25 Jun

5 Ways To Guarantee You Won’t Be Approved For A Mortgage

General

Posted by: Roberto Pelaccia

In today’s day and age, everyone has drastically different financial situations. Whether you’re someone who is an employee on salary, a contractor, or your own boss, the list goes on. All of these situations come into play when you’re applying for a mortgage. Not to mention a list of other things that could negatively impact your ability to be approved.

In this article I go through a brief list of things that will basically guarantee your disapproval. It’s the harsh reality but by being aware of these things, you’ll be able to avoid them and potentially get into that dream home you’ve spent so much time saving and looking for.

1. Your Credit Score

According to a recent study – done by BMO – over 50% of Canadians have never checked their credit score. In addition to those findings, 31% of Canadians have no idea how to check their credit score and another 20% are under the impression that checking their credit score somewhat penalizes them.

The bottom line is that having a bad credit score will have an impact on whether or not you’re approved for a mortgage. This isn’t just a simple case of taking a cell phone plan out in your name, you are asking for a loan worth hundreds of thousands of dollars. If your credit score is low, then you’re at a high risk of defaulting on payments. So, knowing your credit score and maintaining a healthy credit score will increase your chances of being approved.

2. Your Employment

Like I mentioned earlier, you could be an employee on salary, a contractors, or your own boss, either way, these all mean something different when applying for a mortgage. The key is to show longevity. Lenders do not want to see someone who has changed jobs, changed industries, etc. Ideally, they want to see an established individual who is consistent within their career.

If you’ve changed jobs or industries recently, lenders will want to see extensive proof that you are going to be able to keep the job and in turn, pay your mortgage. They will want to see proof of employment, proof that your probationary period has been waived, pay stubs, and maybe more. So if you’ve changed careers or industries, be prepared to provide this information.

3. Your Debt Ratio

Everything you owe leading up to the possession date is going to be brought up. It’s important that your debt to income ratio remain low so the lender doesn’t see any issues with you being able to take on this new debt – your mortgage.

Now I know what you’re thinking, “but I want to buy new furniture and other things for my new home.” Absolutely you can! But, wait until you’ve gained possession of your home. Once you’ve gained possession, then you can go and get whatever you’d like. But if you do it before, it will simply be added to your current debt load and potential cause a disapproval.

4. Verification of Identity

This is crucial. You need to be able to provide the necessary identification at every step. On top of that, your ID needs to match on every form and with every different individual involved in the process. If you’ve provided your middle name to the lender but not the lawyer, this will be considered a red flag.

So, be consistent and always provide the same ID and information to everyone involved.

5. Down Payment

How much? Where is it? How long have you had it? Where did it come from? Who gave it to you? Is it a loan? These are typical questions you need to be able to answer easily regarding your down-payment. Most lenders require you to provide up to a 90 day history of where you have been saving the money, and it all needs to be accounted for. If you don’t’ have these answers then you are on your path to being disapproved for your mortgage request.

 

These are just simple things that you need to be aware of during your mortgage application process. If you’re thinking of buying a house in the near future, then start thinking about these things now and prepare yourself for what you will need to have. By avoiding these “mortgage killers” you’ll increase your chances of being approved and getting into your dream home.

15 Jun

How To Pick The Right Realtor For You

General

Posted by: Roberto Pelaccia

Finding and knowing how to pick the right realtor can be overwhelming, especially when you’re already going through the process of buying or selling your home. It’s like planning a wedding. You’ve made the decision to get married but now you have to choose all the vendors. There are so many options and prices always vary. How are you supposed to choose, let alone know which one is right for you?

Let me put things into perspective for you. In the greater Toronto area, there are 30,000 licensed real estate agents. That’s one for every 160 people! Now, granted some of them are part-time or are inactive, but the number is still mind-blowing either way. And, if you’re someone looking to buy or sell your home, how are you supposed to find the right realtor for you with that many options to sift through and choose from.

Not to worry; I’m here to lend a hand.

In this article, I’ve combined some simple tips you can use to make sure you pick the right realtor for you.

Number 1: Do not get sucked into hiring a friend or family member who has just gotten their license

Now, if you know someone who has their real estate license, they have experience, and are qualified, then by all means, go ahead and hire them. However, it is very common for someone to get their license in order to dabble in the business part-time. And, as a result, many people can be convinced that going with someone you know is the best option because you trust them and they know you. This is incorrect because the market is complicated and you need someone who has experience. You owe it to yourself to find the most qualified person out there to help you make this big life decision. You would be doing yourself a disservice by choosing someone who is under-qualified.

Number 2: Interview at least three agents before making a decision

This is like when you are hiring someone for a job. You can’t just pick the first person that hands in a resume, you have to interview a few people to way the skills and experience. It’s the same with real estate agents. Also keep in mind that you need to discuss more than just the standard “got to know you” questions. Make sure you ask about what their strategy would look like for selling your home or how they would go about finding you your perfect home. Get a feel for how they would approach your specific situation or learn about similar situations they’ve dealt with in the past successfully. That way, you’ll be able to paint a picture of what working with them would be like.

Number 3: Don’t be afraid to ask hard questions

Asking hard questions is key to making sure they’re the right fit for you. And, as an experienced real estate agent, not only should these questions come as no surprise, but they should also have no issue answering them. Here are a few you should consider:

  1. How will their specific experience work well with your situation?
  2. Can they tell you about some recent work successes as it relates to your specific needs?
  3. What are some of their most effective strategies when marketing or finding a home?
  4. What are their fees, commission, etc?

If you ask these questions, you will be able to see how prepared the real estate agent is and how comfortable they are with your situation. Like I said, if they have the experience, then they should have no problem answering these questions.

Find the Real Estate Agent that’s right for you

The bottom line is, don’t just settle for anyone. This is a big step and big decision and you deserve to have the best person in your corner. To help you do this, I’ve listed some top Real Estate Agents that I would personally recommend due to their experience and skills.

 

 

6 Jun

Everything You Need To Know About Potential Closing Costs

General

Posted by: Roberto Pelaccia

Contrary to popular belief, your closing costs are not included in any of the other fees that you need to pay throughout your home purchase process. This means they’re not included in your down payment, your monthly mortgage payment, the overall purchase price of your home, etc. And yet, you’re still responsible and required to pay these costs.

Like I said, this is contrary to popular belief. What I mean by this is that a lot of home buyers either don’t know about these costs or they completely forget about them until it’s time to pay up. If you’re a first time home buyer, or someone who’s purchased before, or anyone really, unforeseen expenses always throw us for a loop. It could be something going wrong with your car, a medical expense, etc. Anything that pushes us out of our budget always makes us feel uncomfortable or uneasy.

So, you know you have to save for your down payment. This is something that people do over a couple years so they can walk in and have a nice chunk of money to put towards their home. On top of that, you need to save and budget for all the fees you will have to pay throughout the process, such as your closing costs. While these costs vary from person to person and situation to situation, here is a break down of the different kinds of closing costs you can expect to pay:

Legal Fees

There are a variety of legal costs that accumulate while paperwork is being put together to solidify your home purchase. This paperwork could include the transfer of title, registration, etc. While many new home builders will cover this cost for you, it is not a guarantee. These costs are typically paid on the closing day

Property Taxes

It’s common for you to have to pay your first year of property taxes upfrom. This cost will depend on your city. So, if you’d like to be as prepared as possible, you can contact your city to get an estimate and to request a change to monthly payments once you’ve paid that first annual lump sum.

Mortgage Insurance

Not everyone has to pay this cost. However, if you are someone who has less than 20% for a down payment, or are in need of specialized insured mortgage programs, than you may have to pay for mortgage default insurance. This essentially protects the bank should you default on your mortgage loan at any time. You are required to pay the HST on the premium as a direct part of your closing costs, but the premium itself can be built into your monthly mortgage payment.

Homeowners Insurance

When you close, you will most likely be asked to show proof of homeowners insurance. I would suggest you do your research to compare pricing and coverage to find the best option for you.  You will have to pay for the first month’s premium to receive that proof of coverage. Though it’s not a direct closing costs, it is an expense paid toward the time of closing.

Condo Fees

Of course, this only applies to people who are buying a condo type property. You may need to pay your first month’s condo fees upon closing. The fees are used to cover the maintenance of shared spaces, among other things.  Again, another example of an indirect closing costs.

Land Transfer Taxes

These taxes make up the bulk of your closing costs.  They are paid on the entire purchase price and the rate is based on a sliding scale. For example the first $55,000 is the lowest tax bracket at 0.5%, 1% for the amount between $55,000= $250,000, and it continues upward to 2.5% for amounts over $2,000,000. The city of Toronto has their own land transfer taxes that are in addition to the provincial taxes. So, if you are buying in Toronto you pay double the land transfer taxes.

If you are a first time buyer you can save up to $4000 as a one time tax rebate. Be sure to ask and let your lawyer know you are a first time buyer, so they can apply for the rebate in part of the closing of your home purchase.

Be Prepared

This is just a small list of the closing costs you may need to pay. Like I said, budgeting for closing costs is the best way to avoid being blindsided by an unexpected expense. And, while it’s difficult to place a specific dollar value on closing costs, you can expect a general range of 1.5% of the value of the home you’re purchasing.

So, the key is to save and budget for both your down payment and your closing costs. If you do this, your home buying experience will be much smoother than most people because like I said, most people aren’t aware of these costs or they completely forget about them. Get yourself ahead of the curve by planning for these costs and enjoying your home purchase experience.