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Coming out on top. Improve your chances, and reduce your stress, in a multiple offer situation.

As seen in the Metro Vancouver New Home Guide   .

Whether you are a first time buyer, looking at buying a bigger house or downsizing, if you are looking at buying an investment property it is important to be prepared. This spring a sellers’ market is in full swing, which is more noticeable in certain areas of the Lower Mainland. With historically low interest rates, buyers are making the jump into homeownership, because for many, their mortgage payments will be less than what they are paying in rent. It is certainly a great time to get into the market. However, in a sellers’ market buyers find themselves in competition with other buyers to purchase a home.

House in the hands of the man on a background of blue skyBuying a home can be exciting but having to compete for a home can add a bit more stress. In this case, a property’s asking price and what the property will sell for is quite different, and in most cases the selling price will be well above and beyond the listed price.

When a homebuyer goes into a multiple offer situation, they are less in control. As a buyer, you need to prepare yourself in doing work upfront and with the understanding that you might not get the property in the end.

During multiple offer situations, the seller is not obligated to negotiate or accept any of the offers. The seller has the liberty to choose the best offer to negotiate and they will accept the offer that best reflects their needs. While price is important, that will not be the only factor they consider. They will also look at things such as subject conditions, completion and possession dates.

Here are some things you can consider and help you feel more in control of the situation when going into multiple offer situations:

  • Get pre-qualified by a Mortgage Expert – One of the most imortgage_pre_approval_300mportant aspects of buying a home is knowing how much you qualify for. You will know what you are comfortable paying on a monthly basis but also what is the highest amount you can offer. While you might have been qualified, the lender still have to approve the property you are buying.
  • Prepare and have all your documentation ready – It is important that you provide your Mortgage Expert will all the documentation the lender is going to require upfront. Especially since time will be of essence, you don’t want the added stress of getting documentation when you are in the middle of negotiations and during the subject condition period.
  • Having the right real estate agent – It is critical that you have an agent that has your best interest in mind. As a buyer it is not your job to seal the deal, it’s your agent’s responsibility to know what is your limit and respect that. Don’t let your agent try to upsell you on the price and encourage you to go above your budget. It’s their job to research comparable properties in the area and advise you, but you are the one that makes the final decision. After all, it’s your money.
  • Set your boundaries – Onhome & calclatorce you set your budget, stick to it. Determine how exactly how much you can go over if you end up in multiple offers. Don’t get sucked in by emotion and peer pressure because in the end it can end up costing you a lot more money.
  • Consider doing a home inspection ahead of time – The buyer could consider your offer more readily if it doesn’t include a “subject to inspection” clause.
  • Be flexible – Winning a multiple offer situation might be as easy as agreeing to the seller’s conditions such as closing dates, buying the property “as is” or even tightening the subject removal dates. This is important if the seller has already bought another property and is anxious to moving on. By agreeing to make the transaction as easy as possible could mean winning over a more generous offer. When buying a property “as is” and limiting the subject conditions (such as requesting that a missing knob or floor tile be replaced) might work in your favour too. If your agent is aware of any information about the seller’s situation and if you can be flexible in any way, take advantage of this opportunity that might help you get your offer accepted.
  • first_time_buyers_480Write it down – Perhaps you might want to write a quick letter to the seller explaining who you are and why you want to buy their home so much. Buying and selling a home is an emotional time for everyone, especially if the seller has lived in that home for a long time and raised their family there. Sometimes, it’s not about the highest offer but it can certainly also be about an emotional connection. Even though your offer might be lower than the others, some sellers might feel a strong connection to your story and decide that it’s not about the money but about someone who will really appreciate a great home!
  • Know when it is time to walk away – Multiple offer situations can be stressful and sometimes listing agents strategically set the price of the home below market value to start a multiple offer situation. Make sure you stand firm.

Buying your home is about a great investment and you have to be smart about it. In the end, it’s about being comfortable on what you are paying a month and happy with the decisions you make. After all it’s about finding a home that will be a great place to start building equity and creating memories.

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What Happens When Financing Falls Through?

If your mortgage approval is rescinded at the last minute, your purchase could be in jeopardy. Here’s how to fix it. As seen in REW.ca

Q: I’m buying an old house, and the offer subject to financing. But what happens if the bank doesn’t approve the house and my financing falls through at the last minute?

A: If your financing falls through at the last minute, we would advise to get an extension on your subject removal date and not remove subjects until your financing is in place.

When you put an offer to purchase a home, you are saying that you will be buying the home provided all the conditions are fulfilled prior to you giving a deposit. Those conditions are commonly refer to as “subject,” such as subject to inspection, review of the strata minutes, financing, etc. During this time you will do your due diligence along with your real estate agent and mortgage expert via the lender. Prior to putting an offer, you would have been pre-approved or pre-qualified. While the lender might have approved you, they have still not approved the property you are purchasing.

Once you have an accepted offer the lender will issue a commitment letter agreeing to approve your mortgage provided you can fulfill the financing conditions. Some of these conditions include income confirmation, source of down payment, appraisal (if required), and approval of property such as property disclosure statement, strata minutes, Form B, etc. It is critical that the lender reviews and approves all of these documents before removing subjects. There has been cases where the lender has no issues with the borrowers but has issues with the property and therefore will not approve the financing.

When you work with a bank you only have one option, but when you work with a mortgage expert because we have access to multiple lenders if one lender doesn’t approve the mortgage, then we are able to go to another lender. This will save time and stress to the client. We have seen many situation in which the lender is not comfortable with the property so, in order to get financing with other lenders, an extension of one or two days is required to ensure all financing conditions are fulfilled and the client feels comfortable in removing subjects.


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Is the Rate the Most Important Factor in a Mortgage?

With ultra-low interest rates all over the news, it’s no wonder that’s what people focus on. But they shouldn’t. As seen in the REW.ca.

It is interesting that, time after time, when you ask someone “What is the most important thing about a mortgage?” they respond by saying “the rate”. This was exactly the answer we got at a networking event last week when we asked that question.

DiscountThe reason why people focus on “the rate” is because that is the only thing you hear on the news. Last week, it was all over the news that both BMO and TD announced that they have dropped their five-year rate. Then the talk around the watercooler is “What is the rate on your mortgage?” or “I just got 2.74 per cent for five years”. There are other lenders that mortgage experts work with that have being offering lower rates than that for weeks.

But it’s not about “the rate” – or it shouldn’t be. While the rate is an important component of a mortgage, it is not the main thing you should focus on. You should be focusing on what is the best mortgage for your individual needs that provides a great rate but most importantly the best terms and conditions.

By understanding mortgage terms and what they mean in dollars and cents, you can save the most money and choose the term that is best suited to your specific needs.

So What Should You Consider When Looking for a Mortgage?

  • Pre-payment penalties.

All closed mortgages have the pre-payment clause that says that is you pay off your mortgage before the end of the term, you would have to pay a penalty calculated based on the greater of the IRD (interest rate differential) or the three-month interest penalty. However, there are some lenders that they are offering lower rates and in addition to the above penalties they are also including a 2.5 per cent to 3 per cent penalty (depending on the lender), which ever one is greater. In addition, since there is no magic formula to determine the penalty, each bank has its own calculation formula. Most banks determine the rate you pay based on the posted rate minus the discount you receive. However, at the time to calculate the pre-payment penalty they use the posted rate.

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  • Pre-payment options.

The pre-payments without penalty clause is one of the conditions that can save you thousands of dollars over the life of your mortgage. This clause allows you to make payments on the principal of your loan, or increase the amount of your periodic payments (monthly, bi-monthly, etc.) without a penalty. Each lender has different programs for pre-payments, they usually vary from 10 per cent to 20 per cent. For example, you can pay any amount within the approved percentage of the original value of your mortgage, or increase your periodic payments once a year, without paying a penalty. Many people don’t take advantage of this clause because it is generally difficult to save the extra money to make additional lump sum payments, but they can certainly increase their payments up to 20 per cent. By doing this it will help you reduce your amortization period and pay more money toward principal than interest.

  • How your mortgage is registered – collateral or conventional mortgage.

o   With a conventional mortgage, the amount you are borrowing (property value minus down payment) is the amount that’s registered. But with a collateral mortgage, the amount that’s registered is 100-125 per cent of the property value, and the lender has both a promissory note and a lien registered against the property for the total registered amount. The advantage of a collateral mortgage is easy access to credit. Since the mortgage is already registered for a larger amount than you need to buy the house, you can access additional funds in the future without any extra steps or legal fees. However, there are also several downsides of collateral mortgages especially if you are putting less than 20 per cent down payment. The reason being is that with the current mortgage rules you are not able to refinance your mortgage unless you have more than 20 per cent of equity in your home. Therefore, unless your home dramatically increases in value in the next five years you will not be refinancing anytime soon.

o   Free transfers or switches to a new lender when your term is up aren’t usually available. Most other lenders don’t like the fine print and restrictions of collateral mortgages and won’t accept them unless they’re a refinance, which costs you legal, discharge fees and possible appraisal fees.

o    You could end up paying a higher interest rate at renewal. If your collateral mortgage makes it difficult to switch lenders at renewal, you don’t have the ability to shop around for the best rate. That could end up costing you up to 1 per cent more on your mortgage rate.

QAsignpost-wide386Therefore, before you sign on the dotted line, make sure that it is clearly explain to you what are the terms and conditions of the mortgage you are getting. If you are not comfortable with the answers you are getting or if they are not taking the time to explain the details of the mortgage take a step back.

That is why it is important that you work with someone that you trust, feel comfortable with and know that they are looking out for your best interest. Mortgage experts have access to multiple lenders – including banks, credit unions and other lenders that only work with brokers – which will ensure that we find the best mortgage for your individual needs. After all, we work for you and not for the banks.


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Do I Really Need Mortgage Pre-Approval Before House-Hunting? – conclusion

Mortgage pre-approvals are often recommended for would-be homebuyers – but there are exceptions to every rule. As seen in Rew.ca

Q: I’m beginning my search for a new home. Is it really necessary to get pre-approved for a mortgage first, especially with interest rates going down?

A: Last month we explained the difference between getting pre-qualified and pre-approved for a mortgage. We often recommend that buyers get pre-approved for a mortgage (not just pre-qualified) before they start house-hunting, to put them in the best possible position when that perfect home comes up. But of course, there are exceptions to every rule.

preapproved1Whether you get pre-approved or not, it’s very important to figure out how much you can afford to pay before you start looking. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there is no quick and dirty way to translate that monthly payment into a specific maximum mortgage amount. Other factors have to be taken into consideration such as down payment amount, closing costs, mortgage default insurance, property taxes, strata fees (if applicable) and heating costs. And you might be qualified to borrow more or less than you think, depending on your income, debts and credit history.

As discussed last time, obtaining pre-approval on a mortgage can offer advantages, particularly in terms of locking in a great rate for up to 120 days. However, it isn’t always advantageous, depending on the situation.

For example, we recently had a client who had a considerable sum to put as a down payment on a new home. With the price range he was looking at, the loan to value (LTV) ratio would have been close to 50 per cent. As previously mentioned, the most important thing is what you are comfortable paying on a monthly basis, not what you qualify for. This client wanted to keep his payments only a little bit above what he had been paying in rent. He had a great job and income, so he would have been able to qualify for a lot more. He had no credit card debt, no loans or lines of credit but had an established credit history.

Therefore, in this case, we didn’t get him pre-approved, because we knew there would be no problem getting him a great mortgage when the right time came. But we did do an in-depth analysis of his financial situation so he would know what his mortgage payment would be on the price range he was looking at, and also the maximum amount he would qualify for so he would have a wider price range to work with if necessary.

In addition, as interest rates were going down, there was no need to lock in a rate from a lender. However, if we had noticed that interest rates would be moving up again during his house hunting, we would have obtained a pre-approval. As mortgage experts, we do a lot of work behind the scenes to ensure we have the best options for our clients and provide them with the best mortgage available.

It is also important to remember that getting pre-approved doesn’t mean that your mortgage has been fully approved. The final approval is given once you have an accepted offer, your application has been submitted to the lender, and the lender has received and approved all the outstanding financing conditions outlined in a commitment letter.

Purchasing a home can be an emotional and time-consuming process as you want to make sure you find the right home for your needs. Knowing what you qualify for is critical when you start working with your real estate agent, as it shows you are a well-qualified buyer who is serious about purchasing a home. In fact, some agents won’t even show properties to buyers who haven’t talked to a mortgage expert or bank.

Talk to a mortgage expert to find out how much you qualify for and get you started on the road to homeownership.


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Difference between pre-qualified and pre-approved? – part 1

Determining how much house you can afford involves plenty of number crunching. Jorge and Alisa Aragon explain two stages on the road to mortgage approval – As seen in REW.ca 

Q: What is the difference between pre-qualification and pre-approval for a mortgage?

A: Pre-qualification is a relatively simple process where the mortgage broker or bank estimates both your borrowing power and the maximum amount of mortgage you can carry. This is done by providing information about your financial situation, such as your income, assets and debts. This easy and quick step doesn’t take into account your creditworthiness or involve a thorough analysis of your financial situation. It’s simply a place to start to estimate the price range of homes that you could qualify for. As mortgage experts, we do this during our initial meeting to give you a rough idea how much you will be able to qualify for. Pre-approval is a more in-depth analysis of your financial situation, as you will complete an application and provide consent for the lender to obtain your credit report. At this point, the lender has more detailed information on your income, assets and liabilities, and your information has been checked and verified. Your credit report has been pulled to learn about your credit score, history and credit worthiness. Based on this information, the lender will issue a pre-approval letter letting you know what you are likely to be approved for a mortgage and the amount you may be approved for. The pre-approvals can also guarantee current mortgage rates for up to 120 days. It is important to acknowledge that you are not guaranteed to get a mortgage if you are pre-qualified or pre-approved. Many things can happen during the process, and some lenders may give a pre-approval letter without actually verifying your information. Talk to a mortgage expert to get the pre-qualification/pre-approval process started and get you on the road to homeownership.


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There are stricter debt ratio standards on the way as CMHC tightens mortgage rules.

There are stricter debt ratio standards on the way as CMHC tightens mortgage rules.

We are committed to keep you informed so you can take advantage of current guidelines. If you are looking at purchasing, refinancing or investing before the new guidelines come into effect at the end of this year, give us a call so we can find the best options for you.

When CMHC tightened mortgage rules last year, among the changes were stricter debt ratios and income confirmations. For typical borrowers, these are key factors in determining whether or not you’ll get a mortgage. If you’re close to the line on debt and income, last year’s changes have made it more difficult for you to qualify. And unfortunately, things are about to get even more difficult!

CMHC has issued new guidelines for calculating debt ratios and confirming income documents. While most lenders have already been following these rules, CMHC is now closing the “loopholes” that allowed some lenders to offer easier approval for borrowers with tight debt ratios. Here are some of the rules that have been clarified:

  • If you have variable income from things like bonuses, tips and investment income, lenders must use an amount not exceeding the average income of the past two years.
  • If you own other non-owner-occupied rental properties, the principal, interest, property taxes and heat on those properties must be deducted from gross rent revenue or included in “other debt obligations” when Total Debt Service ratio is calculated.
  • For unsecured credit lines and credit cards, no less than 3% of the outstanding balance must be included in monthly debt payments.
  • For secured lines of credit, lenders must factor in “the equivalent” of a payment that’s based on “the outstanding balance amortized over 25 years.”
  • For heating costs, lenders must obtain the actual heating cost records of a property or use a set heating cost formula. This can double or triple the cost factored into debt ratios on larger properties, and reduce it on smaller ones.

Since the new rules take effect on December 31, 2013, it’s important to talk to contact us today  to find the best options with the current guidelines. We still have access to a select group of lenders who may be able to provide the mortgage approval you need. For more information, call us today at 778.893.0525!