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Use a Mortgage Broker or Do It Yourself? – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Use a Mortgage Broker or Do It Yourself?

Some people prefer to use a mortgage broker while others may be of the mindset that it is better to it on their own. What are the advantages and disadvantages?

When researching mortgage brokers on the web you may likely find that many brokers advertise the fact that they have more than 50 lenders that they can access.

The premise is that the more lenders that you can access the better the chances that you will find a better deal on your mortgage. But, should you solely rely on a broker or should you do the contact work on your own?

One of the perks of using a mortgage broker is that they do have access to multiple lenders which is a huge advantage. But did you know that their pool of lenders has diminished over the past several years?

Why? The reason is that some of the banks have left the independent broker market as they are of the belief that they can enhance their own profitability by peddling mortgage directly to their clients on their own. Some of the bigger banks which have exited the independent broker market include the CIBC, BMO and ING along with several others and have been doing so since 2007.

Many mortgage borrowers also don’t realize that many brokers don’t compare all the lenders available to them. A survey conducted by Maritz Research revealed that typically for most broker that up to as much as 90 per cent of their volume generally goes to only 3 mortgage lenders.

The reason is that these brokers prefer to deal with a lender they know well versus a lender they only know partially. Another reason they do so is because they are likely to get a preferential rate and better service such as quick approval time from their main source of lenders. They also receive a financial incentive from a lender if they reach a certain volume.

This is not really a problem if the lender can provide the best mortgage for a borrower but it may not always be the case. One way to avoid this problem is to use a broker who has been established and is an experienced high-volume broker.

Here are some tips where you can get the best of both worlds and increase your odds of finding the best possible rates and mortgage deals.

• Contact non-brokers lenders on your own which includes BMO, RBC, ING, CIBC, HSBC, PC Financial and Manulife Bank.
• Use the services of a mortgage broker or obtain your own quote fro TD Bank, Scotiabank, National Bank, Canada Trust, Desjardins, Industrial Alliance, and the other major credit union banks.

• Use the services of a mortgage broker to obtain a quote from wholesale lenders such as Street Capital, MCAP, First National, Merix, MonCana Bank, ICICI bank, B2B Bank, Radius Financial and other similar wholesalers.

This approach allows you to spread your net further afield which can save you money on your mortgage.

The disadvantage in performing all this work by yourself is the time it take to do so. Another disadvantage of doing this on your own is that you could end up choosing a lender who has numerous restrictions cased in the fine print which might end up costing any savings you might have gained upfront.

Using comparison sites can also be risky because you will not be fully apprised of all limitations that come with them such as penalties, portability and policies which can affect mortgage increases.

Even if you think using a bank as the best route to go you might end up better off by using the services of an independent mortgage broker. A broker will likely have a better opportunity to find you a more flexible mortgage at a better rate and can offer you valuable financial advice on how you can save money on a mortgage.

Brokers are also a better choice if you don’t have a stellar credit history or if you are self-employed. Mortgage brokers also have a greater opportunity to find a lender which has a greater choice of features such as pre-paying a mortgage, extending your term before it is due, linked credit lines and lenders which have lower penalties and other advnatages.

Another thing about doing it on your own is that you have to have some degree of knowledge and expertise to conduct your own research in the first place. You have to know what questions to ask and the right questions to ask because the cheapest rate doesn’t always mean you are getting the best deal and could you much more than you expected.

The Complexity of a Mortgage Pre-Approval – Ask a Vancouver Mortgage Broker

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The Complexity of a Mortgage Pre-Approval

Recently, Rick Robertson of Mortgage Mentor Inc. was performing some research and contacted several real estate agents and mortgage lenders to obtain their definition of what a mortgage “pre-approval” means.

He received 2 very common responses to his query which includes the following:

• A certificate or a confirmation that provides a mortgage borrower with the ability to complete a purchase offer without having to include a “Subject to Finance” provision.

• A procedure which entails using a DSR (Debt Service Ratio) and scrutinizing all other supporting documentation to ensure a mortgage borrower fulfills all the guidelines required by a lender to receive approval for mortgage financing.

However, he also found that while discussing the issue with mortgage lenders that they had a variety of differences in how they define a pre-approval but in no instance did any of their replies actually meet how the marketplace defines the meaning of a mortgage pre-approval.

This did not come as a surprise for Mr. Robertson, but what did surprise him were the replies that he received from 2 particular mortgage lender executives. He asked them to consider what they considered as being different between a mortgage pre-approval and a “rate hold.” They replied with considerable degree of confidence that in their opinion they were the “same thing.”

The opinions expressed by many professionals in the mortgage industry is that a pre-approval and a rate hold are different from each other. To most professionals, a rate hold means a “rate guarantee.” A pre-approval means that the approval has gone through the underwriting process including reviewing the applicant’s credit profile, employment, financial resources and the property itself to determine if the applicant can be approved.

What add confusion to these terms is that some lenders present what they refer to as a “pre-approval” but in actuality is really by definition a “rate hold.”

From a result of his survey with a variety of mortgage lenders he did uncover a variety of specific policies that are considered for the most favourable pre-approval or rate hold rates which include the following:

• Most lenders require detailed documents and information from the borrower before they will consider a pre-approval.
• Only a very few lenders will actually review any documentation for a basic rate hold.
• Some, but not all lenders will not approve a rate hold if there is no available information relating to the property being purchased.
• Many, but not all lenders will add a surcharge on top of the rate.
• The majority of lenders will not offer a rate hold on a property which is being refinanced.
• Only some of the lenders would allow a mortgage borrower to opt for a different term at the available rate on the “hold” day.
• Most lenders will lower a borrower’s rate when rates fall if requested by the broker, and some lenders will do so automatically.
• A number of lenders will assess the funding ratio of a broker depending on their follow through of a rate hold or a pre-approval.

Since there so many differences in how all the lenders approach a rate hold and pre-approval, it is well worth the while of any potential mortgage borrower to discuss either of these issues in detail with their broker as it can be well worth their while to do so.

Standards for B.C. Home Inspector standards to be overhauled – Consult with a Vancouver Mortgage Broker

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One of the first steps taking by Premier Christy Clark following her party’s recent re-election was to instruct the B.C. Housing Minister, Rich Coleman to implement a new home-inspector accreditation process for home inspectors.

Stake holders in the home inspector sector are now looking at re-structuring the qualifications which are required for home inspectors in B.C. as there has been recent criticism that they are currently insufficient.

The new qualification accreditation standards which are in the development process are intended to ensure that new home buyers will have greater confidence that the home inspector they use will be sufficiently trained and qualified to perform a proper home inspection.

Consumer Protection B.C. representatives have been conducting meetings with several of the four groups that currently assess the qualifications of a prospective home inspector in the province.

The reason is that a number of concerns have arisen regarding inconsistencies in how inspections have been carried out.

Home inspectors in B.C. have been required to be licensed by the province since 2009. B.S was the first province to implement licensing requirements for home inspectors.

Any home inspector who wanted to practice their profession is required to be licensed by Consumer Protection B.C. which has approved 4 specific groups who assess the qualifications of a home inspector and issue licenses. One of the problems identified is that these 4 groups all have different standards.

Consumer Protection has mandated that every home inspector must have a minimum of 150 hours of formal training in home inspection along with a minimum of 50 hours of supervised field training.

As far back of March of this year, the Canadian Association of Home Inspectors released a press release stating that they felt that the current minimum qualifications for home inspectors in B.C. were “inadequate.”

The problem is that despite the current licensing requirements, a prospective home buyer may be using the services of a home inspector who has considerably less training or field experience than they might have found with a home inspector employed with a different agency.

Since the four agencies which grant home inspectors a license have different criteria for issuing a license, there continue to be inconsistencies in the services provided.

One of these agencies which are being consulted by the government to address this problem is the Applied Science Technologists and Technicians of British Columbia. This group has stated that they would like to see a single association instead four agencies who can issue a home inspector’s license.

Two of the other agencies have been identified as the Canadian National Association of Certified Home Inspectors Inc. and the National Home Inspector Certification Council. Both of these agencies are based in Ontario.

Although the process is still in the early stages, the Office of Housing and Construction Standards will work closely with all affiliated parties to create a new model for the licensing of home inspectors in the province.

101 Series: Preparation Tips for your First Mortgage – Ask a Vancouver Mortgage Broker

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Preparation Tips for your First Mortgage

One of the problems noticed by some brokers about new home buyers is that although they’ve saved for a suitable down payment, found a suitable home and had their offer accepted is that they haven’t performed sufficient background work when it comes to arranging their mortgage.

Some new prospective home buyers may easily become beguiled by the rates offered by banks or on online sites. You should be cautious about these rates which are often termed by many mortgage insiders as “sucker rates.” Many of these advertised rates comes with high fees, and other restrictions such as penalties when is comes to how you might make a lump sum payment.

These advertised rates should only be viewed as a starting point when it comes to finding a mortgage. By taking your time and performing some due diligence, a new home buyer is actually in a much better position to negotiate such things as a better term for their mortgage rate and in other areas such as fees and restrictions.

Here are 4 tips to before you come to the table and get a better deal on your mortgage.

Get Prepared Early

You will need to get yourself prepared early when acquiring a mortgage. The process is more complicated than simply filling out an application form for a pre-approved mortgage. The bank or lender will want to know your current credit score, everything about your current debt, tax assessments for at least the past 2 years, and income verification for all your income.

You also need to know that you will have to have enough cash on hand for your closing costs which can be as high as 2 percent of the home’s purchase price. A new home buyer will also have to put down a deposit for their utilities, and a condo buyer will also have to be able to handle maintenance fees for their condo.

Understand and Learn about Mortgage Basics

A mortgage broker can give you a lot of assistance and advice but it also is very helpful for you to bone up on mortgage basics. Key terms which you need to understand include fixed and variable mortgages along with what an open or closed mortgage means.

You also need to understand what is meant by pre-payment options and break fees as they are very important. You might know for example that you will come into some money down the road so you might to seriously consider a lender which has a flexible pre-payment feature.

Consider Carefully what Mortgage Options Suit you Best

If your employment situation involves the possibility of having to move to another city, you will want to carefully examine the break fees on the mortgage you’re thinking of obtaining.

Or, if you buying a home which you plan to renovate then you want o ensure that you have fairly easy access to a HELOC (Home Equity Line of Credit).

In other words, make sure you know and understand the fine print of a prospective mortgage before you sign on the dotted line.

Use your Leverage

Lenders have high regard for the first time buyer and are in fierce competition with each other. By knowing what and where you can negotiate on your mortgage can potentially save you thousands of dollars down the road.

This is a big investment you are making so doing it right by learning what you need to know and what you can negotiate with a lender can be a crucial to the decision making process.

What You Need to Know About Stricter Debt Ratio Standards

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What You Need to Know About Stricter Debt Ratio Standards

One of the key factors used to determine whether you will be approved for a home mortgage in Vancouver is your debt ratio.

Last year, the Feds have imposed a stricter debt ratio calculation and it is appearing that by the end of this year, these debt ratio calculations may become even more conservative.

Back in the latter part of June of this year, the Canada Mortgage and Housing Corporation has also issued new guidelines for how debt ratios are to be calculated and how income documentation is to be confirmed.

The new guidelines issued by CMHC will clarify how each input for debt ratio calculations will be treated and will become effective for all CMHC mortgages as of December 31, 2013. In reality however, the majority of lenders are already applying these new guidelines.

The guideline standards will be applicable to all 1-4 unit residential mortgages and despite the loan-to-value ratio.

A conventional or uninsured mortgage will have different policies but it is expected that the majority of lenders will apply these same guidelines to their approval process.

Some of the guidelines have been clarified for insured mortgages as follows:

Variable Income

Variable income means income which includes investment income, bonuses, tips, and seasonal income. Lenders are now required that they must use an amount which does not exceed the average income of the “past two years.”

Rental Income

The P.I.T.H. (Principal, Interest, Property Taxes and Heat) must be either deducted from the gross rent income or included as other debt obligations when calculating the TDS (Total Debt Service).

Guarantor Income

A guarantor (one who will make the full mortgage payment if a borrower defaults) will not be allowed to have their income used in a GDS (Gross Debt Service) ratio or TDS (Total Debt Service) ratio unless they are residing in the home as either the spouse or common law partner of the borrower.

Credit Lines and Credit Cards

For both of these debts, no less than 3% of the outstanding balance will have to be included in the debts payments that are made monthly. Payments which are considered as “interest only” will not be considered for lines of credit. A borrower’s credit history must be assessed by a lender when considering the amount of “revolving credit” that can be considered in a debt ratio.

Heating Costs

A lender must now use the actual heating cost record of a property or a reasonable estimate if one is not available. Some lenders now use a formula such as:
square footage x $0.75 / 12 months to calculate as estimated heating cost.

Many of these guidelines are already being used by most lenders, but some exceptions exist for borrowers who have a much tighter debt ratio, and these guidelines are being as a means to restrict some of these loopholes.

Stricter Debt Ratio Standards on the Way – Ask Bruce Coleman about Great Rates

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Stricter Debt Ratio Standards on the Way

A New Bank With a New Model — Canadian First – Consult with a Vancouver Mortgage Broker

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A New Bank With a New Model — Canadian First

 By Rob McLister, Editor, CanadianMortgageTrends.com

Should You Get Your Mortgage From Your Bank? – Consult with a Vancouver Mortage Broker

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Should You Get Your Mortgage From Your Bank? – Consult with a Vancouver Mortgage Broker

You may or may not know that the mortgage lending practices of banks are regulated by a variety of federal government agencies. This is because most banks have a federal charter so they can operate in other provinces which means they are subject to federal laws and regulations.

Although that might sound comforting, did you know however that this does not apply to the entire bank’s lending practices when it comes to mortgages? There are a variety of mortgage lending practices that they in engage which only require that the bank is self-regulatory.  This means that these federal agencies do not regulate all aspects of these lending practices.

Some of the areas where a bank can be self-regulatory can include the manner in which their agents are compensated and in how their own representatives make their recommendations when it comes to the suitability of a mortgage application.

If the mortgage application that you made to a bank doesn’t qualify, you won’t necessarily be automatically declined as some banks will attempt to farm your application to other lenders. The bank employees who perform this task are acting the capacity as a mortgage broker but they may not even necessarily be licensed as a broker.

These bank employees will receive a commission if the application is approved by another lender. The problems is that every other independent mortgage broker is governed by provincial laws when it come mortgage lending practices, but these unlicensed bank employees are exempted from provincial regulations because they are regulated federally.

What does this mean? A mortgage broker that is licensed by the province can be audited and even sanctioned when a complaint is made or a ruling is made in the complainant’s favour.

However, if a complaint is made against the bank for the same reason, there is no federal authority that will perform such an audit or issue a sanction. Why? Because the banks are allowed to handle the complaint procedure internally, and this is why they are self-regulatory.

The federal agency which monitors banks is known as the Office of the Superintendent of Financial Institutions (OFSI). Many people are under the impression that OSFI would act in the same capacity as provincial regulators do when it comes to handling a complaint. However, the OSFI does not perform this monitoring or complaint capacity in the same manner that provincial regulators do for mortgage brokers which have provincial licenses.

The OFSI is mostly concerned in the solvency of the bank but does not concern itself with the mortgage practices of a federally chartered bank.

The other federal agency which does have some ability to protect consumers is known as the Financial Agency of Canada (FCAC). They do address issues such as the cost of credit disclosure and mortgage penalties but they do so only on an overall systemic basis and do not address individual consumer complaints.

The problem is that if your mortgage application is declined by the bank and farmed out to another lender by the bank’s employees, you will not necessarily be treated in the same capacity as would by using an independent mortgage broker. The banks have relationships with these other lenders. Your mortgage application may ultimately be approved but you may not necessarily be getting the best mortgage rate available.

Many banks would contend that their own self regulatory rules are quite stringent, but the whole complaint review process is performed by employees within the bank and not an outside agency.

The point is that although it might be more convenient to use a bank to apply for a mortgage, and you have a complaint about how the mortgage was processed, it will be the bank itself that addresses the complaint.

So, if you want to get the best possible mortgage rates, and are concerned about how a complaint might be handled, then maybe you might to consider that using an independent mortgage broker like myself who might offer you more of an advantage.

What Home Buyers Who Are Single Should Know – Ask Bruce Coleman, Vancouver Mortgage Broker

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What Home Buyers Who Are Single Should Know

Nationally, and this of course includes Vancouver, a recent census survey from Stats Canada revealed that single people now comprise 27.62% of Canadian households. They actually make up a larger group than people who are married or living common law with children.

Single people also want to invest in real estate and want to buy either a home or a condo just like everybody else. Real estate investment is still quite an attractive investment these days interest rates the lowest they’ve been so it’s still a perfect time to buy.

Rent money just ends up in someone else’s pocket and doesn’t earn you a dime. With an investment in real estate, you can build up equity and increase your investment through appreciating property prices. This means you can use your investment as a means to make money which you can build up for your retirement.

The question that a single person might be wondering about is whether they are likely to experience more of a hurdle when it comes to getting approved for a mortgage application.

So, should you take the plunge? The main problem with being single is that your mortgage payment is your sole responsibility as you can’t access the income of another person.

If you feel you have job security, and plan to be living in the City of Vancouver for the next few years, then it could be advantageous for you to invest in real estate.

It’s important that you plan to live in your newly acquired real estate purchase because asides from the down payment you have tot remember that the closing cost for buying a property can be as a high as 2% of the purchase price which could take some time for you to recoup.

Most experts suggest you should only consider buying a property if you plan to be staying for at least a minimal of 3-5 years.

What Lenders Look for in Single People

Several of the things that lender will be looking when it comes to a single person applying for a mortgage includes:

• Employment – A lender will want to know that you have a solid employment history with your current employer, and will look at your employment history going back for the past several years.
• Income – You will also have to provide at least 3 years of your past tax records to verify your income as stated on your application. You will be required to provide additional information if you also happen to be self-employed. The lender will perform what a debt-service ratio analysis as most lenders won’t consider you application if more than 32% of your income is used towards the payment of your outstanding debts and costs to pay for a mortgage including property taxes, utilities and insurance.
• Debts – A lender will also want to know everything about your current debts, and credit history including outstanding personal loans, conditional contracts and credit cards.
• Down Payment – Any down payment which is less than 20% of the purchase price of a real estate property will require that you apply for mortgage insurance through such agencies like the Canada Mortgage and Housing Corporation (CMHC) which is an additional expense that will be added onto your mortgage cost.
• Closing Costs – As stated previously, you need as much as an additional 2% in expense to cover closing costs.

If you’re single and ready to take the plunge into real estate investment then you might want to consider using an independent mortgage broker such as myself. I can give you plenty of helpful advice and can also help you find the best possible rates as we have access to numerous mortgage lenders.

101 Series: What Is a HELOC? Consult with a Vancouver Mortgage Broker

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What Is a HELOC?

A HELOC is an acronym for “Home Equity Line of Credit.”  You could say it is a form of a second mortgage, but is different from a second mortgage which is a loan for a specific amount of money.

A HELOC also uses your home’s equity but you use it as a line of credit. It is also different from a second mortgage because you use only the amount of money that you actually require.

A Home Equity Line of Credit is something that can be conveniently used for a variety of purposes such as a home renovation project which could include re-doing your kitchen or bathroom for example. Or, you could also use A HELOC as a means to refinance your home, take care of outstanding debts or pay for your children’s college tuition.

Lending Requirements for a HELOC Approval

The majority of mortgage lenders will not consider a HELOC application unless you have a minimum equity built up in your house equivalent to around 20 % – 25%. The amount you will be able to borrow will also fluctuate from lender to lender and will also depend on the total amount of equity that you have built up.

Approval of your application will also likely be influenced by how well your credit is rated and the amount of your current outstanding debts.

Benefits of a Hone Equity Line of Credit

One of the benefits of using a HELOC is that you are not restricted by its use. A HELOC does not have to be specifically used for home improvements or renovations as you can use it for many other reasons.

Another advantage of a HELOC is that the interest rates tend to be lower than what you would pay for a personal loan and can be significantly lower than what you pay on your credit cards.

Flexibility of a HELOC

A HELOC also gives you a great deal of flexibility. You can take out the money as you need it and only the amount you actually need up to the maximum credit amount for which you were approved on your application. However, if you are taking the money in increments, there may be a time limitation involved.

A HELOC is also flexible when it comes to repaying back the line of credit you borrowed. Most lenders will allow you to make extra payments or pay the entire amount off beforehand without extra penalty, but you should confirm this beforehand as repayment methods vary from lender to lender.

Cautions about Using a HELOC

Although a HELOC has many advantages, you should use it wisely. Some lenders will only require that you pay the amount of interest owed as the minimal payment.

This might sound tempting but you could end up paying a lot more than you expected and end up paying more interest than the principal amount of the loan.

Make sure you can afford to re-pay as much as possible and are in a financially viable position so that you pay the principal down.

You should also not be tempted use a HELOC frivolously as once your application is approved than you will not be able to use the equity you have built up until your HELOC has been repaid.

If you need more information about using a HELOC than you can always give us a call as we would be happy to help you out.