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Get mortgage pre-approved

I had planned to do a deep dive into the speculation tax, but after a phone call with one of my favourite realtors, I felt it was time to talk about the importance of having a pre-approval before going house shopping.

The realtor asked if there was anything I could do for her client. She gave me an overview of the client’s situation (no names, just a few key points). The client had written an offer on a home almost a month ago.

His bank had been working on the file for three weeks and finally came back with a decline as they couldn’t make the numbers work. He went to a credit union that also came back unable to help the client.

At this point, there is a back-up offer in place, so if the client isn’t able to find financing over the next week, he will lose out on the property.

From the client’s perspective this is unfortunate. The new home has a detached double garage and is on five acres, so is a perfect fit for this man’s hobbies and interests. It is also in an area where homes rarely come up at this price.

From the seller’s and realtors’ perspectives, this is frustrating as they have lost a month of time and effort where they could have already had the home sold.

Issues with financing can pop up, even when you take the time to get a pre-approval in place:

  • lenders may not like a specific property
  • your credit score may drop
  • you might write an offer on a type of property you had not discussed with your mortgage professional (i.e.: a mobile home, a strata property where the strata payment puts the debt servicing numbers too high, an age restricted complex, etc.).

However, the odds of having your financing approved (in many cases) certainly increase if you’ve taken the time to get your ducks in a row before heading out shopping.

After 10 minutes on the phone, I told the realtor that the only solution I could see was potentially adding a strong co-signer and increasing the down payment. She wasn’t sure whether this was an option for her client.

As a mortgage broker, another challenge that I sometimes face is being able to support and document what my clients have told me while completing their application. Because of this, I am very particular about seeing my clients’ documents upfront.

As an example, I recently took an application from a client who told me his annual base salary was $62,000. When I received his employment verification letter, it stated that his annual salary was $47,000 plus tips.

When I asked the client if he declared tips on his tax return, he said no.

This is a problem because we are required to document and verify income that supports the mortgage application. Lenders don’t want to go down the road of foreclosure. They want to know that you are going to make your mortgage payments.

I’ve also run into a situation where a client went out and wrote an offer without talking to his bank ahead of time. Everything was moving forward and looking positive until the lender pulled a Transunion credit report and discovered a loan that the client had co-signed for a friend.

The client hadn’t disclosed the loan to his banker as he never had to make any of the payments.

He didn’t think it was an issue.

It was an issue.

In this case, the client had already sold his current home and ended up having to work with a B lender and pay a higher interest rate to buy the new home. Frustrating but avoidable.

With mortgage applications, the three most important considerations are:

  • your employment / ability to repay the mortgage
  • your down payment
  • your credit history

Even if you have purchased a home in the past, it is important to touch base with a mortgage professional before you make any big decisions.

Changes to mortgage legislation over the last two years have dramatically affected your borrowing power. Lenders have become increasingly more particular about the documentation they need.

To learn more about the pre-approval process, check out https://www.okanaganmortgages.com/mortgage-pre-approval-know-what-you-can-afford/

Having a pre-approval is not a guarantee that your financing will be approved. Working with a knowledgeable mortgage professional that takes the time to educate and prepare you for the home buying process can save disappointment down the road.

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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 http://www.okanaganmortgages.com

Visit their blog at https://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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