22 Oct

CMHC CHANGES TO ASSIST SELF-EMPLOYED BORROWERS

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CMHC CHANGES TO ASSIST SELF-EMPLOYED BORROWERS

As a self-employed person myself, I was happy to hear that CMHC is willing to make some changes that will make it easier for us to qualify for a mortgage.
In an announcement on July 19, 2018, the CMHC has said “Self-employed Canadians represent a significant part of the Canadian workforce. These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation. These policy changes are to take effect Oct. 1, 2018.

Traditionally self-employed borrowers will write as many expenses as they can to minimize the income tax they pay each year. While this is a good tax-saving technique it means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.
Plain speak, we don’t look good on paper.

Normally CMHC wants to see two years established business history to be able to determine an average income. But the agency said it will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.
Take for example a borrower that has been an interior designer with a firm for the past eight years and in the same industry for the past 30 years, but just struck out on his own last year. His main work contract is with the firm he used to work for, but now he has the ability to pick up additional contracts from the industry in which he has vast connections.
Where previously he would have had to entertain a mortgage with an interest rate at least 1% higher than the best on the market and have to pay a fee, now he would be able to meet insurance requirements and get preferred rates.

The other change that CMHC has made is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write-offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.

It is refreshing after years of government claw-backs and conservative policy changes to finally see the swing back in the other direction. Self-employed Canadians have taken on the burden of an often fluctuating income and responsible income tax management all for the ability to work for themselves. These measures will help them with the reward of being able to own their own home as well.

Kristin Woolard

KRISTIN WOOLARD

Dominion Lending Centres – Accredited Mortgage Professional
Kristin is part of DLC National based in Port Coquitlam, BC.

15 Oct

Wine Survivor 2018 – Starting the Campaign

Wine Survivor

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Wine Survivor 2018 – Starting the Campaign

2018’s Grande Prairie Wine Survivor – Ht Mortgage group is doing our annual fundraiser the Wine Survivor for a new cause. Our Goal? To purchase skates and helmets for Children in Grande Prairie and area.

Q: Where can I get an entry form?

A: Right here 🙂

Q: In other years hasn’t the wine survivor gone to the bike for kids fund?

A: Yes, but we wanted to make a bigger difference. The thing with bikes is only a few kids get to enjoy them, and not even right away. Skates are a healthy outdoor winter activity that they can use right away! And we can buy more pairs of skates than we can bikes, so more kids benefit!

Q: I like the name wine survivor, what does it mean?

A: Well every team donating has 4 slots. Starting November 12th, each day we draw names of all the participants. When your name is drawn, you’ve been kicked off wine island. When all 4 of your teammates names have been drawn, your team is out of the running. The final teams to survive on wine island win!

Q: Wine Island?

A: Well it’s a nice visual. Maybe I’ll get a YouTube video going casting people off.

Q: How much of the wine-raiser proceeds goes to the kids?

A: This is a 50/50 style draw. 50% of the proceeds go into buying skates and helmets, and the other 50% is going into wine.

Q: What type of wine?

A: I’m easily influenced. Send me an email with suggestions on your favorite labels to htmortgagegroup@dominionlending.ca I know a couple of contest’s have been lobbying for unique label’s and more expensive wine’s… but sometimes a big mass of stuff looks good too.

Q: Buy how much wine could my team get if we win?

So the first team kicked off wine island will get 10% of the wine, and the last team kicked off will get half the wine. That leaves 25% and 15% for 2nd and third place teams.

Q: But Roughly how much?

A: Well last year we ended with 42 teams so thats…. $2100 towards wine – hmmmm – that’s a lot of wine. The real numbers will depend on the type of wine we go with. Local fruit and honey wines? Rare wines? Top Label Wines?

Q: Skates for the kids?

A: Ultimately these skates are going to end up at the Salvation Army to distribute to kids and family’s in need around Grande Prairie.

Q: I don’t like wine, can I still participate?

A: Yes! Just let us know that you want your money to go directly to skates and it will. 100% of it.

Q: Where do I get my entry forms?

A: Right here 🙂

 

Interview with Jill Napen, Office Manager at Dominion Lending Centers Ht Mortgage Group in Grande Prairie

More Questions? Give her a call at (780) 513-6611

15 Oct

WHY WE CHOSE A MORTGAGE BROKER – OUR HOUSE MAGAZINE

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WHY WE CHOSE A MORTGAGE BROKER – OUR HOUSE MAGAZINE

Spent months searching for a house
Lindsay Austin and her husband never imagined they could get a home with a lakefront view. Their real estate journey began in 2012, when the couple purchased their first place, a townhome in Kelowna B.C. with the help of a Dominion Lending Centres Mortgage broker. By 2017, they were ready for something bigger and better. So the couple reached out again to their mortgage broker, who was there to lend a hand. After months of searching, the couple found their home. A one-acre property just outside the city overlooking Okanagan Lake. They purchased the home for $618,000 and moved in just before the summer.
“It’s rural, a little out of town. It’s exactly what we need,” Austin said, noting her mortgage broker was patient and right by their side as they spent months searching for the right place.

Q: Why did you choose a mortgage broker?

A: We got connected with our broker in 2011. At the time, being our first home, we were financially lost. We were new to the market and my mom said reach out and try. And it just made the process so simple. She’s a one-stop-shop. She collects all of our information once, and I have this touch point and this person who I can trust. My brother and sister-in-law just went through the process, and they had appointments at all sorts of banks, and they sit down and do this and that, and then they do it again with another stranger. Our broker was able to get our information streamlined and out to all of the available lenders and get us the best rates and just simplify it for us. I think that was so key. She made the first process in 2012 so smooth and so easy for us. It wasn’t even a question that we would go with her again because it was so easy the first time.

Q: How was it working with a mortgage broker?

A: It was fantastic. I can say her customer service was so high, and she was always looking at every option. Even with the changes (to mortgage rules) in the last couple years, I’m sure mortgage brokers have had to learn a bunch of new things. She was such a good communicator, and it’s so easy having just one touch point.

Q: What advice would you give someone in your situation?

A: Ask lots of questions, and your mortgage broker will have all the answers. That’s their job and that’s why they make it so nice and easy. Ask lots of questions and be totally honest. Those, along with communication, and you’ll have a very pleasant experience.

Jeremy Deutsch
JEREMY DEUTSCH
Communications Advisor –  Dominion Lending Centres

 

9 Oct

CASH BACK AND DECORATING ALLOWANCES ON NEW BUILD OR PRE-SALE PURCHASES

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CASH BACK AND DECORATING ALLOWANCES ON NEW BUILD OR PRE-SALE PURCHASES

As the market shifts, developers will increase their incentives to buyers with cash back and decorating allowances on new build or pre-sale purchases. It is very important to review those options with your real estate agent representative and vital to consult with your Dominion Lending Centres mortgage broker. Although these offers may seem attractive, they can impact your financing and could cost you thousands of dollars.

Before you write a contract on a new build or pre-sale, ensure you have set up your team including a real estate agent and mortgage broker. Always consult with them to ensure you have sound advice. Do not rely solely on the developer’s sales representative.

What happens when you sign a contract on a pre-sale?

When you visit the sales centre for the pre-sale and decide to write a contract you have a rescission period where you can back out of the purchase. The contract you sign is drafted by the sales centre and once you remove any conditions, you are locked into the purchase. Therefore it is essential you have your real estate agent with you at the time of signing or at a minimum, they review the contract. It is in your best interest you fully understand the terms, the disclosure statement, what you are buying, schedule to build, GST, deposit schedule and any incentives.

Once you remove any conditions, the deposit is paid to the developer and a schedule set for all other deposits till the building is complete. Those total deposits are typically 20% of the purchase price. That is money you will not receive back if for any reason you are unable to proceed with the purchase. Some contracts allow assignment to another buyer, but those must be approved by the developer and may come with restrictions. Your realtor can guide you on these matters.

How Will Cash Back or Decorating Allowances Impact Your Purchase?

When the market slows, developers will use incentives such as cash back and decorating allowances on new build or pre-sale purchases as a strategy to increase sales. Regardless if this is a cash back or a rebate for decorating, it will have an impact on the purchase price for the lender on the financing. This is a common misconception among buyers and even realtors who do not understand the process from a financing perspective.

For example: A purchase price plus GST is $800,000. The developer is offering a $20,000 decorating allowance. The lender will automatically deduct the $20,000 from the purchase price. Your new purchase price will be $780,000 for financing purposes. This does not change the actual purchase price. You still have to pay the developer $800,000 for the home. The lender will lend on the $780,000 only. Therefore you must pay in cash at the time of funding the $20,000 difference.

The developer has sold you the idea you are receiving decorating upgrades of $20,000. You are receiving the value of that allowance BUT make no mistake you are paying for it.

If the incentive is a cash back amount in the above example, you will receive the cash back from the developer at the time of completion. However, the lender will still only offer financing on the lower value minus the cash back amount.

Pauline Tonkin

PAULINE TONKIN

Dominion Lending Centres – Accredited Mortgage Professional

5 Oct

WHAT SHOULD COME FIRST, THE HOUSE OR THE CAR?

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WHAT SHOULD COME FIRST, THE HOUSE OR THE CAR?

So you just got a shiny new car, and now you want a shiny new home to go with it. Will that new car payment affect your mortgage pre- approval? The short answer… absolutely it will.
Recently, I have encountered many people looking to pre-approve for a home purchase that do not qualify. While it may be in part because of the mortgage “Stress Test” rules, a good portion is due to large debt obligations such as car loans. I have witnessed applicants that have brand new car loans/leases with huge payments and not one gave thought as to whether it would affect their ability to qualify for a mortgage.
Unless you have already done your home work with your mortgage broker by getting a mortgage pre-approval that factors the new car payment into it and your budget, you may be in for disappointment.
However, it doesn’t necessarily have to be one or the other. Here are some tips to get set for mortgage approval success.

1. Get pre-approved. Seek the guidance of your mortgage broker to know exactly what you qualify for before you start the house hunting process. Knowing what your maximum purchase price is, helps you and your realtor.
2. Be realistic with what you can afford. Start by looking at what you pay in rent now. That’s a good starting place to figure out what you can pay on a mortgage. However, you also must consider what you can get approved for.
3. Remember to save and budget for more than the mortgage payment. When you own a home, your monthly payment consists of more than just the mortgage payment. You will also pay property taxes, home owner insurance, and utilities on top of your other monthly debt obligations. Having emergency savings can help alleviate the stress of taking on the financial responsibility of a owning a home.
4. Clean up your credit. Paying off credit balances can not only help improve your credit score, it can also increase your buying power.
5. Avoid making big financial changes. This is the big one. Most lenders want to see that you’re a stable applicant. Doing things like buying a new car before you buy a new house does not establish you as stable. Similarly, opening new credit cards, or making a drastic change to your employment can also be detrimental to getting approved for a mortgage.

When in doubt always seek the advice of your Dominion Lending Centres mortgage professional.

Lynn Nequest

LYNN NEQUEST

Dominion Lending Centres – Accredited Mortgage Professional
Lynn is part of DLC Forest City Funding based in Kitchener, ONT.

2 Oct

The Pros and Cons of Co-signing for a Mortgage

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THE PROS AND CONS OF CO-SIGNING FOR A MORTGAGE

If you keep up on the news you know that qualifying for a mortgage is getting tougher and tougher. Someone who would have sailed through the application process 10 years ago could find themselves declined for a mortgage today.
Often I find applicants can afford the monthly payments but they can’t prove that their income is stable. If they waited another 6 months to a year, they could but they would miss out on a great opportunity to buy a home now. Buyers who have recently switched jobs, receive overtime or get a portion of their income from tips are the people who need co-signers to make the deal work. A strong co-signer can be more persuasive to a lender than offering to put more money down.

I also have found that people with “thin” credit are being asked for co-signers. These are applicants who have one credit card but no car loans or other credit facilities showing on their credit bureau report. Often they are recent university graduates who recently started work.
Rick Bossom, an accredited mortgage professional with Bayfield Mortgage Professionals in Courtenay, British Columbia, says that it’s an alternative to lenders just turning the deal down in cases where the borrowers are just on the edge of qualifying.

“They’re close but they just need a little bit more and that’s why the co-signing thing would come up. It’s not like they’re really, really bad, they’re just not quite there.”

What does a co-signer do? Their job is to continue payments in the event that the main applicant(s) default on the mortgage. In essence, they are saying that if you skip out on the payments, they will take up the slack.
As a result, lenders want to have co-signers on the application just as if they would be living in the home and making the mortgage payments. If they have mortgage payments of their own, they have to show that they can financially afford to pay both mortgages and any other monthly obligations that they may have like car payments.

One thing that surprises primary applicants as well as their co-signers is the amount of information required from the co-signers. They will have to provide an employment letter, recent pay stub, a credit bureau report at a minimum. If they are self-employed company income documents will also be required.
It’s always best for the primary applicant to have a conversation with the co-signer or co-signers to inform them of this in advance. The co-signers should also be aware that this will tie up their credit for the term of the mortgage. If they are planning on buying a vacation home or making a large purchase, they may be declined based on their financial obligation to your mortgage.

However, there is one feature that banks don’t tell you about but your Dominion Lending Centres mortgage professional will tell you. There’s the ability to remove the co-signer from the mortgage after 12 months of successful on time mortgage payments. Co-signers don’t have to stay on the mortgage for the whole term.

Make sure that you mention that you are interested in taking your co-signer off the mortgage in a year and your mortgage broker can pick a lender who will allow this. It’s really nice to be able to remove your co-signer and thank them for their help without tying up their credit capacity for 5 years.

 

David Cooke

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Clarity Mortgages in Calgary, AB.