I have had an ongoing conversation with Jason Dodd of Verico Maximum Mortgages about changes to mortgage financing in the recent past. I've asked him to write a blog to update you on what to expect. It really is time to change our thinking about the process. This is especially for those folks newer to Canada, self employed or any buyer who wants to have the best options, not just those available at the last minute.
While we have enjoyed a very competitive mortgage market and low interest rate environment over the last few years, a slow steady change has happened with mortgage qualification. Lenders and insurers are under much more scrutiny to adjust qualification standards for all borrowers involved in a real estate transaction.
Only a short time ago we had 40 year amortizations, 100% financed mortgages with best rates, and a host of other options to ease qualification for borrowers. Although I agree with a lot of the rule changes, in some cases it has tightened the mortgage rope around many buyers that qualification is being affected.
Clients whether new to the market or experienced in buying need to adjust to new parameters set out by both lenders and insurers. The best way to do that is to shift your view from Pre Approval mode to Mortgage planning mode. The difference is this, most clients we come across have a one page approval that says you are approved up to a certain dollar value with this interest rate. Where we see this fail is when an offer goes live and suddenly clients are finding out they don’t qualify for a number of reasons. Often this comes as a surprise to the buyer and the realtor showing them homes.
A properly planned mortgage strategy would help clients address their qualification up front and deal with any issues before an offer is being made. Review of all relevant documents that are applicable to each individual applicant, as well as a review of the credit history to make sure it meets lender and insurer standards. If there are any additional documents that need to be gathered we can also instruct clients to begin preparing them. Most clients are surprised on the detail that is required to verify the down payment in a transaction as because of regulations in our industry you have to verify the source of funds used in a real estate transaction.
Lastly clients often are not aware at the different terms, rates, privileges and general fine print that are offered by many lenders. So clients feel rushed or pressured to take a certain term because they have had little time to prepare or think about different options. Why not take the time to research this with a broker before an offer is made so you are versed in the debt you are about to take on. There is a beginning, middle and end to a mortgage so be prepared for all stages of your financing.
- Courtesy of Jason Dodd of Verico Maximum Mortgages - www.jasondodd.ca