Credit Problems? A Mortgage Direct2u Mortgage Consultant Can Help

For individuals who have had credit problems, shopping for a mortgage on one’s own has traditionally been a challenge. It used to be that those with “bruised credit” could only obtain a mortgage with a significant down payment along with double digit interest rates and significant fees.

Today’s mortgage market provides many opportunities for borrowers with a poor credit history, and a Mortgage Direct2u Mortgage Consultant can advise you on a wide range of home finance options now available. He or she has access to lenders who offer mortgages to people with credit issues. In addition, some of these lenders will lend with low down payments.

These new mortgage products allow borrowers to get access to funds today and after a period of time when their credit issues are behind them, they can move to the prime lenders with better rates and terms.

A Mortgage Direct2u Mortgage Consultant will look at your individual circumstances and find the best mortgage for you. Access your options today.

Buying a Home - The Main Players

Purchasing a home means relying on a range of professionals to guide you through the process. For first time home buyers in particular, it helps to be acquainted with these specialists and their roles. The following is a list of people you can expect to connect with:

Mortgage Broker – a mortgage expert who introduces buyers to a full range of mortgage products, interest rate options, and strategies to pay off a mortgage more quickly. This professional works to help you sort through an array of financing options to find one that is suited to your needs, and will be your contact person with the lender.

Lender – financial institutions, such as banks, credit unions, trust companies, pension funds, and life insurance companies, which lend money to home buyers either directly or through a mortgage broker. Many lenders who offer mortgage financing through a mortgage broker do not lend directly, so the mortgage broker can provide access to a wider array of products than you could access yourself.

Realtor – a real estate representative who will work with you to find a property in your price range that is suited to your needs – size, style, features, location, accessibility to schools, transportation, shopping and other personal preferences. They are familiar with current real estate values, taxes, utility costs, municipal services and facilities. A real estate professional will facilitate negotiation of a win-win agreement that will satisfy both you and the seller and who arranges the purchase transaction on your behalf.

Appraiser – if your lender requires an appraisal report, this property specialist will determine the property’s market value, based on its condition and the selling price of comparable properties recently sold in the area. The market value enables the lender to determine the loan to value ratio of the mortgage (the amount of the mortgage versus the value of the home).

Property Inspector – examines the home you intend to buy to evaluate its roof and structural stability, electrical work, plumbing, appliances, fireplaces and furnace. This inspection is usually arranged by the buyer, and allows him or her to address any issues with the seller prior to closing, as well as anticipate any repairs that may be required.

Lawyer / Notary Public – your lawyer or notary will review the Agreement of Purchase and Sale, ensure that all closing documents have been completed correctly (including the title search and title insurance), as well as file documents with the provincial land title office. Your lawyer or notary will also ensure your property is clear of all existing mortgages, judgments and builder's liens.

Default Mortgage Insurer – mortgage insurers protect lenders from a borrower defaulting on a mortgage at any time during the amortization period. Home buyers with down payments of less than 20% generally must purchase mortgage insurance from the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial, or AIG/United Guarantee – this insurance is arranged by the lender.

Tips for Boosting Affordability When Buying a Home

For many first-time buyers affordability is a key issue as they look for a home of their own. Fortunately, there are some ways to increase mortgage affordability. Here are some tips to consider as you arrange financing:

1. Look into a longer amortization. Some lenders offer mortgages with amortizations that range up to 40 years, instead of the traditional 25-year amortization. With longer amortizations buyers can access more expensive properties, but they will also have to pay more in interest over the life of the mortgage. Those opting for a longer amortization should plan to make lump sum payments down the road or increase their monthly payments (say, after receiving a salary increase), to lessen the amount of interest they pay throughout the life of their mortgage.
2. Increase the size of your down payment. A common way to come up with more cash for a down payment is to make use of the federal Home Buyers' Plan which allows qualifying purchasers can withdraw up to $20,000 each from their registered retirement savings plans (RRSPs) to buy or build a qualifying home without incurring tax penalties. A mortgage broker has full details on the ins and outs of this program.
3. Many mortgage options are available where the down payment can come from a properly documented gift. These options have recently been expanded to include a borrowed down payment, provided the home buyer qualifies based on the repayment terms of the loan. If a home buyer has a loan with favorable repayment terms this will assist with the affordability calculations.
4. Revisit your current debts. When applying for a mortgage, a lender will look at you total debt service ratio (TDS), or how much or your total income is going towards various types of debts, including car loans, credit cards, and other consumer loans. A mortgage broker can advise on restructuring your current debt (by increasing the amortization and lowering payments on your car loan, for example), to ensure that your TDS ratio is acceptable to prospective lenders.
5. Ask yourself if a rental suite is a good strategy for you. For some homeowners, a rental suite allows them to generate added income which can be put towards the mortgage. Note that many lenders require the suite to be legal before they will count any income it may generate. Most importantly, ask yourself if you would be happy with the responsibilities of being a landlord – you’ll have to rigorously screen tenants, field repair requests, and in some cases track down overdue rent payments.
6. Explore the option of a stated income mortgage. For the self-employed, or salaried workers with a side income, so-called stated income mortgages can offer a way to have non-traditional sources of income counted during the mortgage application process. It has only been recently that salaried individuals have had access to mortgage options at reasonable interest rates that allow borrowers with good credit to use income from other sources such as tips, business from home, and part-time work. There will be some onus to prove that there is a reasonable income attributed to these other sources. These types of mortgage options open the door for even more people to get into home ownership.

With a changing mortgage marketplace, a mortgage broker can offer valuable advice throughout the financing process on ways to boost affordability that suit your situation and personal goals. Finally, even though you may find yourself vying for a home with several other interested buyers, you may want to consider making your offer subject to a home inspection to ensure that the building and its systems are in sound working order. In addition if you are going to arrange a high-ratio insured mortgage (where the down payment is less than 20%) the property must meet the standards of the mortgage insurance company. While a mortgage broker can prepare you to make an offer with confidence knowing that you are pre-approved, be aware that the property you buy still has to be acceptable to the lender and the mortgage insurer.

Why Use A Mortgage Broker?

A great rate is important – but it's all the other terms that add up to a great mortgage. Most people assume the lowest rate means the best mortgage. Banks know it – that's why they display their rates in large numbers everywhere you look. A mortgage broker understands that rate is only one aspect of the mortgage, and that negotiating other terms to your advantage will maximize your savings in the long run. We'll help you get the whole package – a great rate plus the best amortization schedule, payment frequency, flexible repayment terms, transferability, and more so you don't find yourself trapped with huge penalties if your needs change.

Applying for mortgages with several banks can harm your credit rating. Many people are surprised to learn that skipping payments isn't the only way to damage a credit rating – the truth is, you weaken your credit rating with every application you fill out. This is because each bank pulls a credit bureau on you to assess your application and these inquiries are reflected on subsequent bureaus. Many lenders consider multiple inquiries to be a red flag on your credit. A good credit rating is critical in getting the best mortgage rate and terms. A mortgage broker protects your credit by pulling just one credit report and submitting it to lenders on your behalf. This way you can shop for the best possible mortgage amongst many lenders without damaging your credit rating.

A mortgage broker can often negotiate a better deal than you can. Don't take this personally – it's not necessarily a reflection on your negotiating skills. Thanks to industry affiliations and memberships, mortgage brokers have access to discounts that aren't available to the general public. Plus, experience tells us which terms lenders will flex on, so we can shape a mortgage to your exact needs. One note of caution, however: once you start an application personally, a mortgage broker can't step in and negotiate you a better deal with that same bank. That's why it's important to let your mortgage broker handle the process from start to finish.

A pre-approval isn't a commitment from your bank – it's just an indicator of what you can afford should you be approved. A pre-approval is a clever marketing tool on the part of banks. It appears as though the bank has promised to fund your mortgage once you've found a house in your price range. The reality is, it's only a promise to hold a rate for you within a certain time frame – you still need to qualify for the mortgage once the time comes to purchase your home. The last thing you want when you've found your dream home is to lose it because the bank is dragging its heels or offering different terms than you expected. A mortgage broker can help ensure a smooth process from start to finish, so you won't experience any nasty surprises - just the excitement of purchasing your new home.

There's a world of mortgage products the average person doesn't know about. Most people aren't aware that banks offer only a fraction of the mortgage products available. A mortgage broker, however, is an expert on the different products and lenders in the industry and stays abreast of changing market conditions. That knowledge can be invaluable in finding the best mortgage for your needs. Self-employed? New to Canada? Looking to buy a rental property? A mortgage broker can help you qualify for specialized mortgage products like these and many more.

There's more to most variable rate mortgages than meets the eye. Just like mortgages, people typically fall into two categories: Variable Rate or Fixed Rate. “Fixed rate” people feel most comfortable when they know their exact mortgage payment at all times. “Variable rate” people are willing to experience the uncertainty of their payment amount in exchange for the savings that come with it Variable rate terms and conditions can be quite complex, however. A mortgage broker has the expertise to sort through the conditions, explain their implications to you and help you find the right variable rate mortgage for you.

Your mortgage broker works for you, not your lender. When you visit a bank, the representative's job is to recommend their mortgage products to you, regardless of whether they really suit your needs. A mortgage broker, however, has no such mandate – our only job is to ensure you get the best mortgage possible. Think of it this way. You probably wouldn't buy a house without the advice of a real estate agent. Nor would you close the sale without a lawyer. Why? Because they're specialists in the field of home buying – they know the right questions to ask and the proper steps to take to minimize the risk that you'll regret your purchase later. They're looking out for you. And so are we.

Tips For Paying Off Your Mortgage Faster

For most homeowners, paying off their mortgage quickly so that they own their home free and clear – is a top priority. Paying down additional principal during the first years by a variety of means can shorten the mortgage — and dramatically lower the amount of interest you will end up paying over the life of the financing. Here are a few ways to make this happen:

• Consider making lump sum prepayments. Most lenders will allow you to do this on the anniversary date of the mortgage.
• Use your tax refund to make mortgage prepayments. Instead of spending your tax return, invest it in your financial future by putting it toward your mortgage.
• Consider making bi-weekly or weekly mortgage payments. This strategy can add the equivalent of another monthly payment each year, which can add up over the life of the mortgage.
• Round up your payments. Even a few extra dollars each month can amount to significant savings over the long term.
• Increase the amount of your payments when your income rises. The trick here is to keep your lifestyle generally at the same level as before, while concentrating on debt reduction.
• Ensure that your payments are as large as you can afford. Try tracking where your discretionary income goes each month – you may find room to increase your regular mortgage payment, or make a lump sum prepayment.
• For some variable rate mortgages, keep your payments the same size when rates go down. This allows you to put the savings associated with a lower rate towards the goal of principal reduction.

When Bad Things Happen to Good People

10 Tips on Obtaining a Mortgage After Bankruptcy

Many Canadians find themselves bogged down with a bad credit rating for the wrong reason – illness, losing a job, or simply not understanding consumer credit. Sometimes bad financial situations happen to good people and bankruptcy is the only way out. But it’s not all doom and gloom – there are a number of strategies for putting one’s credit back on track and getting approved for a mortgage, even after bankruptcy.

“Going from one financial institution to the next, only to be declined again and again can be very frustrating,” says Gary Siegle, regional business manager in Calgary with Invis, Canada’s largest mortgage brokerage firm. “This is where an experienced mortgage consultant on your side can make all the difference.”

Here are some point to consider:

1. Locating the right lender: Some lenders will not approve a mortgage if a bankruptcy shows up on a credit report, however so-called non-conforming lenders may consider doing so, provided the borrower can demonstrate that he or she has the income to support the payments and is now a good credit risk.
2. Length of time since bankruptcy discharge: Different lenders have different criteria regarding the length of time since a bankruptcy after which they will grant a mortgage – typically two years along with proof of re-established credit. Some lenders may consider applicants with a more recent bankruptcy – a mortgage consultant can advise on the regulations of various lenders. Reasons for bankruptcy: If a bankruptcy was due to factors beyond your control, this is more acceptable to the lender than if the bankruptcy was the result of poor money management and excessive debt, which can affect the terms of an applicant’s mortgage approval. Size of down payment:
3. With a past bankruptcy, most lenders will consider a minimum 15% down payment consisting of one’s own funds, not borrowed or from a gift. On a case by case basis, a down payment of 10% or less may be permitted.
4. The type of property: Some lenders will only lend on houses or row townhouses. Very few will consider apartments or stacked townhouses, which may involve stringent criteria to qualify.
5. Credit report: A detailed history of how consistently one’s financial obligations are met, a credit report provides a picture of financial health based on past behaviour. You can obtain a copy of your credit report free from Equifax (1-800-465-7166) and Trans Union (1-800-663-9980).
6. Credit score: A credit score is an objective summary that translates personal information from a credit report and other sources into a three-digit number representing overall credit-worthiness. A borrower’s credit score may determine the rate of the mortgage — the higher one’s credit score, the better the rate which can be negotiated. Some lenders have minimum credit score requirements for those with a bankruptcy.
7. Rate considerations: Most lenders charge a higher interest rate and even some extra fees to those with a bankruptcy. A lender may grant a better rate if certain lending criteria have been met, such as: two years since bankruptcy discharge, good re-established credit, minimum beacon scores, saved down payment, good debt servicing ratios, and a long term history of job stability.
8. Re-established credit: Re-established credit shows the lender that a prospective borrower has new credit and has managed it well since bankruptcy. Typically, re-established credit should involve a recent record of on-time payments on major bank or credit cards. Those re-building their credit need to be aware that a missed payment at this stage could be mentioned on one’s credit report for the next six years, and could be grounds for some lenders to decline a mortgage application.
9. Don’t do it alone: Explore the benefits offered by mortgage brokers: For those with bad credit and/or bankruptcy, a mortgage consultant can coach you on how to improve your credit score over time. While you work on bettering your score, a mortgage consultant can advise on how to get a mortgage despite bruised credit. Mortgage Direct2u / Invis (www.mortgagedirect2u.ca) mortgage consultants work with prospective homeowners across Canada to provide valuable advice before and during the home buying process. You can speak to an Mortgage Direct2u / Invis mortgage consultant directly by calling 1-866-799-4799.

Pre-Approvals: What You Need to Know

When searching for a home, it makes sense to get a mortgage pre-approval and line up the necessary documents prior to house hunting.

What is a pre-approval? It’s the process of determining how much money a prospective homebuyer will be eligible to borrow prior to a formal application for a mortgage loan, based on information they have provided.

With a pre-approval, you’ll get a good sense of how much you can afford, and you’ll be assured of a particular mortgage rate for a set period of time. With a locked-in rate, there is no risk of interest rate increases while you are house hunting. A mortgage broker, like those at Mortgage Direct2u / Invis, may be able to obtain a longer pre-approval rate hold. Another benefit of a pre-approval is that you'll be in a much better position to negotiate with sellers.

On the other hand, a pre-approval is not a rock-solid guarantee of financing, does not eliminate the need to make a conditional offer, and you still must consider all closing costs.

More and more home buyers in Canada are turning to mortgage brokers for pre-approvals and expert mortgage advice. Contact an Mortgage Direct2u /Invis Mortgage Consultant to get a pre-approval for mortgage financing before you start to look for a home – with a little preparation, you’ll be in a much stronger position to get the home that’s for you.