What Does a Lender Consider When Looking at Your Mortgage Application?

• Income and Job Stability – Your income determines how much you may borrow. In most cases, 32% of your gross income for salaried, non-self-employed or commissioned people is used to determine how much you can borrow to cover the cost of the mortgage payments, taxes and any applicable maintenance. All other debts (eg, car loans, credit cards and lines of credit, etc) must not exceed an additional 8% of your gross income. 
• Credit History – Your credit score must show that you pay your bills on time. If not, you may still be approved, but the interest rate may be higher than expected.

What you need to supply to the lender:

a)      Income Confirmation – For salaried individuals: letter of employment and your most recent pay stub.

b)      Down Payment Confirmation – The lender will require that you prove the source of your down payment. You will have to send in bank statements, statements showing RRSPs, stocks etc. You must show a three-month history of your accounts. If there are any large lump-sum deposits, you are likely to be asked to show where the deposit originated. For mortgages where your down payment is less than 20% of the purchase price, you will also be asked to demonstrate that you have access to 1.5% of the purchase price in your bank account. You must be able to show this through a credit card, line of credit, gift from family or savings in case closing costs run higher than expected.

c)       Contract of Purchase and Sale – This is a copy of the accepted offer of the home you intend to purchase and a copy of the MLS listing sheet.

Please contact Mortgage Advisor Cory Kline at 705-794-1283 or cory@ndlc.ca

The Mortgage Financing Process

The number one question a homebuyer often has is “What does the mortgage process entail?” In very simple terms, following is an outline of the process upon which you are about to embark:

a)      Get pre-approved: Avoid any hiccups or obstacles before you begin the home shopping process. Being pre-approved helps in the following ways:

• Determines price range – it will help you understand what your monthly costs will be and determine your price range.
• Guarantees the rate – from 90-120 days. And we will automatically adjust your rate down with any market reductions.
• Allows you to put in a competitive offer – become a successful bidder with a short subject to financing requirement.

b)      Put in an offer: Once you have found the property that meets your needs, you will put in an offer that will be accepted or countered. This may go back and forth until you reach an acceptable price with the vendor.

c)       Offer is accepted:

• Fax us a copy
• An appraisal is ordered (if necessary)
• Send in any remaining documents required for financing (income confirmation, down payment confirmation, etc)
• Send an inspector in (if applicable) – I can help you arrange this
• Receive the lender’s approval on property and final approval letter

d)      Remove Subjects: At this point, your financing is in place and you are ready to proceed with the purchase of the property.

e)      Lawyers’ Office: You will be asked to provide any money that is to be used as your down payment, which is not already on deposit with your realtor. Typically, you will go in 1-2 days prior to the completion date.

Types of Mortgages

Mortgages can be a confusing subject. Buying or selling a home is an emotional decision and can be very stressful. As a mortgage advisor, I will take the confusion out of mortgages and make the process as smooth as possible.

In Canada, there are two major categories that mortgages fall into, either closed or open. Most mortgages are closed, meaning that you can’t pay out the mortgage in full without paying a penalty to the lender. You can, however, often make lump sum or extra payments each year.

An open mortgage allows you to pay out the mortgage anytime without penalty. But you typically pay a higher rate than when opting for the same closed version. Open mortgages may have an administration fee that is higher than a closed mortgage if you do, in fact, decide to fully pay off the mortgage. This is partly why it is so important to read the fine print and ask about these charges. In most cases, it’s better to take the closed product if you do not intend to fully pay out the mortgage in a short period of time.

Closed mortgages are offered in terms starting at six months. The interest rate is fixed during that term. (The term should not be confused with the amortization. Amortization is the time period it would take to fully pay off the mortgage by making regular payments.) Variable-rate mortgages, on the other hand, have a rate that floats with the prime rate and are often closed mortgages.

Let me help you make one of the biggest decisions in your life by providing options and advising you on the best scenario for your specific needs.

-Cory Kline

cory@ndlc.ca or 705-720-1001 ext 226

The bond rate has moved up the last few days with news of stronger that expected U.S. job figures. There continues to be lots of turmoil with the Middle East situations and news of possible rate increases in Europe due to inflationary concerns.

There have been no major changes in short or long term interest rates the past week.

There is no change expected in the Bank of Canada at this time. 

Bank prime is at 3.00%