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.

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

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

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. You should check in with your mortgage broker if you have any questions along the way. They are happy to guide you through the process of not only getting a mortgage but also having a mortgage too!

If you want to buy a home and don’t have a bucket load of cash – you are going to need a mortgage.

In order to get a mortgage, you are going to need credit…

When you get a mortgage, banks lend you “their” money and secure the loan against the property you are buying. Therefore they want to know how you’ve handled credit in the past.

Bad credit = high interest rates
Really bad credit = NO mortgage
If you have bad credit, you need to improve your credit to get a mortgage/better interest rates.

When you have had credit challenges – you are going to be limited with the number of credit card companies willing to offer you credit.

In order to buy something on credit, most lenders follow the Rule of 2:

2 lines of credit (credit card, line of credit, loan etc.)
Minimum credit limit $2000
2+ years (24+ months) history
One of the quickest ways to rebuild your credit is to get 2 credit cards.

Since you’ve had credit blemishes in the past, many credit card companies aren’t interested in giving you more credit.

If you have had any files that have gone to collections, you MUST pay those off ASAP.
One way to get a credit card for the credit challenged, is to get a secured credit card.

DEFINITION of Secured Credit Card

A secured credit card is a credit card that requires a security deposit. Secured credit cards are generally for individuals whose credit is damaged or who have no credit history at all.
A secured credit card works just like a traditional credit card. A secured credit card can help you establish or rebuild your credit.
The security deposit will depend on your previous credit history and the amount deposited in the account.
Security deposits for secured credit cards tend to range between 50% and 100%.
The security deposit cannot be used to pay off the balance on the credit card.
Typically, secured credit card companies will increase the limit on your card once you have proved you are a good credit risk. This takes time. With continued good credit history over a few years, they will refund your security deposit and issue you a regular credit card.
Five Tips for Wisely Using a Secured Credit Card

Use for small purchases you can pay off each month.
The point of using a secured credit card is to show your ability to responsibly charge and then pay off your balance. To do this, make a few purchases each month and pay your bill in full. By NOT carrying a balance you avoid paying interest & build your credit.

Pay on time, and more than the minimum payment.
To get a healthy credit score – it is essential that you pay on time. Ideally you want to pay off your balance in full. If you can’t pay the full amount, pay down as much as you can, so you are reducing your credit utilization (the amount you owe compared to your credit limit).

Make Multiple Payments every month.
Making more than one monthly payment can help keep your balance low. A large balance reduces your overall credit which can negatively affect your credit score. If you make a large purchase, pay it off quickly to keep your credit utilization low.

Set Payment Alerts.
Even the most organized person misses a payment now and then… That’s OK for people with good credit… if you have credit blemishes you’ve lost your “get out of jail free” privilege. One missed payment is one time too many! Set up payment reminders 1 week before your payment is due.

Enroll in Autopay.
If you are concerned about making your payments on time? The easiest plan is to enroll in autopay, which allows your credit issuer to automatically deduct the monthly balance form your bank account, so you don’t have to keep track of bills. This assumes you have the money in the account to pay off the credit card.

Please note: Prepaid Credit Cards do NOT help you build credit. You’ve prepaid the amount on the card, so no one is actually offering you any credit.

If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

By Kelly Hudson

While many people will go to their bank to obtain a mortgage or line of credit, they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.
A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.
This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs. Do they prefer emails or phone calls?

When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification. I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.
I then list the areas I want to highlight: Income, credit, property, down payment and start with their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As a result, underwriters trust me and have given my clients a second look or asked for an exception. Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file.

I never yell or give my underwriters a blast if they decline a file. I will, however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation. Just as a FYI, a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation. Now who do you think mortgage clients should deal with? A bank or a broker?

By David Cooke