The impact of your credit card on your mortgage

Credit cards & credit reports

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Paying off your credit card on time impacts your credit rating.

Its been a while since I wrote about the importance of your credit report. This topic popped up twice this week so I think a refresher is not a bad idea.

When we submit a mortgage application lenders look carefully for a few specific things:

Is the home you are looking to buy or refinance readily marketable / appeals to a wide range of potential buyers?

Do you have your down payment in order?

Do you have consistent income to repay your mortgage?

Does your overall financial profile show you manage yourself responsibly?

Does your credit report reflect a history of payments made on time and as agreed?

When they are reviewing your credit report they are also looking for a few specific things.

How long have you had active credit facilities (credit card/line of credit/mortgage etc)?

Do you have a history of making your payments on time?

Do you pay most of your credit card balances off regularly or do you run with cards maxed out all the time?

Lenders fully understand that sometimes life happens and we can sometimes explain one-off blips or issues. If you have a consistent history of late payments that can become a bit more challenging to explain.

One thing that I chat about with my clients is how making your credit card payment a few days ahead of your statement cutoff date can really help boost your score.

Over the last few years it has become more common that people use their points cards for everything over the course of the month then pay their card in full once they get their statement. If you operate your credit card this way your credit report only picks up the balance as reported on your statement so it can look like you are always carrying a significant balance even though you always pay in full.

For most people this is not a big deal, but if you are working on improving your credit score this small tweak can have a huge impact.

The other issue that popped up this week was incorrect information on a client’s credit report. Part of her first name was missing and the birthdate was incorrect.

The client was able to confirm everything on her credit bureau for me right down to previous addresses, employers, and old loans that had been paid off.

Lenders would not move forward until her credit report was corrected and in this case because two items were wrong the client needs to correct it herself (normally we can help make changes fairly quickly).

Its always a good idea to review your credit report at least once a year to make sure that all of your information is reporting correctly. If there is an issue you can catch it early and correct it before you are in a panic midway through a mortgage application.

Changing topic a wee bit as my daughters are on evacuation alert already …

If you are in the process of buying a home as we move into fire season please make sure you have a clause in the agreement as to what will happen should there be an active fire nearby. Nail down your home insurance as early as possible because once there is an active fire close by securing an insurance policy can be very difficult if not impossible.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

No dumb questions when it comes to applying for a mortgage

Work with a mortgage pro

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Important to work with a mortgage professional when securing financing to buy a home.

“I know this is a dumb question but ….”

“I should probably know this already ….”

“I’m sorry to ask so many questions but …”.

Many times, clients start out with one of these statements. They feel like they should have a better understanding of the mortgage process and its terminology. The truth is, buying a home is not a simple journey and applying for a mortgage is not a cake walk.

Even if you’ve been through the process in the past, the goal posts seem to move faster than you can keep up.

One of the reasons I love (most days) my work is I am able to spend as much time as I need with my clients, helping them understand their financing. When I worked for one of the chartered banks in a previous life, I was so tightly scheduled that when our time was up that was it. Someone else had an appointment and I needed to be on time for that.

Clients have different learning and communication styles. Some come well-versed and understand the mortgage process, while others have not done any research and need a lot of hand-holding.

My goal is to make sure that by the time they sign their legal paperwork in front of their lawyer, my clients understand the decisions they made and the rationale behind them.

Whether it is the first time you buy a home or you look to refinance your current mortgage, it is important you find a professional to work with who is patient and non-judgmental.

In a beautiful world, you connect with someone who has bought and sold a few of their own homes and has worked in the mortgage world for a while.

It can feel very intimidating to bare your soul to a complete stranger. We often don’t share details of our finances with anyone except our banker or spouse and in some cases I find clients feel embarrassed about the state of their finances.

We see, often via social media, others living lavish lifestyles and somehow feel we should be doing the same.

The bottom line is whether it is your first plunge into the homeownership pool or you are a veteran in the market, it is important to connect with someone that takes the time to understand your situation and your goals. Knowing your long-term plan and how you handle your finances can help your mortgage professional set you up for success.

So, please make sure you ask all of the questions, even if you think you should know the answers.

Guessing that you understand something or bluffing without listening to your mortgage professional’s advice can cause unnecessary grief down the road.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

When buying or selling property, working with a realtor is better than going it alone

Work with a realtor

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Mortgage broker Tracy Head advises her clients to work with realtors when buying or selling property because of the expertise they bring to transactions.

When I work with clients who say they are writing an offer on a private sale, I always talk about the benefits of working with a realtor.

Realtors do so much legwork behind the scenes that clients aren’t aware of. Most times it is challenging on my end when clients try to tackle the process of writing an offer on a private sale themselves. I joke and say I am going to charge them an extra fee because of the additional work it creates on my end. I don’t actually charge a fee to be clear but I am only half kidding.

When you start down the road of buying a home there are many new and unfamiliar terms you may hear. Whether you are working with a realtor or not, arguably some of the most important things you need to learn about are the “subject to” conditions to include in your offer to purchase.

When you write an offer to purchase a home, your realtor will offer guidance as to the conditions you include. Common conditions you will see are:

• Subject to arranging suitable financing

• Subject to a satisfactory home inspection

• Subject to arranging home insurance

• Subject to review of strata documents

• Subject to the sale of your current home

If you are purchasing a rural property or are in a unique situation you may also see:

• Subject to a water potability test

• Subject to an inspection of the septic system

• Subject to the seller finding a suitable home to purchase

These lists are not all-encompassing by any means.

The purpose of adding conditions to your offer is to protect you in case there are any issues with the home you are looking to purchase.

In previous columns I’ve written about the potential dangers of writing a subject-free offer. The high-level, quick position is that if you write a subject-free offer you’d better have cash on hand to buy the home.

I have worked with several clients over the last few months who have written private offers. We do absolutely everything ahead of time to try to ensure they will be successful with their financing.

These files stress clients more than you can imagine. They have to either find templates to fill out or pay a lawyer or notary to prepare the documents for them. Either way they need to quickly learn about the conditions I listed above and understand key dates involved in the buying process.

The clients need to deal directly with the sellers on any issues that may arise. When you are working with a realtor they handle these issues on your behalf. A knowledgeable realtor also helps avoid issues by taking any of the personal contact and emotions out of any potential areas of conflict.

Make sure you do your due diligence and have your ducks in a row as you move forward with an offer to purchase, whether writing an offer with a realtor or on your own.

Now that the sun has come out and the election is over, I’ve seen my clients more actively shopping, which is encouraging.

As always, my advice is to work with a realtor you are comfortable with and who knows your area well.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

Not all lenders are created equal when it comes to mortgages

Finding right mortgage fit

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When it comes to mortgages, there's more to it then just a good interest rate. says mortgage broker Tracy Head.

Just as no two clients seeking a mortgage are the same, not all lenders are created equal.

For the majority of clients getting the best interest rate is their primary concern. For me, as a mortgage broker, it is as important to find a lender that provides a smooth process from start to finish and excellent customer service once a mortgage is finalized.

What do I mean by that? When new lenders pop into the mortgage market, they often offer low interest rates or better compensation to encourage mortgage brokers to send files their way.

Sometimes, those new lenders are amazing and sometimes, not as much.

Once in a while, more established lenders will offer brilliant rates in order to increase the number of mortgages they have on the go. We see lenders float in and out of the competitive rate market based on how much money they have available to lend at any given time. While this can be great for clients, it can also be a nightmare.

If one lender offers rates much lower than other lenders, they end up flooded with applications. They may or may not have the staff—staff with expertise—to handle larger volumes and increased time pressures.

If I am working on a refinance with flexible dates, that isn’t necessarily a problem. If I am working on a purchase application with deadlines, it can become stressful for all involved.

On top of that, lenders have different processes for handling the legal paperwork that goes to your lawyer’s office. Some lenders handle everything in-house and have very responsive teams to handle getting the documents to your lawyer and addressing any changes that need to be made. Others hire third-party service providers to produce their documents and that adds an extra day or two to the process.

As a broker, I try to learn about my clients’ longer term plans and find the right fit lender-wise. I look at lenders’ policies for portability, pre-payment options, flexibility with respect to their guidelines, broker support and equally, as important client service experience after the mortgage finalizes.

Does the lender have a portal? Will it allow me, as a broker, to help my clients or do they require clients to work with them directly for any changes?

I sent applications to two newer lenders in the last month because they had fantastic rate specials available. Both files ended up being very stressful as we were down to the wire waiting for mortgage instructions to be sent to the clients’ respective lawyers. I prefer not to have to deal with last-minute stress on my files.

Rate is of course incredibly important to your long-term financial health. In my mind, a smooth process before and after your purchase or refinance is also important. There are many considerations that go into choosing the right package for my clients.

My recommendation one day may change the next, depending on both the client’s situation and what I am seeing behind the scenes with various lenders.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.