Mortgage Information
Mortgage Calculator
A simple tool to help you determine what you can afford what your payments could be
Mortgage Articles
A wealth of information to help you make the best financial decisions regarding your purchase or sale
Mortgage Terminology
Glossary of common mortgage terms to help you better understand the process
How To Save Money On Your Mortgage
7 Mortgage Tips To Save You Time And Money
The loan and mortgage process is a stressful and sometimes frustrating process. The idea is to make the entire process go as smoothly as possible. What is most important? Be prepared before you sit down with your loan officer.
Here are some things you can do to help ensure successful results, as well as give you some control over your own loan process.
1) Take time to straighten out your finances
If you don't have a grip on what's coming in and what's going out (and where and why), you may be in for a rough time when you apply for a home loan.
2) Make sure to check your credit record
Everyone's heard the horror stories - your best friend, your sister, neighbor, goes to buy a home only to discover the worst... that the credit report contains negative or inaccurate credit information. Instead of having a clean record, he or she has an $80,000 outstanding bill that is not their own. The loan officer looks at the outstanding bill and gives you a choice - clean up the credit problem or no loan. Some choice.
And you've probably heard how difficult it is going to be to get your credit history cleaned up. Maybe so, but it's important to try nonetheless. Here's what to do: First, order a credit report on yourself. You can contact Equifax By phone at 1-800-465-7166 or online at www.equifax.ca.
Equifax will send you your credit report for free via the mail, or for a small charge you can have instant online access. This is the same information lenders will receive. By getting a copy of your credit report before you apply for a loan, you'll get a first look at any problems or discrepancies that have sprung up.
Let's backpedal a moment and talk about credit bureaus. In this computerized, big-brother-like world we live in, credit bureaus generally have exchange agreements with companies who provide credit, like credit cards (Visa, MasterCard, American Express, and others) and department or retail stores as well as banks, credit unions, and savings and loans.
On a daily, weekly, monthly, or semi-annual basis, these companies electronically send all their information to the credit bureau, which stores it in a mammoth database and updates the records of each person on file. When you go to any department store like and sign up for its credit card, it calls the credit bureau (to do a credit check) to be sure you have enough funds to pay your bills. Banks do it the same way. When you go to apply for a mortgage, the lender wants to know how many debts are outstanding, and what your track record is in paying them.
So let's say you've ordered your credit report and it turns up an erroneous bill that does not make sense. You realize that this isn't your bill. What do you do? You could go to the credit bureau, but since they didn't originate the information (remember, all the information is sent to the credit bureau from the companies giving credit), they probably won't be able to help you.
Instead, go to the source of the problem — the company or credit originator that claims you owe them money. Ask them to pull up the payment record and try to work out whose bill it actually is. If it does turn out to be yours, then pay it. There should be some identification other than name that can easily solve the problem, like a social insurance number, the male/female check box, age, race, etc.
Once you prove that the bill is not yours, the credit originator should correct its computers. Of course, it may take some time for that correction to work its way through the company's computers all the way through to the credit bureau. If you've started the process before you've found a home, you shouldn't have too much trouble. On the other hand, if you've gone to a lender because you've found the house of your dreams and then discover your credit is in jeopardy, you may want to get a letter from the credit originator that explains there has been a mistake and it has been corrected. You want to get your name cleared up as quickly as possible.
3) Gather The Information You Need Ahead of Time
It's a great idea to gather information ahead of time and organize it so that it's easily accessible for you to review and have corrected. Now, you'll also need complete copies of your past two or three tax returns plus a current pay stub, or a current profit and loss statement if you're self-employed. This means you'll be able to have that information on hand when you sit down with your lender.
4) Know The Current Lending Guidelines
Get a current copy of the lending guidelines. If you are applying for a high ratio mortgage, the federal Canada Mortgage and Housing Corporation (CMHC) must insure these loans. The protection is for the lender, not for you. Mortgage insurance is expensive: it can range up to 2.9% of the value of the loan. You have to insure the entire loan, not just the amount that is above 65% of the purchase price. For instance, with 10% down, the insurance premium for a $140,000 mortgage would be $2,800. Most lenders will let you roll the insurance premium into your mortgage - but you end up paying interest on the insurance fee as well.
5) CMHC's 5% Down Program
If you are a first-time buyer, you can put as little as 5 per cent down with an insured mortgage - provided you earn enough income to qualify. The amount of money you can borrow under this plan depends on where the house is located. Contact CMHC for more information about your specific situation and location.
These loans must be insured, and while you can choose any term you wish, your income must be able to meet the payments required under a three-year term.
Some lenders now offer 0% down mortgages as well. These are essentially the same as cash back mortgages, but the lender gives 5% cash back to the seller as a downpayment, essentially putting you into a 95% mortgage situation. Additionally, there are lenders willing to finance up to 103% of a home's value, in order to help cover your closing costs.
Every lender is different, so it is best for you to discuss your needs and the available options with your own lender.
6) Conventional Mortgages
Conventional mortgages require a down payment of 25 per cent of the home's appraised value. If you're looking at a house with a price tag of $200,000, that means you need to come up with $50,000 of your own money. But if you don't have that much saved, you may still be able to purchase that property.
Although it may seem that the lender's primary job is disqualifying mortgage applicants, the reverse is true: The lender wants to qualify as many applicants as possible (lenders make their money by approving loans and charging interest) but are restricted by the rules and regulations of a larger, more powerful body. If you understand up front what your lender is going through, it may help smooth the process.
7) Qualify your lender
Just as you shop for a real estate broker and a new home, it's very important to shop for a lender, your realtor can help you by making recommendations. Always ask for at least 2-3 different mortgage lenders. And not all lenders are created equal. Loan products, services, style, and personal attention vary greatly. Look for a lender that is best qualified to meet your needs. Look for someone exceptionally well trained and thoroughly knowledgeable in the mortgage type you want to use. Look for someone who is seasoned in the business and can guide you through with a practiced hand.
For example, if you're self-employed, and you've only been self-employed for a year, you may find it more difficult, even though you may have paid every bill on time in your life. The reason for that is that lenders need to see that you've been self-employed, maintaining an income for at least two years, and have the tax returns to prove it. At this point, your choices would be to wait until you've been self-employed for two years, or go with a sub-par loan (also known as a second and third tier lenders in the mortgage industry).
You may also want to work with a mortgage broker. Mortgage brokers have pioneered the subprime credit market, using innovative loan packages to allow low-to moderate-income borrowers, with less than perfect credit histories, to start enjoying the benefits of home-ownership. Many low income borrowers with less than perfect credit histories would not have been able to purchase their dream home without the assistance and dedication of a mortgage broker.
Since mortgage brokers offer the products of many wholesale lenders they often can offer consumers a wider selection of loan products. This question presumes that anyone can know what is the best deal. While many would consider the best deal to mean the lowest rate, a loan program with a very low interest rate may not be the best choice for a consumer with limited cash, if that rate comes with high points and fees. So, the best deal for any consumer depends on his financial circumstances, needs and goals.