August 19, 2009
Book, First Time Home Buyer, Mortgage Insurance
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Conventional Mortgages
A mortgage is considered conventional if you have a down payment that is greater than 20% of the value of the property.
Why is this important?
It is important because if your mortgage is Conventional you will not have to pay the Mortgage Insurance fee but you may have to pay for other smaller fees like an appraisal.
High Ratio Mortgages
A mortgage is considered High Ratio if the down payment on a property is less than 20% of the value of the property.
Why is this important?
It is important because if your down payment is less than 20% you will be required to get Mortgage Insurance.
To find out more about why we have mortgage insurance check out my earlier post.
http://jasonpeatz.com/2008/05/lenders-mortgage-insurance-part-one/
To find out how the mortgage insurance is calculated check out my earlier post.
http://jasonpeatz.com/2008/06/mortgage-insurance-fees/
May 23, 2009
Book, Case Study, Credit, Employed Persons, First Time Home Buyer, Interest Rates, Mortgage Insurance, News, Pre Approval, Proving income, Small Business, Switch
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Over the past few months I have confirmed something that I have suspected for the last several years – People need to know more about mortgages and the mortgage process.
So in an effort to address a number of the key issues I have began writing this blog.
Through this blog I have attempted to inform people about some of the basics of the mortgage terminology, products and process. The response has been outstanding to say the least. People really appreciate the straight forward information that I have been giving them.
I think that this is worth while and fun so I will continue to blog, but I want to do more. So I am officially announcing that I am in the process of writing a book for people who live in Alberta and who are looking to purchase or refinance a property. The working title of this book is “So you want to get a mortgage in Alberta”.
I am excited about giving Albertan’s clear information about mortgages.
The chapters and topics have largely been decided but feel free to leave a comment below to let me know what you would like to see included in this book.
If you keep reading then I will keep writing.
March 31, 2009
Employed Persons, First Time Home Buyer, Interest Rates, Mortgage Insurance, Pre Approval
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Buying a home can be a stressful experience.
There are many people involved in the process. The process moves fast. And you are the one who is stuck with the payments at the end of it all.
But I have some great news for you. While you are not in control of the process, you are in control of who is representing your interests – your team:
- So choose a great realtor.
- So choose a great real estate lawyer.
- So choose a great mortgage broker.
What a great mortgage broker will do for you is:
- Understand your circumstances
- Give you a clear and defined process for moving forward
- Be non judgmental about your past
- Mitigate most blemishes on your file
- Collect your paperwork before you put an offer to purchase down
- Tell you your payments
- Find the right lender for you
- Get you a great rate
- Explain mortgage insurance
- Answer all of your questions.
Just knowing that you have someone on your side as you go through the process reduces your stress.
Your team may not be able to make the home buying process stress free but we can reduce the stress to a level you can easily handle.
Call me to see if I can be a great fit for you and your team.
February 19, 2009
Employed Persons, First Time Home Buyer, Interest Rates, Mortgage Insurance, Pre Approval
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Over the past couple of months I have had the chance to spend my Saturdays and Sundays at an awesome townhouse condo complex in Calgary.
Brad Logel and his helpful staff will show you around Light House Landing built by Cardel Lifestyles. Feel free to check out their website. http://www.lighthousecondos.ca/public
Many of the people who are walking through the doors are first time home buyers. These people are excited about the idea of getting their own home instead of living with parents or renting. So the first question that I typically hear is “What is the first step to buying a house?”
The answer I always give them is, “Get a pre-approval”.
Getting a pre-approval from a licensed mortgage broker takes about 20 – 30 minutes but will save you an incredible amount of worry and get you on the right track.
What everyone wants to know is how much the lender is willing to lend them but there are many other benefits as well.
- Find out your current financial situation – Many people have a good idea of where their finances are but by giving the application they get to find out with exact certainty.
- Knowing where you are right now lets you know the next steps.
- Find out all about your current credit status
- Figure out the process
- Find out what paperwork you will need to show.
- Find out what your monthly payments will be.
- Get a rate hold.
So the benefits are many and are certainly worth a few minutes of your time. Once you have gone through the process there is no obligation so it really is a no lose proposition.
If you are looking to purchase your first home take the time to get a pre-approval and reap the benefits of the process.
Cheers!
June 2, 2008
Mortgage Insurance, Uncategorized
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People don’t typically understand how the Mortgage Insurance Fee is calculated. This is too bad because it gives great insight into how lenders and insurers think, and can in- turn be helpful in other parts of the deal as well.
The fee is determined by the simple calculation noted below.
Fee = Premium rate X Mortgage Amount
We know what the mortgage amount is but how do they figure out the Premium Rate?
The premium rate is determined by two factors the Loan to Value and if you have decided to have an amortization that is greater than 25 years.
Loan to Value is calculated by the following calculation.
Property value – Down Payment = Loan to Value Ratio
Property value
So in the case of a house that is valued at $200,000 and the buyer has a $20,000 down payment then the loan to value is…
$200,000 – $20,000 = $180,000 = 0.9 = 90%
$200,000 $200,000
With a greater down payment that ratio reduces and with less of a down payment the ratio increases. The lender and insurer look at this ratio as one of the risk determinants. They believe that if the person has a greater down payment that it shows two things.
- First that they will have a greater incentive to make their payments because they have their own money tied to the property.
- Secondly that anyone that can save a large sum of money must be pretty good with their money and paying debts.
So the smaller the down payment the higher the premium and the larger the down payment the smaller the premium.
Extended amortizations are another factor that can affect the insurance premium. It used to be that the maximum amortization that was available was 25 years – so all insurance premiums were based upon the 25 year standard. Recently lenders have given the option of extended amortizations up to 40 years. By spreading the debt over an extra 15 years it reduces the monthly payments but it also increases the risk to the lender/insurer because the principle won’t be paid down as quickly. So they add to the premium for every five years that the amortization is extended beyond 25 years.
The system takes these two factors and comes up with the Premium Rate.
Please contact me.