Proud To Be Canadian

Here is a post on an American blog by Eric E. Sattler. We should all be proud of our Canadian banking system and Mortgage lenders who are "smart & compassionate".

In recessionary times, it would seem that Canadian financial institutions remain true to form. By that I mean, Canadian banking professionals are again seeking to be proactive and flexible in dealing with that nation's current residential mortgage troubles. It is my opinion that our American bankers could have dampened a fair amount of our current economic turmoil by taking a smart and compassionate page from the Canadian mortgage industry playbook.

A quick and interesting article from Tara Perkins, at globeandmail.com, reveals how Canadian bankers have solicited their customers to come in for help with problematic mortgage payments. It would seem that, unlike their American counterparts, Canadian bankers like to deal with tough scenarios before the dung hits the fan.

Toronto-Dominion Bank chief executive Ed Clark stated his bank's focus this way: "We are really trying to say to our clients and customers: 'Don't wait until you have a problem. If you think you might have a problem, why don't you come talk to us and we can then sit with you and try to get ahead of the problem and do some things?'

What a novel, responsible and forthright idea.

The solutions which Canadian banks are willing to discuss with financially troubled mortgage customers take several convenient forms. Some customers may be directed toward switching out flexible rate mortgages in exchange for fixed rate notes. Some customers might be offered short-term payment deferrals in cases where a job shift is expected to restore income. Lengthened amortization terms may allow some customers to keep their homes via lowered monthly payments. In some cases, Canadian banks are even willing to negotiate custom mortgage notes with unique terms.

For many of the people faced with mortgage turmoil in the U.S., it's already too late to help. In most cases, our banks have carelessly stepped past the point of being truly helpful. One can only speculate upon why exactly that has happened. However, as foreclosure actions continue, and as we're startled like little consumer deer in the headlights of oncoming consumer debt defaults, please let us remember that simply throwing up our hands in defeat, and then crawling in a corner muttering, "I've failed," has never helped anyone.

Be ready to fight for your good name, your dignity, and your credit score. When the banks come calling for your head, demand that they discuss some options with you. If they won't do that, then when you have your day in court, tell the judge that the bank failed to fully exercise due diligence and good faith. Perhaps the judge will take up the gauntlet and make those corporate lawyers sweat a little. Really, you have nothing to lose by trying.
Source

Why You Shouldn't Buy A Car Right Before Buying A House

An occasional but easy mistake that I see first time home buyers make before buying a house is to purchase a big ticket item like a car which they don't realize has a very real and negative effect on your mortgage application.

Typically, I notice that when an individual’s income starts growing and they manage to set aside some savings, they commonly experience what may be considered an innate instinct of modern civilized mankind: The desire to spend money.

Since North Americans have a special love affair with the automobile, this becomes a high priority item on the shopping list. Later, other things will be added and one of those will probably be a house.
However, by the time home ownership has become more than a distant and hopeful dream, you may have already bought the car. It happens all the time, sometimes just before you contact a mortgage broker to get pre- qualified for a mortgage.

As part of the application process, you may tell your mortgage broker your price target. He will ask about your income, your savings and your debts, then give you his opinion.
“If only you didn’t have this car payment,” he might begin,
“you would certainly qualify for a home loan to buy that house.”

Its like this, when determining your ability to qualify for a mortgage, a lender looks at what is called your “debt-to-income” or "debt-to-service" ratio.

What are debt-to- income ratios?
A debt-to- income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs – including principal, interest, taxes, insurance, utilities, etc. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, and…. CAR PAYMENTS!


How a New Car Payment Reduces Your Purchase Price
Suppose you earn $5,000 a month and you have a car payment of $400. At a 6% interest rate you would qualify for approximately $40,000 less than if you did not have the car payment.

If you haven’t already bought a car, I advise you to remember one thing: Think ahead. Think about buying a home first. Buying a home is a much more important purchase when considering your future financial well-being.

The Credit Crisis Explained

Over the past 18 months, our vocabulary has included such words as 'credit crisis', 'bail outs' & 'subprime'. I have taken part in, and over heard a number of conversations involving people trying to make sense of the current crisis.

I came across this link to a fantastic video that explains in a very plain and concise way how we got to our current state.

Enjoy...

http://www.crisisofcredit.com

The 3 Things That Scare You Most About Buying a Home

Buying a home must be up there with public speaking and the remake of The Exorcist for frightful experiences, but many of us will buy a home, speak publicly and watch that movie again and again in our lifetimes.

By giving you a few of the “behind-the-scenes” secrets, we hope to help you deal with the 3 things that scare you most about buying a home.


1. The Cost
The greatest fear that people have about buying a home is being able to afford it. This is what keeps us awake at night – calculating and recalculating how many lunches we have to pack instead of going out with the gang, to be able to make the mortgage payment.

The behind-the -scenes secret to dealing with this fear is working with a great lender, getting pre-approved BEFORE you start looking at homes, and being realistic about what you are willing and able to spend. The lender will give you are range of loan options available, and if asked, will give you a realistic projection of what you can REALLY afford considering your budget and lifestyle.

2. The Commitment
Women like to stereotype men as having a fear of commitment – but when it comes to buying a
home, we’re all susceptible. Buying a home usually means committing money and time (at least a year – usually more like 5 years) to being in one spot. If you’re just finishing a degree or training, or you’re not sure that you’ll be in the same position for a while, you may consider waiting until your life is a little more stable.

The behind-the -scenes secret to dealing with the fear of commitment is in buying a home that will re-sell easily – that has features that other people will want. In addition, you can get a two-step mortgage, that allows you to pay a fixed rate for a certain period of time, and a flexible rate later on – so that you can get out of the loan easily after the first step.


3. The People
Who can you trust in this home buying process? This is a big investment we’re talking about. And it seems that everyone is out to make as much money as possible OFF of you!
There are sellers, real estate consultants, mortgage brokers, builders, movers, and attorneys, all of whom may be strangers, and have a vested interest when you buy a home. It’s easy to be afraid that they will take you to the cleaners.

The behind-the -scenes secret is to check their references. Really. Many brokers and real estate consultants operate on a “by referral only” basis – in which they ask clients to refer them to others they know are buying a home. Those who offer “lifetime relationships” and other services (like Free Reports and seminars on buying or selling homes) are already striving to meet your needs.

In reality, they are NOT all out to get you – because in the long run, the BEST business strategy is to make sure that you get what you need and want in a home.

Here’s A Quick Way To Figure Out How Much House You Can Afford…

Here’s the simplified version of what a mortgage broker would do with you.


Step One: (Annual salary ÷ 12)
What is your gross monthly income from all sources? If your annual salary is $75,000, divide this by 12 and you’ll see that your monthly income is $6,250.

Step Two: (Monthly salary x percent you want to spend)
Brokers and financial planners will recommend that you spend anywhere between 25% and 36% of your monthly income on household expenses. We’re going to use 36%. $6,250 x
.36 = $2,250.

Step Three: (Calculate your debt)
Add up your current monthly debt. This includes things like a car loan, insurance, school loans, credit cards, and any other personal debt you may have. All of this added together gives you your total debt. Just a guess, but let’s say that these add up to $750 a month.

Step Four: (Amount you want to spend minus total debt)
Now, take that total debt and subtract it from the amount that you were willing to spend per month to get your maximum monthly payment for your mortgage.
$2,250 - $750 = $1,500

Step Five: (Monthly payment x 12)
Multiply that house payment by 12 months, and you have
$18,000 to spend each year.

Step Six: (Annual payment ÷ interest rate)
Divide this annual amount by the current interest rate (I’m using 6%, because it’s a nice round number, and a good average). So, $18,000 ÷ .06 leaves you with $300,000 available for a mortgage!

Step 7: (Mortgage + Down payment)
Now, take the amount that you have calculated that you can afford to pay for a mortgage, add the amount of cash that you have on hand to make a down payment, and you get your purchase price! Many lenders in today’s marketplace will lend with as little as 5% downpayment if you have good credit and a steady job.

So, using the current example: The mortgage was
$300,000 plus you have $20,000 on hand for a down payment, then you can afford to purchase a home for $320,000.


Now, did that REALLY seem like algebra to you?
Although this is a quick and easy estimate, you should work with a mortgage broker so that you know EXACTLY how much you can afford. There are also many maximum mortgage calculators found through out the web. Check out the calculator on Tridac Mortgages website.

I’m The One Buying A Home -- Just Who Are All These Other People?

Many people are involved in the home buying process. These professionals have based their careers on helping you find and purchase the home of your dreams. But do you really know just what they do for you?


1. Real Estate Consultant
The first person that you’ll probably become involved with when you begin your search for a home is the Real Estate Consultant. This term includes real estate agents, sales persons, brokers, Realtors, Listing agents, and Buyer’s agents, all of whom must be licensed to serve you. The agents and salespersons work for a broker. Those licensed to sell may represent either buyers or sellers. However, the listing agents typically represent only sellers and buyer’s agents
represent only the buyers – so as to avoid potential conflicts of interest. Only those that are members of the Canadian Real Estate Association (CREA) may use the designation “Realtor”.


2. Mortgage Broker
The person that you work with to get your loan is called a mortgage broker, consultant or mortgage planner. The job of the lender is to take your application for a loan, and verify your income, employment and credit history and find a lender who offers the right mortgage product to suit your needs.


3. Solicitor
There are usually two Solicitors/Lawyers involved in the purchase of a home, one for the seller, one for you the buyer. The role of your solicitor is to make sure that you avoid any pitfalls in your purchase contract. They also examine the title, insure the title, and issues a title report – verifying that you can become the rightful owner of the property.


4. Appraiser
The Appraiser, who is usually certified, is frequently involved after you purchase your home to verify that you paid a reasonable price. They examine the appearance, condition, size, and quality of the home – then estimate the home’s value based on other sales in the neighbourhood or area.


5. Home Inspector
The Home Inspector checks the working condition of electrical, mechanical, structural, and plumbing systems in the home. In Canada, there are currently no regulating bodies for home inspectors, so choose yours carefully, and ask your real estate consultant who they would recommend. Generally, an inspection lasts about three hours. It will focus on determining potentially large expenses and safety-related concerns. Most inspectors don't mind at all if you tag along. In fact, this is a great opportunity to learn about any major problems first-hand and to find out ways to keep your future property in good condition. It’s an excellent opportunity to learn and ask questions about the house.

Four Important Questions To Ask Your Mortgage Lender Before You Sign Any Of Their Documents...

1. Do you have a variety of loan programs to fit my cash flow and expected length of ownership needs?
If you are going to live in your new home for less than five years, you may want to consider a variable rate mortgage or “VRM.” With a VRM, your payments will be lower, but they will go up according to the Prime rate charged by the bank. Most people aren’t aware that with a 25-year mortgage they’ll be paying approximately 2.5 times the total amount of the mortgage in payments. A mortgage planner like the team at Tridac Mortgages can help you develop strategies that can help you payoff your mortgage in approximately half the time saving you $1000s in interest.

2. Do you offer written mortgage pre- approvals, not just pre-qualifications?
A “pre-qualification” is usually a lender’s opinion of your eligibility for a mortgage. If you ask to be pre-approved, the lender will actually submit your job and credit history to an underwriter and get a conditional approval for a loan and a loan commitment. The advantage of having a pre-approval is that it will make your offer to buy a home stronger and it will usually allow you to close the deal faster.

3. Do you have the ability to handle difficult credit history?
Many lenders will only work with you if you have perfect credit, and if a problem comes up, they won’t help you. Lenders look at your credit history to figure out how much they will lend you and how much they will charge you to lend it. Before you make an offer on a home, make sure your lender has reviewed and received approval for you and your specific credit history.


4. Is the rate that you quoted me the rate I will get at closing?
Many lenders advertise their rates in the paper and in homes magazines. These are what are called “Teaser Rates” in the industry. The name says it all. After they’ve got you committed to using them, many lenders then tell you what the “real” rate will be. By this time, it’s too late for you to do anything about it.