Posts Tagged ‘Mortgages’

Five Steps to Scoring a Mortgage

Tuesday, May 24th, 2011
Steps to getting your Mortgage Application Approved

Steps to getting your Mortgage Application Approved

A variety of factors can keep you from qualifying for a mortgage. The big ones include a low credit score, insufficient income for the size of the loan you want, insufficient down payment and excessive debt. All of these factors are within your control, however. Let’s take a look at your options for overcoming any liabilities you may have as a borrower

1. Repair Your Credit and Increase Your Score

To lenders, your credit score represents the likelihood that you will make your mortgage payments in full and on time every month. Therefore, with most loans, the lower your credit score, the higher your interest rate will be to compensate for the increased risk of lending you money. If your credit score is below 620, you will be considered subprime and will have difficulty getting a loan at all, let alone one with favorable terms. On the other hand, if you have a credit score above 800, you’ll easily be able to get the best interest rate available (also known as the par rate).

Measures you can take to improve your credit score relatively quickly include paying down revolving consumer debts, such as credit cards or auto loans, using your debit card instead of your credit cards for future purchases, paying your bills on time every month and correcting any errors on your credit report. However, some flaws, like seriously late payments, collections, charge-offs, bankruptcy and foreclosure, will only be healed with time.

In addition to managing your existing credit responsibly, don’t open any new credit accounts. Applying for new credit temporarily lowers your credit score, and having too much available credit is also considered a warning sign. Lenders may be afraid that if you have a lot of available credit, you’ll take advantage of it one day and adversely affect your ability to make your mortgage payments.

2. Get a Higher-Paying Job

If lenders say your income isn’t high enough, ask them (or your mortgage broker) how much more you need to earn to qualify for the loan amount you want. Then try to find a new job in your existing line of work where you’ll be able to earn that much money.

Because lenders like to see a steady employment history, you’ll have to stay in the same line of work for this strategy to be successful. This can be disappointing news for borrowers, as switching professions entirely might offer the best chances for a salary increase. However, switching companies can also be a good way to get a significant boost in income. Significant raises from existing employers aren’t that common, but a new employer knows he’ll have to offer something special to get you to make the switch.

If switching companies right now won’t be enough to get the raise you need, think about things you can do relatively quickly to make yourself more valuable to employers. Is there a continuing education program that you could complete? If you’re a legal secretary, could you become a paralegal? If you’re a receptionist, could you become a secretary? A career counselor or headhunter might be able to give you some guidance specific to your situation about how to improve your marketability and how to reach your income goals

Unfortunately, getting a part-time job on top of your full-time job may not provide what lenders consider qualifying income. The part-time job may be viewed as temporary, and since it will probably take you at least 15 years to pay off your mortgage, lenders are looking for you to have long-term income stability

3. Save Like Crazy

The larger your down payment, the smaller the loan you’ll need. In addition, the lower your loan-to-value ratio (LTV ratio), the less risky lenders will consider you. Both of these factors will make you more likely to qualify for a loan. Be aware that you may have to reach a certain down payment threshold, like 10 per cent or 20 per cent (with 20 per cent being the most conventional), before a larger down payment will help you qualify for a loan.

4. Don’t Pay More Than the Bank’s Appraised Value

The bank will not want to lend more than the house is worth because they could be on the losing end of the deal, should you foreclose and owe more than the bank could get for it. A 20 per cent down payment also becomes much less valuable if the house is worth 20 per cent less than the purchase price. Collateral value is important to lenders, so it should be kept in mind when making an offer to purchase a property.

5. Reduce Your Debt

To a lender, what constitutes excessive debt is not a set number – it’s a total monthly debt payment that is too high for you to be able to afford the monthly mortgage payment you’re asking for. When deciding how much mortgage loan you qualify for, lenders will look at what’s called the front-end ratio, or the percentage of your gross monthly income that will be taken up by your house payment (principal, interest, property tax and homeowners insurance), and the back-end ratio, or the percentage of your gross monthly income that will be taken up by the house payment plus your other monthly obligations, such as student loans, lines of credit, credit cards and car payments.

The more debt you’re required to pay off each month, whether it’s “good debt” like a student loan or “bad debt” like a high-interest credit card, the lower the monthly housing payment lenders will decide you can afford, and the lower the purchase price you’ll be able to afford. Decreasing your debt is one of the fastest and most effective ways to increase the size of loan you’re eligible for.

Playing to Win

Qualifying for a mortgage isn’t always easy. Lenders require all applicants to meet certain financial tests and guidelines and allow a limited amount of flexibility within those rules. If you want to score a mortgage, you’ll have to learn how to play the game, and you’re likely to win if you take the steps outlined above.

I would be happy to go over your situation for you to determine what it is going to take for YOU to score a mortgage!

Angela Vidakovic is part of the Atalick Team at Remax Garden City Realty, St. Catharines and is a St. Catharines Mortgage Broker with Dominion Lending Centres , Easy Street Mortgages in St. Catharines Ontario.

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CMHC Mortgage Changes on March 18, 2011

Thursday, March 10th, 2011

CMHC Mortgage ChangesSome big news this morning regarding some upcoming changes to both mortgage amortizations and refinance loan to values.  Please note that these changes come into effect on  March 18, 2011.

Maximum Amortization – 35 to 30 Years

For the average purchaser  this will not make much of a difference.  As with last year, when the maximum amortization moved from 40 years to 35 years it did not have the negative impact the lenders feared, as the mortgage brokers and lenders worked hard to get even 1st time home buyers to fit into their debt service guidelines.  We’ll need to do more of the same this time around.  With interest rates at all time lows this shouldn’t be an issue.  **Note.  Home buyers can continue to purchase with a minimum of 5% downpayment! And some special cases we can still get you into home ownership with zero down **

Loan to Value Changes on Refinances ONLY

Of the two changes coming into effect, the change to loan to value limits on refinances will have the biggest impact.  Effective  March 18th, 2011 clients will only be able to withdraw up to 85% of their home’s current value (as opposed to 90%).  This represents at drop of 10% in the amount of equity that we can refinance from two years ago.

So if you are looking to refinance or restructure your debt, now is possibly your last chance to get it done before the new rules come into effect! Did you know we have an on site Mortgage Broker at our St. Catharines Remax Office. Why not take advantage of our one stop shopping here at Remax Garden City Realty Inc.

If you are looking to buy or sell a home in St. Catharines don’t hesitate to contact the Atalick Team, St. Catharines Real Estate Agents.

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