It’s important to understand the home buying process, so here’s a 7-step checklist.

Step 1: Down Payment

The hardest part to buying a home is saving the down payment (a gift from the Bank of Mom & Dad also works).

• For purchases under $500,000 minimum down payment is 5%.
• Buying between $501-999,000 you need 5% on first $500,000-PLUS 10% down payment for anything over $500,000.
• Buying a home over $1 million you will need at least 20% down payment, depending on the lender’s sliding scale

For any home purchases with less than 20% down payment, you are also required to purchase Mortgage Default Insurance.

Step 2: Strategize, Define Your Budget and get Pre-Qualified

Unless you can afford to buy a home, cash in hand, you are going to need a mortgage.
You need to get pre-qualified, which should not be confused with the term pre-approved.
The big difference is that no approval is ever given by a lender until they have an opportunity to examine the property that you wish to purchase. The bank may love you… but they also must love the property you want to buy.

Pre-qualifying will focus on gathering documentation to prove the information on your mortgage application including credit, debt load, income/employment, down payment etc.

Mortgage brokers will make sure you get a great mortgage rate. Just as important as rates are the terms of your mortgage which should include:

• prepayment options (10-20%)
•  penalties
• portability

We also discuss what type of mortgage fits your current situation

• fixed vs variable?
• life of the mortgage (amortization) 25 or 30 years etc.
• payments – monthly, semi monthly, accelerated bi-weekly

Step 3: Set Your Budget

Keep in mind that just because you’re pre-qualified for a certain amount of mortgage, doesn’t mean you can actually afford that amount. Prepare your own monthly budget to be sure.

Typically, your total home payments (including mortgage, property taxes, strata fees & heat) should not exceed 32-39% of your gross (pre-tax) income.

Step 4: Find the Right Property – Time to Engage a Realtor

Once you have been prequalified for a mortgage, based on your budget… you need to find a realtor.

Selecting the right real estate agent is a very important step in the home buying process. When you work with an agent, you can expect them to help you with many things, including:

• Scheduling tours of homes
• Researching the market, neighbourhood and home itself
• Making and negotiating your offer to purchase, and counter-offers
• Providing expert advice on home buying
• Handling the offer, gathering documentation and closing paperwork

Get referrals for realtors from friends and family… OR ask me, I have a group of realtors that I know and trust.

Step 5: Mortgage Approval

Once you have found the property you would like to call home, your mortgage broker will send your mortgage application and property information to the lender who is the best fit for your situation, based on your input.

If the lender likes your financial situation and the property, they will issue a “commitment” letter outlining the terms of the mortgage. The lender will send you a list of documents, so they can verify and validate all the information you told them on the mortgage application.

Step 6: Time for the Solicitor (Lawyer or Notary)

Once the lender has reviewed and approved all your mortgage documentation and the property documentation, your file will be sent to your solicitor (in B.C. you can use a lawyer or notary). They will process all the necessary title changes and set up a time for you to meet, review mortgage documents and sign.

Step 7: Get the Keys

On the closing day the documentation for your home purchase will be filed at the land titles office by your solicitor. Typically, the possession date is 1 or 2 days later, giving time for the money (down payment & mortgage) to get to the home seller. On possession day you set up a time to meet with your realtor to get the keys.

Congratulations you’re done – you now own your home!!

Mortgages are complicated, but they don’t have to be… Call me today!

dcarlson@jencormortgage.com

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By: Kelly Hudson – DLC

With government officials citing limited resources and a lack of funds available to conduct a proper investigation, criminals have been manipulating and taking advantage of the Canadian legal system. It is now coming to light the impact this has had on our economy, most notably our real estate market.

To crack down on this, the government implemented “sourcing the funds” for down payment used to purchase a home. The federal and provincial government require mortgage lenders collect a minimum of 30 (for uninsured mortgages) –  90 (for insured mortgages) days of transaction history for every bank account where money has originated to complete a real estate purchase.

E-transfers and transfers between accounts within a 30 – 90 day period require a history of the account in which funds were transferred from. For example, if a savings account has been reserved just for down payment and $1000 a month has been transferred into this account from a chequing/savings account, cashed in $5000 from a TFSA and deposited $3000 in cash, all before an offer was written on a home, the lender is going to request a 30- 90 day history of the savings, chequing and TFSA account, along with a history of the $3000 cash deposit.

This process may feel invasive and frustrating, rightfully so. However, due to the extreme affect money laundering has had on the economy, these rules are probably not changing. When accumulating down payment be prepared to provide a 30 – 90 day history of every account where money is coming from for down payment. This process is difficult and time consuming for the client, mortgage broker and lenders.

Be prepared! With more focus on anti money laundering, rules and regulations may become more rigid.

If you have any questions,  please feel free to contact me.

dcarlson@jencormortgage.com

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The 3 ‘rules of lending’ focus on determining the maximum size of mortgage that can be supported by your provable (what you paid personal income taxes on) income.

You need to consider two affordability ratios:

Rule #1 – GROSS DEBT SERVICE (GDS) Monthly housing costs are generally not supposed to exceed 35-39% of your gross monthly income. Housing costs include monthly mortgage payment, property taxes and heating. If purchasing a condo/townhouse, the GDS will also include ½ of the condo fees. The total of these monthly payments divided by your provable gross monthly income will give you your Gross Debt Service ratio.

Mortgage Payments + Property Taxes + Heating Costs + 50% of Condo Fees/Annual Income

Rule #2 – TOTAL DEBT SERVICE (TDS) Your entire monthly debt payments should not exceed 42-44% of your gross monthly income. This includes housing costs (GDS above) PLUS monthly debt re-payment (car payments, credit cards, line of credit, additional financing etc.). The total of all monthly debts divided by provable gross monthly income will give you your Total Debt Service ratio.

Housing expenses (see GDS) + Credit Card Interest + Car Payments + Loan Expenses/Annual Income

The other 56% of income is considered to be used up by normal monthly expenses : taxes, food, medical, transportation, entertainment, etc.)

Rule #3 – CREDIT RATING. Everyone on the title of the property is required to have their credit checked. Credit is important as it shows lenders how past and present credit has been handled. This gives the lender an indication of how future credit will be handled, and whether or not you will be a good risk and make your required mortgage payments. If credit is handled well, you will receive competitive interest rates from the banks/lenders. If credit has not been handled well, higher rates or declines can occur.

If you have any questions, contact me today!

dcarlson@jencormortgage.com
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With the mortgage rule changes in recent years, lenders have had to make some adjustments to their rate offerings.

There are different tiers and rate pricing based on the following 3 categories:

1) Insured – a mortgage that is insured with mortgage default insurance through one of Canada’s mortgage insurers, CMHC, Genworth or Canada Guaranty. A mortgage insurance premium based on a percentage of the loan amount is added to and paid along with the mortgage

2) Insurable – a mortgage that may not need mortgage insurance (20% or more down payment) but would qualify under the mortgage insurers rules. The client doesn’t have to pay an insurance premium but the lender has the option to if they choose.

3) Uninsurable – a mortgage that does not meet mortgage insurer rules such as refinances or mortgages with an amortization longer than 25-years. No insurance premium required.

Insured mortgages are the safest type of mortgage loan for the banks and the most cost-effective way of lending mortgage money, so clients seeking or in need of an insured mortgage will get the best rate offering on the market.

Insured as well as Insurable mortgages can be bundled and sold as Mortgage Backed Securities (MBS) meaning banks can get that money back quickly so they can lend more out. While Insured mortgages get the best rates, Insurable mortgages are typically a close second.

If a mortgage is Uninsurable that means the banks have to lend their own money and have to commit to that loan for the full term at least. This makes it a more expensive loan for the bank, so they pass the cost on to the consumer as a premium on the rate – typically 10-20 basis-points.

While there are rumours that the Government may start to allow refinances and 30-year amortizations to be insured again, no formal announcements are expected in the next few months.

In the meantime, consumers looking to tap into the equity they’ve built (consolidation, investment, home renovations) or wanting to keep their payments as low as they can (30-year amortization) are paying the price.

If either a refinance or a longer amortization is something you are considering, it’s wise to have a free analysis of your mortgage done so you can make an informed decision. If you have any questions, contact me today!

dcarlson@jencormortgage.com
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By; Kristin Woolard – DLC

The Huffington article states “Canadians pay attention to the big guys, however, because they’re either too comfortable to make a change or simply not aware they’re being taken for a ride. The banks have a 90-per-cent stranglehold on the Canadian mortgage market and we’ve been slow to start paying attention to the alternative — often cheaper — options out there.”

The drop in rates was a measure to bring bank rates in line with the non-bank lenders who have already been offering lower pricing. The only difference is the banks have high market share of the business and more profit each year so they can afford to spend money on media and other forms of advertising. The media attention helps them to capture more business with a rate drop after a lag time of passing on higher rates to consumers. The informed consumer working with an independent mortgage broker will already know the market and what mortgage product is best for their needs.

However, interest rates are not the only consideration when choosing a mortgage. Each time you make a purchase, renew your mortgage or take equity out to renovate, invest or other reasons, it is always best to consult with your mortgage broker for a review.

One of the big factors is the cost to exit that mortgage before maturity. Life happens. There are costs to breaking the contract early in the event of sale, marital break-up, death or need to consolidate other debts. Bank penalties for early payout are higher than non-bank penalties by a factor of 4 times. By reviewing your needs with me, we can discuss all of the options available from lenders including bank and non-bank, to ensure you are making an informed decision.

dcarlson@jencormortgage.com
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By: Pauline Tonkin-DLC

Picture this: You’ve finally been able to put away enough for a down-payment on your dream home. It’s taken you five years of diligent saving, but you did it! You have also been diligently working on improving your credit score and paying off debts and are at a place of financial stability. So, first of all, KUDOS TO YOU! Second…now what do you do? Here are the three steps that will take you from browsing new homes to getting the keys to your new place.

STEP 1: PRE-APPROVAL
This should actually be the step BEFORE house hunting. Visiting your mortgage broker to get pre-approved is the first step anyone looking to buy a home should do. When you meet with your broker for the first time they will:

• Have you fill out an application (or you might be able to fill out one online)
• Pull your credit
• Determine what your maximum purchase price will be.

Be aware that you will also be asked for additional information when you visit your broker to apply, including a letter of employment/pay stub, down payment verification, two years notice of assessment and/or T4’s, a void cheque, and a number of other potential documents.

Once you are pre-approved it’s house hunting time for you! The benefit of having this done BEFORE you start looking is that you can work with your realtor to find properties within that price range.
When you do find just the right home for you, it’s on to step two.

STEP 2: APPROVAL
If you were able to provide the bulk of the paperwork for your pre-approval, then it will be smooth sailing from here. You may have to supply a few pieces of updated information but otherwise, it’s up to the lender to do the hard work at this point.

Your application will be re-assessed, and the lender will take a look at the property you are purchasing. Once they confirm that it aligns with the guidelines they have laid out for your loan, then it is sent off to the mortgage default insurer for approval. At this point, make sure that you do not remove the financing condition until all the lender conditions are met.

Now that you have final sign-off and are waiting for the final conditions to be met, it’s on to step three.

STEP 3: FINAL STEPS
Your broker will notify you once the conditions have all been met, and the lender will send the paperwork over to the Lawyer’s office. The lawyer will take a few days to go through the mortgage and prepare it for your final sign off. When you go, you will be asked to present:

• Void Cheque
• Two forms of identification
• Balance of the down payment in the form of a bank draft

On the day of funding, the lender will send the funds to the lawyer who sends them to the seller’s lawyer who upon receiving the funds will give you the all clear.

All that’s left is to hand you the keys to your new home!

As one final step, keep asking questions at each stage of the mortgage process, and check in with me if you have any questions along the way. I am happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

dcarlson@jencormortgage.com
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By: Geoff Lee-DLC

With approximately 1,000 people retiring every day in Canada, it’s not surprising that there has been an increased demand for Reverse Mortgages.

A Reverse Mortgage can assist people aged 55+ to realize their dreams in retirement. Whether they want to travel, help their kids or grand kids or even just supplement their monthly income, a Reverse Mortgage can be an effective way to have their home assist them to meet those goals.

There is a lot of misinformation out there however, that could make people hesitant to get into a Reverse Mortgage. Many people think that the Bank will own their home but this is completely untrue. A Reverse Mortgage is just that – a Mortgage registered on the home’s Title, just like any other bank mortgage. The client retains full ownership and control of their home. They have the freedom to decide if and when to move or sell.

Another misconception is that you could end up owing more than your house is worth. In fact, due to the Reverse Mortgage lender’s conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. They will only issue a Reverse Mortgage up to 55% of your home’s value so there is lots of equity remaining to offset accrued interest charges even if you choose to make no payments at all.

In fact, over 99% of Reverse Mortgage clients have equity remaining in the home when the loan is repaid. Many people view a Reverse Mortgage as a ‘last resort’. In fact financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.

Some people think that you cannot get a reverse mortgage if you have an existing mortgage. But many Reverse Mortgage clients use the funds to pay off their existing mortgage and other debts, freeing up cash flow for to use as they wish – and be free of regular mortgage payments too.

I personally have parents over 70-years that could be looking at the expense of Assisted Living for my Mom in the near future. They own their home outright and once both of them are retired that added cost could be too much for their pensions and could force them to sell their home before they’re ready.

I have advised them of the Reverse Mortgage option and we have decided to look into that possibility when the time comes. It is my belief that nobody should feel forced to sell their home and they will explore any options available to them so they have choices.

If you’d like more information on how a Reverse Mortgage may work for you, I recommend calling e-mailing me to get all the facts.

dcarlson@jencormortgage.com
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By: Kristin Woolard

When is it time to think about saving for a down payment? I would say about a year before you think about buying a home. While that’s ideal in today’s world, we often do not have much time to save for a down payment. Sometimes your landlord is planning on retiring and wants to sell the property. How do you get a down payment?

Here’s a few ways to get a down payment for your home:

1. Save – it’s old fashioned but it works. Open a Tax Free Savings Account (TFSA) and put a set amount into it. If you don’t have the discipline arrange for automatic deposits from your bank account. How much can you save $50 a week? That’s $2,600 in a year. Not enough. How about $200 a week?
   Stay at the Mom & Dad Hotel – while your parents may not be able to help you with a down payment they often have a spare room that you can stay in. One year of not paying rent would make a good down payment even if you chip in for groceries.
2. Extra Income – get a second job and bank every cent from it. I know of many young people who have a day job and are servers on the weekends.
3. Home Buyer’s Plan – the federal government will allow you to pull up to $35,000 from your RRSP account. This goes for your partner. You could put down $70,000 between the two of you. These funds need to be returned to your RRSP over the next 15 years. This is a great quick source for a down payment.
4. Take out an RRSP Loan – borrow an amount that you need for a down payment as an RRSP. Hold the funds for 90 + 1 days and you can withdraw the funds. The cons are that you now have more debt and you have to wait for 90 days. Most sellers want a possession day sooner than that.
5. Sell an asset. I had a client sell his vintage Cadillac Fleetwood for a down payment. Be sure to get a receipt or to sign a bill of sale with the purchaser to show where the funds came from. Rare stamps or coins, another property or vehicle are all acceptable assets.
6. The Bank of Mom and Dad – This may be the easiest way to get a down payment or it may not. Most parents are nearing retirement and trying to save funds. There can be creative ways to get a down payment. They might set up a a secured line of credit and use the equity in their home. You could make the payments over the next few years. Note: these payments must be included in your debt ratios. If they decide to gift you the funds and make the payments themselves a gift letter is all that’s needed. They could sell their home and move into a granny suite in the basement or over the garage.

Before you start it’s always a good idea to speak to your favourite mortgage professional, Debra Carlson.

dcarlson@jencormortgage.com
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by: David Cooke – DLC Jencor

Did you know that you can buy a home with ZERO down payment?? If a home purchase is your goal this year but you aren’t able to save up enough of a down payment, you may qualify for a low or zero down payment mortgage. One of our Lenders is offering a great zero down program.

What is a Flex-Down Mortgage?
A Flex-Down Mortgage is a mortgage product that has a flexible down payment amount. There is still a down-payment required, but it will vary based on the property value.

• For a property valued under than or equal to $500,000, 5% down payment is required (sources available below)
• For a property valued at greater than $500,000 and less than $1 million –5% down payment is required up to $500,000 with an additional 10% down payment on the portion of the home value above $500,000.

Flex-down mortgages can only be on first mortgages, not second or third or used in refinance situations. As noted above, the total property value has to be less than $1 million. This type of mortgage will also have insurance included with it—the premium will be lesser of the premium as a % of the total new loan amount or the premium as a % of the top-up portion additional loan based on the rates at that time.

Those that choose to go with this type of mortgage product will have to meet requirements, just like any other mortgage. There are a few specifications with this product:

• You must show that you have standard income and employment verification papers
• A credit score of 650 or higher is highly recommended
• You must have no previous bankruptcies
• Some lenders may still require you to have some of the down payment from your own resources

Those considering this type of mortgage are recommended to have very little debt and be able to accommodate the additional cost of higher mortgage insurance (due to the higher risk to the lender on this type of mortgage). Typically, the insurance premium would be 0.2% higher on a flex down mortgage.

How it Works
You can borrow your 5% payment from a Line of Credit or even a credit card. This can then be used for your down payment. You have to disclose this to the Insurer and it will be on the application that goes to the Lender.

This is perfect for someone just getting into a new high paying job or for someone who is renting and can afford higher monthly payments but would take forever to save up the 5% down payment. This type of mortgage product can be an excellent option if you don’t quite have enough for the down payment. Are you interested in learning more about this mortgage product? Call me so I can show you how a Flex mortgage can make the home of your dreams happen sooner than you think!

dcarlson@jencormortgage.com
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A new survey has emerged showing that out of 1,901 owners and would be homeowners, 43% (more than two out of five) Canadians are not confident in their knowledge of the mortgage stress tests—despite them being in place for more than a year now.

We wanted to give you a brief set of notes regarding the guidelines. This is something you can use and reference whether you are a first-time home buyer or looking to refinance underneath these new guidelines. It gives a clear picture of what/how you are impacted as a buyer or someone who is looking to refinance.

Here’s what you need to know about B-20:

The average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power under these guidelines reduced 15-25%. Here is an example of the impact the rules have on buying a home and refinancing a home.

PURCHASING A NEW HOME

When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:

REFINANCING A MORTGAGE

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify to borrow it.

Source (TD Canada Trust)

These guidelines have been in place since January 1, 2018 and we are starting to see the full impact of them for both buyers and those looking to refinance. Stats are showing that there is a slowdown in the real estate market, however there is also a heightened struggle for many buyers to now obtain approval under these new guidelines. It’s a difficult situation as the cry for affordable housing is still ongoing as the new guidelines may slow down the market but appear to further decrease the borrowing/buying power of individuals.
Keep in mind, this is just a brief refresher course on the B-20 guidelines. As always, if you have more questions or are looking for more information, we suggest that you reach out to your Jencor mortgage broker to discuss and get a full and detailed look at how it will impact you personally.

dcarlson@jencormortgage.com
403-245-3636 x 2027

By; Geoff Lee – DLC