What does a licensed professional mortgage broker do and what advantage is there for me when I work with one?
Mortgage brokers don’t work for any specific banks, we are in fact independent professionals licensed and governed by the Real Estate Council of Alberta. With one application and credit bureau, we can take your application to a variety of lenders to make sure your mortgage is the best fit for your needs. Our hours are often much more flexible than traditional banking and our businesses are built by our referrals- happy clients means better business. We work hard to educate, offer choice, and find ways to make Canadians dreams of home ownership come true. Our work we do is upfront, as we are paid by the lender once the mortgage funds, so there is no cost to you for our services.
Essentially a broker is an intermediary between you the borrower and the mortgage lender. Unlike a mortgage specialist who works for just one bank and can only offer those banks products, a mortgage broker works for you and can shop the entire mortgage market and line you up with the right lender to fit your needs. The “Big Banks” are not the only lenders in the mortgage market. There are also scheduled banks and lending institutions who only lend for mortgages– they can offer rate promotions, niche products and often better privileges and conditions. Through the broker channel we have access to a variety of lenders in the “A” or Prime lending space- including “Big Banks”, scheduled banks, federally regulated mortgage lenders, trust companies and credit unions. If your unique situation does not fit the “A” lending space , brokers also have additional assess to alternative banks and lending institutions specifically designed for borrowers who don’t meet mainstream banking specifications. We can also work with private lenders that offer a kind of flexibility that no other banks can. We are affiliated with all these types of banks and lenders and because of our varied source of funding we can truly source out the best product, terms, conditions and rates for your mortgage.
At Mortgage Sisters West- River City Financial, our business is built on referral from the success of our happy clients. We want you to get everything you want out of your mortgage because your happiness is very important to us for not only for the success of our business but also for the joy it brings us to contribute to your home ownership journey.
The rates you see on the internet are not necessarily the rate you want or the rate you will be offered. Why? Because the super low rates you see posted are designed just to get you to call. These rates have restrictions attached to them such as limited time offer, limited mortgage privileges, specific borrower conditions etc. It isn’t until your application is completed in full and your credit bureau has been reviewed and you have a property of interest that a rate can be more accurate, and unless you have a home or accepted offer to purchase- the rate today means very little unless you have a rate hold.
What is a rate hold?
Prior to searching and putting an offer on a home, buyers should meet with one of our brokers to go through a pre-approval process. During a pre-approval, we submit your application and credit bureau to a lender and if accepted they will offer a pre-approval certification, which is a guaranteed rate hold for 120 days while you search for your new property. Not all lenders will do a rate hold, and if they do the rate is always a five year fixed. It is important to know that although the rate hold will be a decent amount, it may not be the best rate available as with some lenders the rate will be hedged in favour of the lender to offer them protection should interest rates rise between the time of your pre-approval and your approval. It is a really good idea to get a rate hold just in case rates do rise between the time of your pre-approval to your actual purchase. At the time of purchase if the interest rates are lower than your rate hold, you will be guaranteed to get the best rate at that time with that lender or with another should that work in your favour and be in the best interest to you.
What is the difference between a pre-qualification and a pre-approval?
A pre-qualification and a pre-approval occur prior to you finding a home to put an offer on. They are both very similar in that we access the details of your income, your down payment, and your credit report to see how much purchasing power you have for your new home. We can also determine which lenders might be a good fit for your needs and the approximation of rates that are available at the present time to give you an idea of what your payments might be. We advise you on the different expenses for your purchase, and the kinds of insurances you will need to have or consider, and any other questions you might have. If you are a first time buyer, we advise you on the previous items as well as what you can expect in the home buying process.
A pre-approval takes the pre-qualification one step further in that we submit your application and bureau to a specific lender and if your details look like something they would consider lending on, they will offer a pre-approval certificate with a guaranteed rate hold for 120 Days. A pre-approval is not a guarantee the bank will lend you the money- as documentation and the property you purchase have to be within the lender and the insurer guidelines ( insurer if putting down less than 20%). It is very important to include subject to financing on your offer to purchase regardless if you have been pre-approved or pre-qualified.
How do I qualify for a mortgage?
There are four main components that go into a mortgage application with every lender. From the application you fill out with your Mortgage Sisters West broker, and the credit bureau obtained -we sort out your ability to qualify, and the amount you would qualify for. This is the same process with every lending institution as the mortgage industry is regulated by the Federal Government. The benefit of using us at Mortgage Sisters West is you do not have to go bank to bank and do this. We take your application to all the mortgage lenders, that fit your profile- increasing your chances at getting the mortgage you need for your home.
- Do you declare enough income to support the mortgage loan request?
There are two qualifying ratios that are extremely important and all mainstream lenders must follow as ruled by the Canadian federal government. A gross debt service percent of up to 39% of your monthly gross income is allowed to go toward housing expenses- including your mortgage (both principle and interest), your property taxes, the mortgage default insurance payment (should you choose to include it with your mortgage) , the cost to heat your home, and if you are purchasing a condo-50% of the condo fees . The next qualifying ratio is your total debt service which allows up to 44% of your gross monthly income to go toward your home costs and any other debt you may carry- car payment, credit cards, student loans etc. It is stress tested to the Benchmark rate that is set by the Bank of Canada (B.O.C). If your ratios don’t fit within in these guidelines but you have enough equity or a minimum of 20% down payment a mortgage broker has alternative banking that may work better for you.
- How much down payment do you have and where is it coming from?
You will need a minimum down payment of 5%, from savings, borrowed credit, or gifted from a family member. A gift means that you are not required to pay back the money at any point and thus requires a specifically designed letter from the lender that expresses the intention and amount of the gift and who it is from. The source of your down payment needs to be verified by 90 days of bank statements from the account or accounts your down payment is coming from. Any large deposits and sometimes withdrawals need to be explained as part of FICOM.
- What is your relationship with debt and how well do you handle credit?
Your credit bureau is an insight into how you deal with credit. This helps the lender to see what kind of “risk” you are which also sets what kind of rate you will be offered.
- The property itself.
Location, condition of the home, and the kind of home it is are all important aspects to a lender. No lender wants to own a home, but if you default on your mortgage payments the lender needs the security that the property is highly marketable in the event it needs to sell.
The same process is used for every financial institution. The benefit of using a mortgage broker at Mortgage Sisters West, River City Financial is you do not have to visit each and every financial institution yourself. With the information we receive from your application and your credit bureau, we can take your mortgage request to all the applicable lenders that fit you profile- increasing your changes at getting the mortgage you need for you home. We also stay in touch with you to make sure you mortgage is working for you- and at renewal time, we make sure your lender if offering you the best mortgage terms and rates for your mortgage.