Here is where you are currently sitting. You have successfully found your dream home. Negotiated like a true champion and kept your calm through the back and forth with the seller. Provided the endless supply of paperwork required by your lender to meet the financing condition. Set up all the things required for the big day, like scheduling the myriad of people to move your furniture, get your Internet set up and making sure your home is warm and toasty. Then you get a call from your mortgage specialist to the effect of “Houston, we have a problem.” Today we are going to look at the most common ways people unwittingly kill their mortgage approval and leave themselves in the lurch.

First thing to note is this, your financing approval is based on the information the lender was provided at the time of the application. Any, and I do mean any, changes to your financial picture are grounds for the cancellation of the approval. It’s actually in the commitment you have signed.

1. Employment – Not all employment is considered equal by the lender and insurers like CMHC. Self Employed, commissioned, part time, overtime, and bonus are all examples of income types where we must have a two year average to satisfy everyone involved, proving that you will have enough income to support the mortgage.

For example, Bob accepts a position with a new company after his financing condition is met. He has negotiated well and knows that the income will exceed what he made previously. The problem is that now Bob will be paid a base plus a bonus component where he was previously salaried. Until there is a 2 year history, the bonus income cannot be used and the mortgage approval is cancelled.

The other consideration is that most new employment comes with a probationary period which can be up to 1 year. Lenders will not use probationary employment which will likely lead to a cancellation as well.

A really important thing to note here is that lenders are calling at the time of approval and again just before funding to verify the employment information provided.

2. Debt – Again, the approval is based on the debt load you had on the day of the mortgage application. Any changes can cause a cancellation. The following are the most common:

* New vehicle – Often comes with a large monthly obligation

* Do not pay for 12 months – We know you are eager to fill your new home with furniture and that you don’t have to pay for 12 months, but this is a new debt obligation and the lenders have to include a payment for it

* Increase to credit card balances – this can change your affordability ratios too much

3. Down payment source – And yet again I reiterate that the approval is based on the initial information you have provided. You will be asked at the lawyer’s office to verify the source of the down payment and if it is different than what the lender has approved, then you may be in trouble. For example, there are lenders who will allow you to use a line of credit for the down payment. Not all of them do and even if yours is one of them then the lender is still obligated to inform the mortgage insurer and their investors of the change to the source. This leaves you at risk at the last minute of your mortgage being declined.

4. Credit – Even if you do not increase your debt load, you also need to make sure you keep your credit as strong as it was when you were approved. Make all payments on time. This includes cell phones. And be careful about allowing anyone to pull your credit. Too many inquires can be an indication of money troubles as you search for new credit facilities. You could see a substantial drop to your credit score which can…?? You know the answer, kill your mortgage approval.

There you have it. You are now fully aware that your mortgage approval is a delicate thing which requires proper care and keeping during that period between approval and funding. Make sure you take good care of yours. Have a great day everyone.

1. How the penalties are calculated if I break my mortgage early? Specifically, ask what rate they use to calculate the “interest rate differential”. Typically, if the lender has “posted rates” they use these to calculate the penalty. If this is the case, the penalty can be 3, 4 or even 5 times higher than a mortgage lender that does not have posted rates and uses them in their early payout penalty calculation. This one question can save you thousands of dollars!

2. Is this a “collateral” mortgage? Some lenders have recently started putting all of their mortgages into what is called a “collateral” charge. In the right situation, given significant equity in the home, this product can be very useful and advantageous. The disadvantage to this product however, is that you cannot “switch” it to another lender at maturity. You have to actually discharge this type of mortgage and re-register a new one with a new lender which will cost on average $1000 for legal fees and appraisal costs. Beware of lenders who do this, especially if your mortgage is high ratio because it is only useful if you have more than 20% equity.

3. Can I “blend and extend” my mortgage if I buy another house? Most variable rate mortgages cannot be “blended” however, typically the penalty to break a variable is 3 months interest. Some lenders have changed their policies (very quietly) – instead of allowing you to add new money to a mortgage in the event of a new purchase, they require you to pay the full penalty. Some clients have been caught off guard by sneaky lenders who don’t tell them this until only a few days before close, at which time it’s too late to switch lenders.

4. What happens to my life insurance if I switch lenders at the end of my term? This is a very commonly overlooked detail by those who take the insurance offered by their bank or lender. The challenge is that if you want to “switch” your mortgage to another lender at the end of your term, you have to re-apply for insurance. The downside to this is that you’ll be five years older, and if you have developed any health issues, you may not qualify for the insurance at all. Getting insurance that mortgage brokers offer stays in place for the whole time you have your mortgage, no matter who your mortgage lender is.

5. What happens at the end of the term (typically five years)? Will they offer you the best rate they offer their new clients, or will you have to negotiate for best rates at that time. Most banks know that clients likely won’t make the effort to negotiate the best rates. Working with an independent specialist will provide you with the most competitive rates, not only when you buy your home, but when it comes up for renewal. A qualified professional will make sure you have the best options available each time your mortgage comes due.

I receive calls every month from people who want to know how to qualify for a mortgage because they were declined by their bank. In many cases I can help them and in some cases they have to wait – but we identify what they need to do to get in a better situation to qualify.

Here are the top 5 reasons why people don’t qualify for a mortgage with their bank and come to see an independent mortgage specialist.

#5 Lack of a Down Payment or Equity

With the end of cash-back mortgages offered by the banks, borrowers now have to come up with the down payment on their own. They can receive it as a gift from a family member – but no more cash-back from the lender used for down payments. Minimum down payment is 5% for the purchase of an owner-occupied home or 20% for a rental property. Minimum 20% equity in the home if it is a refinance. This will help you qualify for a mortgage.

#4 Insufficient Income

With the high price of homes in the Vancouver area, sometimes people simply don’t earn enough money to manage a mortgage payment, property taxes and strata fees along with existing consumer debt and still have a life. For some home buyers, the only other option is to access more money for a down payment (gifted) or try to purchase a home with suite income or look at alternative lenders who accept room and board and other sources of income to help you qualify for a mortgage. In some instances, home buyers will look for someone else to go on title to add income to the application.

#3 New Mortgage Rules

For those with less than 20% down payment, the new mortgage rules are adjusted to the debt servicing ratios and amortization for borrowers. The new rules for debt servicing apply to those with good credit scores and allow for a max of 39% (gross debt servicing – GDS) of gross monthly income to cover the mortgage payments, property taxes and 50% of the strata fee. In addition a max of 44% (total debt servicing – TDS) of gross monthly income is allowed to cover the same and other consumer debts such as loans, credit cards and lines of credit. The maximum amortization was also reduced from 30 years to 25 years – effectively tightening qualification for borrowers equivalent to a 1% interest rate hike.

#2 Credit Issues

Some people don’t realize if they are late on credit card payments, their mortgage or loan payments the lender will update the credit bureau agencies and the late payments will reflect on their credit report, lowering their credit score. Other items can also effect credit scores such as a collection (if you didn’t pay that parking ticket or fitness membership fee they can send to a collection agency) and those marks on your credit report make your score drop like a rock. Going over your credit card limit, and applying for credit often requiring your credit report to be pulled by the bank, auto dealership and credit card companies will lower your score. Finally, consumer proposal and bankruptcy will greatly impact your score, which can stay on your report for up to 7 years if real estate was involved as is the case with bankruptcy.

#1 Too Much Debt

There are a growing number of consumers doing – well – too much consuming. Credit card debt is on the rise and over use of lines of credit are putting some people in a debt overload situation. Some pre-home-buyers go out and purchase that amazing new truck, along with a large monthly payment, which pushes their total debt servicing (TDS) ratio over the limit. Nice new truck – no home with a garage. Some home owners have so much consumer debt that they are unable to refinance their home to consolidate the mortgage and the credit card debt because the amount exceeds the maximum loan to value allowable (currently 80% of the value of the home) and if housing prices stabilize or drop in some areas – this makes it more difficult for home owners to qualify for that new mortgage and lower payments. Paying off your debt will help you qualify for a mortgage.

Do you want more information for your next mortgage? Contact any of us here at Dominion Lending Centres – we’re here to help!

Now a days with the amount of information that is shared on the Internet and social media, identity theft and Ponzi schemes are happening regularly. Homeowners are taking the necessary steps to protect one of their largest investments which is their home. However, the last thing you want to worry about is yet another way to lose your hard-earned money.

But as a homeowner, you need to be aware of crimes on the rise known as mortgage fraud and real estate title fraud.

Mortgage fraud

Some borrowers may think that providing false documents and making false statements is not a big deal. However, the Criminal Code clearly states that obtaining funds, including mortgages by providing false information is a crime.

The most common type of mortgage fraud involves a criminal obtaining a property, then increasing its value through a series of sales and resales involving the fraudster and someone working in cooperation with them. A mortgage is then secured for the property based on the inflated price.

Following are some red flags for mortgage fraud:

• Someone offers you money to use your name and credit information to obtain a mortgage.
• You are encouraged to include false information on a mortgage application.
• You are asked to leave signature lines or other important areas of your mortgage application blank.
• The seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing.
• The seller or developer rebates you money on closing, and you don’t disclose this to your lending institution.

Title fraud

When you purchase a home, you purchase the title to the property. Your solicitor registers you as the owner of the property in the provincial land title office.

Title fraud normally starts with identity theft. This occurs when your personal information is collected and used by someone identifying themselves as you. There are several ways criminals can steal your identity without your knowledge which includes:

• Dumpster diving
• Mail box theft
• Phishing
• Computer hacking

Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you are the one hurt by title fraud, rather than the lender, as is often the case with mortgage fraud.

Unlike with mortgage fraud, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft.

Here’s what happens with title fraud: A criminal – using false identification to pose as you – registers forged documents transferring your property to his/her name, then registers a forced discharge of your existing mortgage and gets a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting – and your economic downfall begins.

The following are ways you can protect yourself from title fraud:

• Ensure you keep personal information confidential when on the internet or phone until you know who are dealing with, how it will be used and if it will be shared with anyone.
• Only carry minimal information and identification in your wallet, don’t have your social insurance card with you.
• Check your credit report regularly. You can get them free when you request them from the Equifax and Transunion when they mail them to your home. If you notice anything suspicious, contact the credit bureau right away.
• Check your financial, bank and credit card statements regularly for any inconsistencies and unknown charges.
• Consider obtaining a title insurance policy, as title insurance protects against many title risks associated with real estate transactions.
• Check your mailbox for mail on regularly, if not every day.
• Shred and destroy any financial and personal identification documents, as well as any unsolicited credit card applications rather than just simply throwing them away.
• If you don’t receive your bills or other mail, follow up with your creditors.
• If you receive credit cards that you didn’t apply for or if you did apply for them and didn’t receive them.
• Contact your mortgage lender first if you are having difficulty making your mortgage payments.

The following are ways to protect yourself from title fraud when purchasing or refinancing a home:

• Make sure you work with a licensed real estate agent and is familiar with the area you are interested in buying. Select to work with someone that can provide trusted referrals and check on them.
• Check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable.
• Always view the property you are purchasing in person, don’t buy without seeing it first.
• Beware of a real estate agent or mortgage broker who has a financial interest in the transaction.
• Ask for a copy of the land title or go to a registry office and request a historical title search.
• In the offer to purchase, include the option to have the property inspected and appraised.
• When giving a deposit when purchasing a property ensure the funds will be held “in trust” with a solicitor or a real estate agency and not directly with the seller.
• Insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab.
• Ask to see receipts and permits for recent renovations.
• Consider the purchase of title insurance.
• Review and make sure you are comfortable with the terms and conditions with the mortgage commitment letter or approval.
• Review the “cost of borrowing disclosure statement” and be aware of any additional fees or charges. Ask questions if you are not sure.
• Know and understand what you are signing. If you have questions, ask. If you are not comfortable or something is not right, do not sign the documents.
• You might want to consider using your own solicitor for legal advice if you are asked to use the same lawyer as the seller.

“Straw buyer” scheme

Another term for mortgage fraud is the “straw” or “dummy” homebuyer scheme. For instance, a renter does not have a good credit rating or is self-employed and cannot get a mortgage, or doesn’t have a sufficient down payment, so he or she cannot purchase a home. He/she or an associate approaches someone else with solid credit. This person is offered a sum of money (can be as much as $10,000) to go through the motions of buying a property on the other person’s behalf – acting as a straw buyer. The person with good credit lends their name and credit rating to the person who cannot be approved for a mortgage for his or her purchase of a home.

Other types of criminal activity often dovetail with mortgage fraud or title fraud. For example, people who run “grow ops” or meth labs may use these forms of fraud to “purchase” their properties.

It’s important to remember that if something doesn’t seem right, it usually isn’t – always follow your instincts when it comes to red flags during the home buying and mortgage processes. Get in touch with your local Dominion Lending Centres mortgage professional to learn more.

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When people deal with mortgage brokers they want to know that they’re competent. But it’s hard to assess that if you don’t know a broker well.
 
That’s where industry accreditations come in. A credible industry designation shows that a broker has met minimum standards of proficiency and professionalism.
 
Canada’s most common mortgage designation is the Accredited Mortgage Professional (AMP), established by CAAMP in 2004. In the opinion of many, however, the bar for getting those three letters behind your name has never been high enough.
 
That’s about to change.
 
Effective July 1^st, the AMP is undergoing a wholesale transformation. It’s the third major revision of the designation since its inception.
 
Click here to see what earning an AMP designation will now require courtesy of CanadianMortgageTrends.com.

Brookfield RPS is offering a free Property Summit Wednesday, May 28^th in Toronto from 8AM to 1PM (breakfast and lunch provided).
 
The Property Summit 2014 includes a panel discussion on federal policy framework changes, as well as a housing market overview from Ben Tal, CIBC World Markets Deputy Chief Economist.
 
Click here for more details and to register for free.

Phew! Genworth Canada and Canada Guaranty have decided not to follow in CMHC’s footsteps and change their programs for self-employed buyers. But is this only a temporary move?

“Upon review of the current Business for Self Program we will not be making any amendments to current product guidelines,” a Genworth letter to lenders sent Friday reads. “There will be no amendment to the maximum number of Genworth-insured properties per borrower.”

Canada Guaranty has also left its business for self program unchanged, according to the Globe and Mail.

CMHC announced in late April that effective May 30, 2014 the Crown Corporation will no longer insure second homes and self-employed individuals who do not have third party income validation.

For their part, brokers believe this opens up a competitive advantage for the two private insurers of the larger and more prevalent crown corporation.

“If you really look at how many people are self-employed in the country they really are the backbone of the economy,” Zoltan Padar told MortgageBrokerNews.ca. “That’s a good product and it has been proven over time that the two (private) insurers can be very competitive.

“CMHC cutting their business for self program will be a lesson to businesses – some lenders only work with CMHC but if I’m a lender I would start supporting the other two immediately.”

Genworth, howevever, has made one amendment to its vacation and secondary home programs.

“Effective May 30, 2014, the maximum number of units allowable under the Vacation/Secondary Home Program will be reduced from two units to one unit,” Genworth’s letter states.

DLC President Gary Mauris was the live guest on popular industry forum Canadian Mortgage Hangout last week. Click here to watch the full interview.
 
Dustan Woodhouse, DLC Canadian Mortgage Experts, is the source of a MortgageBrokerNews.ca article called How to prepare for upcoming anti-spam law.
 
Pamela Wyant, DLC Northern Mortgage Solutions, is a source in a MortgageBrokerNews.ca article called Opinion divided following one client’s mortgage denial.
 

Adam Bazuk & Darick Battaglia, DLC YBM Group, are sources of a MortgageBrokerNews.ca article called Brokers call for CAAMP membership rule change. 

 
Harry Leichner, DLC Dependable Advisors, is a source in a CityNews TV story called Employers court youth at Toronto job fair.
 
Paul Poirier, DLC Eagle Group Mortgages, is a source in a CBC.ca article called BMO’s mortgage rate cut won’t have big impact on housing market.

There was some great news in the federal budget that could have positive outcomes for anyone looking to purchase a home, refinance or renew their existing mortgage. The Department of Finance expressed their commitment to increasing the competition of mortgage lenders.

Many of the smaller lenders who focus on mortgages, offer us very competitive consumer rates and deal exclusively through mortgage brokers will be given preferable access to better allocation of portfolio insurance and securitization.

This will fuel more competition which means more mortgage options and choices when dealing with a mortgage broker instead of the banks. CMHC is also considering additional “flexible funding options” for smaller lenders which is great for us!

A recent Bank of Canada survey found that using a broker at the time of your mortgage renewal may result in getting a lower rate and saving money because mortgage brokers have the widest access to mortgage lenders.

The same survey found that loyal customers may not get as good of a deal with their bank as they would if they went to a different institution as a new customer