Realtors Looking for New Business
This deal was recently done by aTop Broker in Ottawa. The client was referred to her by a Real Estate Agent who was representing the client as a purchaser looking to buy an investment property.
60 years old, retired receives minimal pension income with sporadic other income that is difficult to confirm. There was an approval at a conventional lender, but the conditions were not able to be met to verify income.
Principal Residence (value $625k) no mortgage outstanding
Purchasing an investment property for $210k
Set up a Reverse Mortgage with a limit of $210K, fully advanced to finance the purchase of the condo.
She was able to leave her investment portfolio to continue to grow.
She is generating some additional investment income, as well as having an asset that continues to appreciate
The accruing interest on her Reverse Mortgage is tax deductible as it is being used for investment purposes.
Client increased cash flow, leveraged her assets without collapsing investment to purchase an income generating and appreciating asset.
Real Estate Agent satisfied client, sold a property, partner referral
Mortgage Broker new client, commission, helped a referral partner with their business retention
Debt Service Ratios - Easy to Understand
Debt Servicing Ratios are a big part of how a lender determines how much money you will qualify to borrow.
Debt Servicing Ratios are split into two categories:
GDS - Gross Debt Service refers to housing costs only.
TDS - Total Debt Service = housing costs + other debt payments.
There is often little correlation between the amount of income we can use on your application and what your actual income is unless you are on a fixed salary or pension.
Monthly Mortgage Payments and Minimum Debt Servicing Payments are also determined by lending guidelines and are not based on actual numbers when it comes to determining how much you will qualify to borrow.
It is quite common for buyers to struggle with the gap that exists between what they consider affordable and what the bank considers affordable. The issue come downs to the fact that the buyer knows what they can afford, but the lender (bound by guidelines and policy) disagrees. If the buyer hits this wall, they will need explanations, information, and guidance to keep everything moving forward. As a broker, my approach is to try and close (as much of) the gap that exists between the buyers expectations and the lenders thru my access to multiple financial institutions programs.
As we enter 2018, an increased amount of time is needed to secure financing in a great number of instances. The financing process has become increasingly challenging and is often frustrating for everyone involved in the transaction. As a Mortgage Broker, I am representing both the client and lender in the transaction, and both sides need to be comfortable or the financing simply doesnt get done.
Mortgage Financing in 2018
Mortgage Financing in 2018 - WHY and HOW
The Most Popular Questionfor banks and brokers has always been whats your best rate, and the assumption on the part of the person asking the question is that they will qualify for that rate. In 2018 though, (and actually for some time now) unless a full application is done, along with a detailed review of all the supporting documents; it isnt possible to quote rates accurately.
Problem is you WILLfind a banker, broker, or website that will tell you what financing you qualify for and what your rate will be without the required level of due diligence being done. I would estimate that 20 % of my book of business is made up of clients that relied on information that wasnt correct before they started house shopping and eventually hit a brick wall with the lender. This is NOT their fault as they are merely relying on information provided by either someone that seems to know what they are doing, or a great website that is unable to capture all of the required information, do a document review, and cannot effectively analyze an application.
An Experienced Mortgage Professionalcan help prevent a scenario where both a buyer and their realtor invest a significant amount of time visiting properties only to have the deal fall apart on financing.
The Buyer Probably Has(but not always) a financing condition in the offer and typically has 5-10 days to get their financing firmed up. The reality though is that if you are closer to the 5-day mark you likely will need to request an extension. Another reality is that lenders are no longer concerned about the financing condition deadline, or if the transaction even takes place.Yes, this is not the way to do business ...but this has become a business where common sense does not prevail. The need for the extension of financing stems from the fact that the approval process has become much more time consuming as the level of due diligence required has become....ridiculous in some cases.
The Regulatory Processthat lenders MUST adhere to is designed by a government that regulates an industry without fully understanding all of its moving parts. Lenders are extremely concerned that when the government walks in to inspect their files, every required process was followed, and every piece of paper needed is present.
If The Required Processwas not followed by the mortgage professional when they pre-approved the buyer, then there is a significant chance that the financing will fall apart when it is time to waive the financing condition. Sadly, it is rather common in these situations that the buyer cant reach the broker or banker that pre-approved them...and the website wont help. The truth is that in some cases bankadvisersand or brokers are avoiding the clients calls and emails as they have been informed by the decision makers that they cant deliver on the financing and in fact the buyer never qualified for it. When these situations occur, everyone involved in the transaction is usually in the dark as to what is happening, and both panic and frustration set in....but this CAN be avoided. Its NEVER been more critical that anyone purchasing a home works with an experienced Mortgage Broker :)
In a nutshell, if you are putting 20% or more of the purchase price of a home and qualified for a 450K you will be eligible for a 360K mortgage price in 2018. Over the past few years; there has been at least a dozen changes to lending guidelines some being more publicized than others. Each change that has come into place has made qualifying for financing more difficult. However, no matter what the government has thrown at us, people are still buying and selling real estate; but the process has become increasingly more difficult and time-consuming.
ANYONE THINKING ABOUT PURCHASING A HOME OVER THE NEXT 4 MONTHS SHOULD APPLY BEFOREDECEMBER 26THAND GET A REAL PRE-APPROVAL DONE TO QUALIFY UNDER THE CURRENT GUIDELINES.
Purchase + Improvements - WHY and HOW
With a drop in buying power, a buyer may no longer be able to qualify for the amount of house they want. This means that if a buyer wants that much house they may need to find a property that has not been fully updated yet and costs less. The nice thing about buying a home that has not been updated means that the purchaser gets to decide what improvements to do and doesnt need to pay for features that are not important to them. In many cases, a buyer can benefit by making improvements to a property that will increase the propertys value beyond the actual cost of the improvement.
The Purchase + Improvements Program has been around forever, but is seldom used. I think moving forward though; it may be something that can be utilized to bridge the gap (in part) between the amount of house buyers want and what they qualify for from a financing standpoint.