, you just need to check your policy or have a qualified person check into it for you.

There are times when you may want the mortgage life insurance. You have not had the time to speak with an insurance specialist and are signing your mortgage papers. Once you sign that paper with your bank or mortgage broker and/or it is sent in for processing you are covered, even if your closing date is still three months away. After you have spoken with an insurance specialist you can then cancel the mortgage life insurance. You may also want to sign as extra coverage, sometimes there may be little perks with the mortgage life insurance that suit your needs.

There are other options as well; disability insurance and critical illness insurance. To make sure you are properly covered and have all your needs met; it may be a good idea to speak with an insurance specialist instead of buying your insurance from a mortgage broker or banker. We refer out clients to someone who can help them with planning their retirement, children’s education, their investments as well as insurance needs.

Please feel free to comment or email me with any questions or concerns.

Ron Miller
Butler Mortgages
905-667-0699
ron.miller@butlermortgages.com

Monday, April 11, 2011

How to Fix and Maintain Your Credit Score

This post is to help people with damaged credit get it back in shape geared towards purchasing a home. I could write ten pages on this subject but this is just the basics and if your situation is unique feel free to ask for more info or you can email me for privacy.

 Obtain a copy of your credit report, and it is best to subscribe to a monthly credit watch where you can start to see your score increase and keep an eye on it. This can be done by going to Equifax and or Transunion. Keep in mind that most mortgage lenders use Equifax.

 Once you have your credit report, check to make sure there are no errors, as it quite common for this to happen. Report errors to the credit bureau as well to the credit grantor responsible, it may take a month or two for errors to be removed, stay proactive.

 If there are any collections on your report the MUST be paid or resolved, you cannot get an insured mortgage when you have collections. Most of the time collection agencies will settle so you only have to pay a portion of the amount. Just make sure you get a settlement letter and keep proof that you paid it.

 You should have at least two credit lines with a minimum limit of $1,000 each. If you cannot get credit cards then invest in secured credit cards such as the Home Trust Secured Visa Card, I can send you an application. If you are a couple you need two trade lines each. You cannot be a secondary on a card; it probably will not be reported on your bureau. If you are co-applicant on a car loan that should be fine, just make sure you have some credit that is just in your name. The main goal is to have two active trade lines in good standing.

 Avoid credit shopping. If you have too many credit inquiries in a short period of time it will have a slight negative result on your score. Generally you can have your credit checked three times in a year with no problem.

 Always make sure you make your payments on time, never miss a payment. If you are a couple days late don’t panic, just take care of it. Late payments of 30 days or more really hurt your credit score.

 Keep the balance of your credit cards below 40% of the limit. This will really help your score increase, and NEVER go over the limit. Keep a small balance, this helps to show you can handle revolving credit.

 When purchasing a home with 5% down you need at least a 600 credit score and some banks want to see minimum 650. With 5% cash back or commonly referred to as 0% down, you usually need a clean credit report with a 680 credit score.

 It may take a few months or a few years to repair your credit but it is worth it. Rebuilding your credit takes time and discipline. Soon banks will be fighting for your business.

 Once you have been approved for a mortgage, and have a firm agreement to purchase a home, you must maintain your credit score until closing. The bank will do a final check. This means DO NOT purchase items on credit for your home until you get the keys.

 Once you moved into your new home, continue to monitor your score and maintain good credit practice, you will need this when it is time to renew your mortgage.

Please comment or let me know if this post was of any help to you, thanks.

Ron Miller
ron.miller@butlermortgages.com

Thursday, April 7, 2011

Mortgage Renewal Letter

Everyone who has a mortgage receives one of these approximately 3-6 months prior to the end of their mortgage term.

It is probably not a good idea to sign it and send it back.  Rarely will a Bank send you the best available rate.  It is always good to bring your letter to our office or call us so we can get you a discount rate. 

Keep in mind the amount of money you can save.  With even a small discount of .3% on a $200,000 mortgage  for a five year rate amortized for 25 years can save you $35.30 a month or $2,118 over 5 years.  Quite often the discounts are much larger, as banks really are not interested in saving you money.

Keep us in mind when you do receive those letters.  The cost associated with a switch is quite minimal.  There is usually a discharge fee around $200 and we cover this cost for our clients.  If the mortgage is not default insured there may be a $300-400 appraisal, which is worth it if you are going to save thousands.  A lawyer is not required.

If you have a 40 year mortgage you can still switch to a different lender.  The default mortgage insurance you paid is good for the remainder of the amortization and comes with you when you switch lenders.

If you have already mailed in your renewal letter, it will cost you about $1,000 in legal fees to get out of the deal prior to your renewal date.  This may be worth it if you are saving thousands of dollars.
Fixed rates fluctuate quite often.  We can hold a rate up to 4 months.  So if you come to us 4 months prior to your renewal we can keep an eye on the rates and if they dip down a bit even just briefly we can lock that rate for you, if they increase again you will recieve the lower rate.  So instead of just accepting the rate the lender offers you, consider putting your mortgage out there to secure the best rate in a four month period from 90 different lenders.  Which is the best option for you?
If you email your renewal date with your name, address and contact info, we will be in touch 4 months prior. 

Ron Miller
Butler Mortgages
905-667-0699
ron.miller@butlermortgages.com

Monday, April 4, 2011

Insured Mortgage Changes

Attention Realtors:

Along with the well publicized new mortgage rules that took effect on March 18th of this year, there have been some unpublished changes to debt servicing ratios by CMHC that will reduce purchasing power for home buyers who are putting less than 20% down. CMHC is using more discretion when approving insurance. If they feel part of the application is not strong enough they can reduce purchasing power, usually they will ask for a co-signer. One is not always available.
These changes can affect the maximum purchase price for a client by up to 20% in some cases when the lender uses CMHC for the default mortgage insurance.  For example, let’s say you have a client with excellent credit (680+ beacon score), pays credit cards and does not have huge loan payments.  With CMHC the ‘NEW’ maximum GDS ratio that they appear to be allowing is 35% of gross income.  This is a huge change. Previous to the past couple weeks they would normally have allowed the client to use up to a 44% GDS ratio.
The Solution here is taking the file to a lender that will use GENWORTH for the default mortgage insurance.  Genworth is still allowing clients to go up to a 44% GDS ratio which means that they are approving higher purchase prices compared to CMHC for the EXACT SAME CLIENT.

We are starting to see a trend of people coming into our offices not satisfied with what their lending institutions have approved them for.  One young lady who had a 43,500.00/yr income was approved for a $180,000.00 purchase price by her bank.  By simply switching her approval to a lender that insures with Genworth, we sent the pre-approval certificate to her Realtor for a $260,000.00 max purchase price.

This may not be the best idea for all purchasers.  We explain to people the dangers of over buying.  However, there are instances where this is the best solution, maybe they are a first year nurse or apprentice, their income will increase significantly over the next few years.  There are times when one spouse is self employed and does not want his/her name on title.  Other incomes that are not claimed are also quite common.   
Currently the biggest GENWORTH supporter in the market is Scotia Bank and we happen to have a very good relationship with them.  Our Team has “Presidents Club” status with Scotia and this allows us to offer rates that are not available to the public as well as allowing us to direct them as to which insurer we would like them to use for default insurance on a given file.  Please note that some other banks/lenders will NOT send a deal to Genworth even if the Mortgage Agent/Broker asks. 
We feel this is extremely important news for our Real Estate colleagues and wanted to let you know.

If you have any questions regarding mortgages please do not hesitate to ask.

Thanks,
Ron Miller   
Butler Mortgages
4-318 Dundurn St. S.

Butler Mortgages

New Mortgage Office
318 Dundurn St. S. Unit 4
Hamilton ON, L8P 4L6

Butler Mortgages has expanded again.  This time to Hamilton. 

You can gain an edge with your competition by forming a partnership with a leading Mortgage Broker.  Here are a few things we provide.

·         Quick return of phone calls.
·         Immediate response to emails and text.
·         One hour pre-approvals for “A” clients.  “B” clients and complex deals are dealt with immediately and pre-approval times vary.  We have a very high success rate.
·         Pre-approvals for clients are generally for higher purchase prices then their own banks pre-approve them for.
·         Competitive rates, typically the “best on the street”
·         Teaching and educating Realtors to understand the different rules and laws that govern the mortgage industry.
·         Giving customer satisfaction: Clients understand what they are signing, they gain wisdom in the financial world, and we are always here.  Our service doesn’t end when they get in their home.

When using Butler Mortgages, you and your clients receive a unique experience.  With 9 full time staff, and the experience dating back thirty years, your clients are in good hands.  We maintain contact with your clients and if they decide to sell or their children buy, you get a phone call.

Dave Butler has appointed me to operate the Hamilton office.  I understand Realtors do not work 9-5, five days a week, so I make myself available evenings and weekends and fit into the schedule that Realtors need.  Providing mortgage counselling to Sellers and Buyers.

Ron Miller

First Time Home Buyers

Hello:

This post is set up to try and make the first home buying experience fun and exciting.  The more knowledge you have and the more paperwork you have in order will make the whole process a lot more fun and exciting.

The very first step is to speak with your local mortgage broker.  Sure it is fine to use online applications and do the process through email and phone, but when it comes right down to it, you want to make sure you can actually meet with your broker.  Chose a broker who will take the time to explain the process and is available to answer your questions.

Once you have chosen a broker you will take part in the pre-approval process.  It is always best to do this in person because online many items can be missed.  People often forget to disclose many parts of their income such as child tax credits, overtime they work, other incomes from non traditional sources.  It is a good idea to bring in a recent pay stub, this ensures that the amount your pre-approved for is accurate.

We will ask you the source of your down payment.  Acceptable forms are savings, investments, gifted from immediate family member and of course RRSP's up to 25k for each purchaser as long as it has been in the account for at least 90 days.  Also income will be asked and a credit check will be done.

Once you have received your pre-approval certificate it is time to go home shopping.  Time to find your Realtor.  If you do not know of one I can definitely refer a few good ones, it does make a big difference on the Realtor you chose.  When you find the home you want it is time to put in an offer.  The Realtor will instruct you to make the offer conditional on financing and home inspection.  If it is an older home you may wish to also add conditional on insurance, as well if it is a condo you will add a condition for the status certificate which is the financial condition of the condo corporation.

Once you have an accepted offer the realtor will ask you for a deposit.  This will count as part of your down payment.  Then the Realtor will send us your offer and we will submit it to the lender that best suites your needs.  Even though you have been pre-approved we still have to get the property approved by the lender and or the mortgage insurer, usually GENWORTH or CMHC.

Once we receive the approval from the lender you can waive your financing condition and if you meet the other conditions you have the offer will be firm, which means you are well on your way to home ownership.  At this point we will start the document collection process.  Required forms of documents depends on your form of income and the lender that is providing the mortgage.  I will go into more detail about this in a later post but generally it will be two pay stubs and a job letter, three months worth of statements showing where the down payment came from, a void cheque and lawyer info.

Once all documents are collected your file is complete and you then get in contact with your lawyer who will instruct you further.  Usually lawyers will set up a preliminary meeting with you to discuss the costs and process.  Then one or two days prior to closing you will get a certified cheque for down payment and closing costs meet with your lawyer and sign the official documents and wait for the magic moment.  You may also want to do a final walk through the day before closing or the day of to make sure the home and or the appliances are as viewed when you put in your original offer. 

On closing day once all monies have been transferred and the home is officially put in your name, you will receive the keys.

Any questions feel free to email or call me.

Thanks,

Ron Miller
Butler Mortgages
905-667-0699
ron.miller@butlermortgages.com