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The-Mortgage-Gal

Now is a good time to get a mortgage rate hold

Get a mortgage rate hold

Fixed mortgage rates are on the rise. Don’t panic.

I will say that if you are seriously considering buying in the next few months its likely a good time to get a rate hold in place.

What is a rate hold?

When I work with clients I work on a pre-qualification. We often use the terms pre-approval and pre-qualification interchangeably but its important to understand the difference.

A pre-qualification means I do a deep dive into my clients’ finances to see what they qualify to borrow based on their overall picture. I look at the amount and type of income, all debts owing, and the amount available for down payment.

We spend time going over the process of buying a home, timing for each step, and what they need to have on hand to move forward. If rates are relatively stable I won’t always get a rate hold in place because that means I have to pull credit bureaus.

I am cautious about pulling credit unless clients are seriously shopping, because if too many lenders pull your credit too often it can drop your score and make it look like you are an avid credit seeker. When the market is rumbling about upcoming rate increases I will move forward with nailing down rate holds more often.

A rate hold is kind of like a guarantee from a lender that provided everything is verified as stated in your application and the property you write an offer on meets the lender’s approval, they will honor the rate on your rate hold even if rates have gone up in the meantime.

Most lenders offer 120-day rate holds, which provides some comfort if you are out shopping for a home and are concerned about rising interest rates.

Your new mortgage has to close within the 120 day period. Some people think that as long as you write an offer within the 120 day period that the rate hold will apply, so its key that you understand the important dates you are working with.

Clients often think that a rate hold equals a pre-approval. This isn’t always the case.

Most lenders have automated programs that evaluate applications for rate holds. As long as the information entered in the application meets their criteria a rate-hold is put in place. Most lenders don’t actually review pre-approval applications (some have an underwriter do a cursory review) or the supporting documents.

More concerning for me is when I chat with clients who have received a pre-approval from on online program and run out to write an offer, thinking they have their financing in order.

If you are planning to buy a home this spring, I encourage you to reach out to a mortgage professional to discuss your situation so you have your ducks in a row when the right home comes on the market.





New year is a good time to take a closer look at your mortgage

New year, new mortgage

Towards the end of each year I carve out time to look back on how the past year went. I think about what went well, and what I’ve accomplished. I also think about things that I will do differently for the coming year.

Part of this reflection includes reviewing my finances to see where I’m at. Working in the mortgage industry I see many different ways that clients handle their finances so it is inevitable that from time to time I compare my ways to things I learn from my clients.

For many of us purchasing real estate is the largest investment we will make and also the largest debt we will carry. Many times once we have gone through the process of purchasing a home we tend to set it and forget it – meaning that we make our regular payments and don’t do much with our mortgage until our five-year renewal pops up.

When we are starting out or have lots of expenses this might make the most sense. However, once our income increases or expenses go down it might make more sense to think about making extra payments to start carving our mortgage down.

As an example, I looked at a mortgage of $440,000. Assuming the same interest rate but increasing the payment from bi-weekly to bi-weekly accelerated, the payment was $67 higher per payment and shaves three years and four months off the life of the mortgage AND paid off almost $9,000 more off the principal over a five-year term.

Each lender has slightly different pre-payment terms so it is worth a look to see what your mortgage allows.

If you are thinking that you don’t have room in your budget to increase your payment, it may be worth doing a deep dive into your finances to track where your money is going. There may be simple tweaks you can make (or more difficult decisions) that will free up monthly cash flow.

If you have significant equity in your home you might want to consider a refinance to tidy things up and make more headway on your overall financial health. For some people this may not be the right move but if you are finding yourself overextended and not making any headway on consumer debt like credit cards or lines of credit it might make more sense to move these debts to a lower interest rate on your mortgage.

We have a great app that you can download to your phone that has a section that lets you compare how making small changes to your mortgage can impact that balance and amortization over the long run. Here is the link if you’d like to see how making changes might help you in the long run using the my My Mortgage App.

The start of the new year always feels like a great time for a thorough review of your finances. Particularly if your mortgage is coming up for renewal over the next few months it’s a great time to see if there are some small changes you can make to improve your overall financial health.

Wishing you and yours an amazing year to come.



Mom of new homebuyer recognizes broker's commitment to client

Mortgage like a mother

I had one of the weirdest compliments of my career this week.

I met with a young first-time home buyer and her mother to go over her mortgage commitment and explain next steps to her. I have been working with this client for close to two years as she has prepared to buy her first home.

In point of fact, she was well-prepared before our first conversation. She had solid employment and started saving for her downpayment when she was 18. She also received an insurance settlement and tucked every cent away in an investment portfolio. By the age of 28, she saved 20% to put down on her first home.

This is highly unusual for a first-time homebuyer in our market, never mind clients who have bought and sold multiple homes.

We sat and chatted for almost an hour about her future plans and what her new financial picture would look like as a home owner. We went through the pros and cons of a 25-year amortization versus a 30-year amortization and ways to make additional payments against the principal of her mortgage.

She was very strategic in her choice and is purchasing a home with a legal basement suite. I have every confidence she will continue to be a strong saver and will likely hammer away at her mortgage to get it paid in full far ahead of the original amortization.

I love having these conversations with clients. I like to know they fully understand what they are getting into, and how to maximize the features of their mortgage. Maybe, most importantly, I want them to know the product I’ve chosen for them is the best fit for their particular situation.

As we wrapped up our meeting, her mother said “I’m so glad we were able to sit down and go through this with you. I feel like you really have her best interests at heart.”

Clients and conversations like this are why I truly love what I do.

Wishing you and your families an amazing holiday season filled with much love and laughter.





It pays to check your credit score when house hunting

Check your credit score

The second time was the charm. In August, I had a call from a couple looking to buy their first home.

On the surface their application looked amazing. They were both in stable jobs with strong salaried income. They both had been in their jobs for more than five years and they had worked hard to save almost $35,000 for their down payment.

I asked what their credit histories looked like. There was a very definite pause.

He had a student loan that had been written off almost fifteen years ago that still showed up on his credit bureau report. The outstanding balance was just under $10,000. She had come out of an abusive relationship and had to make do and raise her children on minimum wage.

Her ex-husband refused to pay any child support and still owes her over $35,000 through Family Maintenance. To add insult to injury, when she moved out, she didn’t think to change over the cable and hydro from her name and he ran up the bills then let them go to collections.

They paid out the student loan and provided proof that the collections on her credit bureau report had been paid years ago. We worked on getting their credit bureaus reports straightened away. I suggested they wait a few months before writing an offer, but they did write one in September.

I managed to get a lender to support their application but none of the insurers would approve the file. The kicker was another unpaid collection that surfaced on her Transunion credit report. She paid it out in full right away.

They were disappointed, but we talked about waiting a few months and trying again. Two months later I got a call saying that they had written an offer on a home.

When I pulled their credit bureau reports again, their scores had both gone up by over fifty points, which put them both over the magic number of 680. We had an approval back in four hours. This is going to be an amazing Christmas present – their first Christmas in their first home.

Working with this couple and helping them find a mortgage approval made my heart very happy.

If you have had some challenges in the past with your credit but have worked hard to turn things around, it can feel painful to be told no. As mortgage brokers we have a process we can use to help correct your credit report to make sure things are reporting correctly.

Sometimes, even if you’ve paid off old debts or collections, the payments are not reported to the credit bureau and can pull your score down.

Taking the time to make sure your credit score is where it needs to be before you go house shopping is key. And if there are old issues that surface, being organized ahead of time can mean the difference between an approval and a heartbreaking decline.

Sometimes your situation can turn around much quicker than you might think.



More The Mortgage Gal articles

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About the Author

Tracy Head and Laurie Baird help busy families find mortgage solutions. Together they have more than 45 years of experience in the mortgage industry.

With today’s increasingly complicated mortgage rules, Tracy and Laurie spend time getting to know the people they work with and help them to better understand the mortgage process. They support their clients before, during, and after their mortgage is in place.

Tracy and Laurie work closely with their clients, offering advice and options. With access to more than 40 different lenders, Tracy and Laurie are able to assist with residential, commercial, and reverse mortgages in order to match the needs of their clients with the right mortgage package.

They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit www.okanaganmortgages.com

Visit their blog at www.okanaganmortgages.com/blog

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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