29 Jun

How does it work to buy a foreclosure?

General

Posted by: Joel Olson

From time to time their may be a foreclosure that comes on the market that may be of interest. They are a little different, than purchasing a regular property.

The lender will always want an appraisal- if you are putting less than 20% down, the mortgage insurer may order and pay for it- but if not you will need to have us order you an appraisal. The value is very rarely a concern. The lender is looking at the condition of the property, and should it be in poor condition or need lots of repairs they may decline to finance it, even if you are a very good borrower.

Once your offer is accepted and conditions are removed, a court date is set, once a court date is set, you will have you offer accepted in court and a court order can be prepared. However, in court there is allowed to be other bids, and if someone else bids higher, they will be able to have the house over you. It is a good idea to be prepared to increase your offer in court- you need to check with us before, and the offer should still not exceed your appraised value. If you need to increase your offer, but are not sure you can approved for the difference, you can do so, but you need to make sure you can pay your increase in cash. Its also important to know that even if you can afford a higher amount of payments, a lender will still not finance you for more, if you bid above the appraised value.

7 Jun

When will an appraisal be required and who pays for it?

General

Posted by: Joel Olson

Every mortgage needs some consideration of value. Your downpayment and the type of property you are buying will determine when an appraisal is needed.

Despite contrary belief, a bank or a lender does not always pay for an appraisal. Although, this doesn’t apply in every situation – here is an idea of when an appraisal will be required.

If you put down less than 20%, a mortgage insurer will have their own valuation system. If it fails, then they will order an appraisal at their cost. The lender, the mortgage broker, and the client do not get to see this report or know information about it. If a property fails the valuation and there is a concern surrounding the property such as conditions, a private sale, or a foreclosure then a lender may require you to pay for an appraisal as part of your conditions.

If you put more than 20% down, an appraisal will be always be required. Some lenders have valuation systems that they will charge a fee for, but these are usually exclusive to bigger centers and only for owner-occupied properties. In this situation, it would always be a client cost. Sometimes lenders will order an appraisal for you and not charge you upfront, but they will add this expense to their closing costs. This often makes it seem that you don’t need to pay the appraisal cost but in reality, it’s still billed to you.

7 Jun

How does a mortgage broker get paid?

General

Posted by: Joel Olson

Our services are free! Well, sort-of… to you anyway! Picture this. You go to your bank, and you ask to speak to a Loans Manager. You have an appointment and you see a few different people, but you don’t pay for any of them. Yet, somehow they are all getting paid. So, instead of all that money going to a bank employee, it goes to us. And still, the cost to you is nothing.

There are certain times when a broker fee is charged, but these are rare and will be disclosed in the commitment that you sign with us.

7 Jun

What is default insurance?

General

Posted by: Joel Olson

If you put less than a 20% downpayment on any home you are purchasing in Canada, you are required to have mortgage insurance added to your loan. This is not an out of pocket expense, but it is added to your mortgage and your balance. There are three companies that offer mortgage insurance in Canada, CMHC, Genworth and Canada Guaranty. All of them have some different rules and policies. It’s important to note that you must also have your loan approved by them in addition to the lender.

There are some situations where you are still required to have insurance even if you put a sizeable downpayment down. These situations can include self-employment, unique property type, etc

Default Insurance doesn’t benefit you, it benefits the lender. If you don’t pay your mortgage, the insurance company agrees to pay back the losses to the lender as a result of your default.

The cost of insurance is described as follows:

A non-traditional downpayment is when you borrow the downpayment. The first table describes the premium you will pay, and the second describes the premium you will pay if you have already owned a house with default insurance on the new amount. For example, should you have a mortgage of $200,000, but are now taking out a mortgage of $300,000 – you would only pay a premium on the difference.

Up to and including 65% 0.60% 0.60%
Up to and including 75% 1.70% 5.90%
Up to and including 80% 2.40% 6.05%
Up to and including 85% 2.80% 6.20%
Up to and including 90% 3.10% 6.25%
Up to and including 95% 4.00% 6.30%
90.01% to 95% —
Non-Traditional Down Payment**
4.50% 6.60 %
7 Jun

What documents do I need to verify my downpayment?

General

Posted by: Joel Olson

There are several laws around tracking the money that is alloted for your downpayment. It can be very frustrating to provide the proper documentation. Here is what would be needed in several situations:

  1. Money Gifted from a Family Member: we will need a bank statement with your name on it that shows the deposit in the bank account. This should be in your account fifteen days prior to closing. We will also require a letter signed by the person gifting you the money. We will supply this at time of approval.
  2. Money Saved Through your Savings Account: we will need ninety days of transaction history. Not just the balance on your account. Any amount over $3000, aside from those labelled payroll, will require an explanation of where it came from. For example, if you sold a vehicle, we will need the bill of sale. If it’s for payment of side work, an invoice will do. If it is a deposit from an investment account, we will need the last quarterly statement from that account.
  3. Money Saved Through your Investment Account (TFSA/Stocks and Bonds/Mutual Funds/RRSPS): we need the last quaretly statement that you were provided.
  4. Money from the Sale of a Home: please provide us with the full purchase contract, statement of adjustment of the sale of your house, and bank statement showing funds in your account. If the sale of your home is closing the same day as your purchase, all we need is the purchase contract.
  5. Money from a Borrowed Source: we need a copy of the credit line or credit card statement.

 

It is very important to note that all statements will need to have both your account number and also your name.

Any funds being borrowed, we need to know upfront or it could change your approval.

If you are having trouble getting these statements, you can take a screenshot of your account. Here are some instructions on how to do this: https://www.take-a-screenshot.org/