I am sure that there are things that my accountant or lawyer would like me to know.
Tips that would make their job so much easier if I just understood. This is likely true of most of us in our chosen career paths. You are obligated to perform certain tasks which your clientele then grumble about it. So today let’s take a moment to look at the things your mortgage professional would like you to know.
1. Credit cards – if you would like to get a mortgage you will need a credit card. Lenders need to be able to see how you handle your credit obligations. So even though too much debt is bad, you do need to have some available to you to develop your credit rating. The flip side of this is that you need to make sure you do not exceed 75% of the available limit and ensure you payments are made on time.
2. Cell phones – cell phones report on your credit bureau. If a lender sees that you are not able to pay this small monthly obligation on time then how on earth can they expect you to pay your mortgage. Late cell phone payments are becoming a much more common reason for declines from lenders.
3. Taxes and collections – you may have a very small amount outstanding on your personal taxes. Or perhaps there is an old cell phone bill you are disputing which has gone to collection. You will be required to pay these in full as a condition of your mortgage approval.
4. Pre-approvals – so you have been proactive and taken the time to get a pre-approval, that’s fantastic but it is not a guarantee of success. Most lenders do not review your documents or even your application until you have an accepted offer to purchase. And then you have to get through the mortgage insurers. This is true even if you have more than 20% down. Many lenders insure all of mortgages they approve. Nothing is final until the lender gives us the coveted all clear.
5. Documents – we will be asking you for a whole lot of stuff. It’s going to feel ridiculous and possibly intrusive. We are honestly only doing our jobs. The lenders are governed by their investors and the mortgage insurers and the provincial and federal governments. They have to ensure there is no fraud or money laundering and also do their best to make sure they are only lending to people who will pay them back. This means that they will ask for documentation and clarification which means that we may have to come back to you for more until they are happy.
6. Down payment – there is sadly no such thing as a 0 down mortgage anymore. You can borrow, be gifted, or save the down payment but you will have to show that you have at least 5% to put down on the new home.
7. Closing costs – the lenders require us to show that you have 1.5% of the purchase price available for the closing costs. They are not trying to be mean. There are genuinely costs which come up at the very end that you will be responsible for so you need to have some extra cash. Legal fees, title insurance, property tax adjustments are some examples of things that you are required to pay.
8. Details – this is your mortgage. You are signing a contract which is legally binding for at least the term of the mortgage. We will do our best to explain it but you should ask questions and read the documents so that you don’t get hit by anything unexpected.
9. Afterwards – Mistakes happen. You may tell me that you would like a bi-weekly payment which includes your property taxes but by the time it goes from me all the way through the lender and your lawyer this doesn’t happen. Take a few minutes to call your lender after the mortgage funds. Double check that your payment is set up exactly how you like. This five-minute phone call can save you oodles of frustration later on.
So there you have it. Things that your mortgage professional would like you to know. Have a great week!
Pam Pikkert is a mortgage broker with Dominion Lending Centre – Regional Mortgage Group.