February 3, 2010
Book, Employed Persons, First Time Home Buyer, Pre Approval
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When people think about a getting their mortgage they usually think it is all about them. If they can qualify to make the payments why would a bank ever say no to any property?
The reality is that the borrowers are only one part of the equation – the property is the other part.
Lenders want to make sure that if unforeseen circumstances arise and they are forced to start foreclosure proceedings that they can sell the property for market value. This means that the house/condo has to be in at least “average” condition.
Lenders may shy away from properties that are great deals because of the following:
- Refurbished grow op house
- One of those houses where there were 20 cats living there
- “Fixer-upers”
- Dirt basements
The lender also wants to make sure that the property has enough funds in the Condominium reserve funds to handle any unforeseen expenditures for the building. So if a building is 35 years old and only has $2500 in its reserve fund this will likely raise a red flag.
It is important to understand that the lender did not implement these policies to stop people from buying places. They just want to be sure that they have invested their money someplace safe – they already think you are strong now they need to confirm that the property is strong as well.
This is just one of the many reasons to be sure that you use a qualified Realtor, home inspector and mortgage broker in your purchase.
January 20, 2010
Credit, Employed Persons, First Time Home Buyer, Pre Approval
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In a previous blog post I ran through the steps that most people take to get their first property. One of the steps that I had written I didn’t have a previous blog post about – Get your down payment prepared.
The down payment is a critical part to getting a mortgage on a property. It determines how much equity you will have in the property after you purchase it. The more equity you have the less risk the lender and insurer will see in your file.
Down payments can come from many different resources:
- Personal savings – This is the money that you have squirreled away for years in a savings account. If it is not in a bank account and you intend to use it put it in a savings account today.
- RRSP – As you may know the Government of Canada has a First Time Home Buyers Program that allows people to take money out of their RRSPs tax free as long as they promise to repay it in a certain time. Check out the following link to the Government of Canada’s website that explains the program. Link
- Gift from an immediate family member – Just like it sounds your parents or your sibling gives you all or a piece of the down payment.
- Borrow the funds for the down payment - This method requires that you use a good mortgage broker to show you if this option will work for you. Depending on the lender there can be a maximum that you can borrow and there maybe other terms in the mortgage that you will need to be made aware of.
There are a couple more options available to you please call to find out more.
Down payments are very important and the lender has some specific needs in proving where the down payment comes from. If you have any questions please contact me and I will answer them.
January 14, 2010
Employed Persons, First Time Home Buyer, Interest Rates, Pre Approval
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On my last blog post I mentioned that clearing away debt is a good (and common) step to take before getting your first property.
The reasons for such actions are two fold.
-Firstly you can help out your debt ratios. In a previous blog post I explained that two specific ratios determine how much you can borrow. By paying down some of your debt you can increase the amount of money the lender will be willing to lend you.
-Secondly it is a great idea to pay down your debt because you will likely have some new purchases to make your property a home.
I recommend that you speak with a quality mortgage professional to determine how to best pay down outstanding debt so it helps you achieve your dream.
January 6, 2010
Employed Persons, First Time Home Buyer, Pre Approval, Proving income
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It is very common for people at this time of year to think back about the year before and to think ahead about what they want to achieve in the coming year.
Most people say that they would like to lose some weight or to be more active. May I suggest another goal for 2010? How about making a goal that by the end of the year you will own your first home?
For most people the amount of preparation to own a home is similar to any medium sized goal.
The steps are generally as follows:
- Get a Mortgage Broker – http://jasonpeatz.com/2009/06/step-1-get-a-mortgage-broker/
- Get pre approved – http://jasonpeatz.com/2009/06/step-2-get-educated-and-pre-approved/
- Clear away any debt that is in your way – I will discuss in up coming posts.
- Get your down payment prepared – I will discuss in up coming posts.
- Start collecting paperwork - http://jasonpeatz.com/2009/07/step-3-collect-all-paperwork-you-will-need/
- Make an offer – http://jasonpeatz.com/2009/07/step-4-put-down-and-offer-and-get-approved/
- Send MLS and Offert to Purchase to your Mortgage Broker – http://jasonpeatz.com/2009/07/step-4-put-down-and-offer-and-get-approved/
- Meet conditions of the lender – http://jasonpeatz.com/2009/07/step-4-put-down-and-offer-and-get-approved/
- Go to your lawyer’s office and sign some papers – http://jasonpeatz.com/2009/07/6-go-sign-some-docs-at-your-lawyers-office/
- Pick up your keys – http://jasonpeatz.com/2009/07/step-6-move-into-your-new-home/
- Smile – http://farm1.static.flickr.com/69/175764184_471aaa850a.jpg
As you can see I have included links to all the blog posts that I have written that relate to the steps above. This process may take some people just a couple of weeks while others months. But the sooner you get started the sooner you can make 2010 a great year.
November 24, 2009
Book, Employed Persons, First Time Home Buyer, Mortgage Insurance, Pre Approval
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Whenever the lender decides to lend money on a particular property they take into account two separate yet equally important parts.
Firstly, they look at the quality of a borrower- their credit worthiness and their ability to make the mortgage payments. The evaluation of the borrower typically takes place in the pre-approval process.
Secondly they look into the quality of the property. What they want to ensure is that in the event of a borrower not being able to make their payments and in turn goes into foreclosure that they can easily market the property and get their investment back. So you can understand that if the house is not at least of average quality then the typical purchaser is not going to want to buy it. The lender evaluates value of this in one of two different ways. If the file is insured then the insurer does their own internal evaluation. If the file is not insured than the lender may request that a third-party appraisal is completed.
One important thing to note is that the quality of the property may take into account things that are beyond the scope of the physical property itself. For example, in a condominium complex, even though the condo complex may be in great condition sometimes the condo financials are not in order.This would be something that the lender would consider to be a serious issue and therefore may not lend of this property.
Why I am telling you this is not to warn you not to go to try different properties but rather to let you know what type of resistance you might find if you decide to purchase a house that is considered a fixer upper.
This is a critical area that needs to be addressed before financing conditions can be met. This is why it is so important that you send all data about the property to your mortgage broker as soon as you can after the Offer to Purchase has been accepted by the seller.
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