Thursday, August 30, 2012

How to qualify for a brand spanking new mortgage

Get that credit in check

The criteria that are really important for mortgage approval: No. 1 is credit, No. 2 is employment and then there's the down payment.

The criteria that are really important for mortgage approval: No. 1 is credit, No. 2 is employment and then there's the down payment.

Photograph by: Thinkstock , Postmedia News

If you have just graduated from university with student debts, the prospect of buying your own home may seem remote. Advisors suggest formulating a plan early on to help get on track to qualify for that mortgage.
"For new graduates, once they've got their job and regular income, they need to [pinpoint] what it is they want to buy," says John Nardi, a financial advisor with Edward Jones in Mississauga. "Have a budget in place. Don't get caught up in the emotion of buying a home," which can lead to over spending, he says. "The last thing you want to be is mortgage poor - you can't enjoy your life at all."
A mortgage professional can advise on what a lender will be looking for.
"There are three criteria that are really important when you come out of school: No. 1 is credit, No. 2 is employment and then there's the down payment," says Victor Peca, a broker with Mortgage Intelligence in Toronto. "At least a year of employment will make the lender see [you] have stability."
Student debt does not have to be all bad news.
"Having some student debt when you graduate isn't necessarily the worst thing," Mr. Nardi says. "Having the debt and paying it back on a regular basis, without missing payments, can actually help improve your credit rating."
Mr. Peca agrees that the key is not whether or not you have a debt, but how you handle it that is of interest to mortgage lenders.
"The beacon score is really a blueprint of how someone spends. They have to make payments on their debts. It will reflect on their credit report," Mr. Peca says. "The lenders view this as the client's first chance to prove they are responsible and credit-worthy."
Mr. Nardi says every situation is different, but recent graduates should take tax and financial advice before switching their student loans from the government to a bank or other lender just to secure a lower interest rate.
If your credit score falls short of the rough threshold of 620 required to get a good mortgage deal, Mr. Peca says, maintaining payments will help increase the score.
"Do not listen to friends when they say 'Hey, don't pay it off, it comes off your record in seven years,'" Mr. Peca says. Clients with high salaries but low credit scores can struggle to get a good mortgage deal. "[Your low credit score] proved to the bank that you don't like making payments."
Mr. Nardi says get rid of all but one of your credit cards. With too many cards, the lender will assume that you are making use of all your available credit and will reduce the amount of mortgage lending accordingly. Mr. Nardi says try to keep the balance below 15% of your credit limit."That shows you are disciplined and you've got a strong commitment to paying it back."
If a mainstream lender tells you that you do not qualify at this time, Mr. Peca suggests working with a professional to improve your credit score and deposit, rather than get yourself into a situation you cannot afford.

Scotia buys ING Bank of Canada

An upstart bank that made a name for itself by running ads that slammed its more established rivals for charging too many fees and advised customers to "save your money" is being bought one of the country's biggest lenders.
Bank of Nova Scotia on Wednesday said it has agreed to buy ING Bank of Canada, popularly known as ING Direct, for $3.1-billion in cash.
According to Scotiabank, ING customers will barely notice the change in ownership. Canada's third largest bank vowed to run it as a stand-alone business, maintaining ING's "unique and successful" Internet business model and offering the same online experience.
Owned by Dutch financial services giant ING Groep, the Canadian operation was launched in 1997, just as the Internet was gaining ground, as a branchless bank that offered products such as savings accounts promising high interest and low fees.
For years ING's television commercials criticizing the common practices of the big banks were ubiquitous. In one ad that ran in heavy rotation, two actresses list the banks' perceived sins, express mock outrage and suggest the bigger competitors are "bad apples" for imitating the Dutch lender's better practices.
Over the past 15 years we have successfully built ING Direct into the leading direct bank in Canada," said ING Groep chief executive Jan Hommen. "I am very pleased that in Scotiabank we have found a complementary owner with the ambition to further grow the business, which is a testament to the quality of our local management and employees as well as to the strength and potential of the business model."
ING Direct has about 1.8-million customers and $40-billion in assets, making it Canada's eighth largest bank. The company also has about $1.2-billion of excess capital, or money that it holds on its balance sheet above regulatory requirements. Scotiabank plans to use that capital to cover part of the cost of the deal, lowering the final price to about $1.9-billion.
The proposed deal, subject to regulatory approvals and various closing conditions, is expected to close by December.
The transaction is garnering a lot of attention because it would be one of the largest acquisitions in Canadian banking in decades. The domestic industry is notoriously concentrated, with just six large players making up for the lion's share of lending and deposits, compared to markets such as the United States where thousands of banks fight over business.
Critics say that concentration is the main reason that bank fees are high in Canada and why the big players enjoy a level of profitability that their international peers can only dream about.
ING Groep has operations around the world but it's been struggling to recover from losses in the financial crisis and more recently the turmoil around European sovereign debt. It's had to replenish its capital buffer, and it's been doing that by selling off parts of its operations. Last year it divested part of its Latin American insurance operation for US$3.85-billion.
Experts have been speculating about the sale of the Canadian subsidiary for several months, predicting possible bids from several of the big banks including Toronto-Dominion Bank, National Bank of Canada as well as Scotia.
The deal comes as players are pushing hard to grab more customers in the coveted domestic market as a way to make up for shrinking profits and declining interest in home loans, one of the most profitable bank businesses.
Scotia officials declined to talk about whether there were other potential buyers at the table, but analysts praised the transaction, saying the addition of ING Direct will boost Scotia's Canadian retail operation, one of the "weaker" franchises among the big banks, according to Gabriel Dechaine, an analyst at Credit Suisse.
The challenge for Scotia will be to hang onto the online bank's 1.8-million customers and to continue to grow the operation.
It may not be easy. ING Direct started off in the 1990s with all cylinders firing — Canadians liked the convenience of internet banking and they appreciated the high interest they were getting on deposits.
But the business has changed over the last several years. Nowadays, most of the banking industry offers Internet access to accounts.
But more important, interest rates have collapsed. In the early days ING had no trouble bringing in new customers with interest rates of 4 or 5%, often double the going rate. But in current zero-interest rate environment, such offers are no longer possible.
As a result, the company's growth has slowed significantly.

Wednesday, August 29, 2012

How to avoid home closing day anxiety

How to avoid home closing day anxiety
By Mark Weisleder | Moneyville Thu Aug 23 2012
Lots of things can go wrong on closing day. If you're careful and think ahead, you can avoid a lot of anxiety later. Sometimes, though, you have to go with the flow.
They only left us one key. The front door has two locks!
This happens more often than you think. Calling the sellers won't help because they usually left the rest of the keys on the kitchen counter. The best option is to call a 24-hour locksmith and then send the bill to the sellers.
Lesson:Sellers must make sure they give their lawyer enough keys to provide access to the buyer after closing.
We walked in and the house smelled awful.
It is hard to sue for these kinds of issues, unless the seller did something to conceal the smell when the buyers were visiting the home in the first place.
Lesson: Be wary when you smell air freshener during an open house. Ask questions and make sure you have the home inspected.
The house is filthy, there's junk in the garage, the mirrors are gone.
If the seller leaves any junk behind and you have to pay to remove anything or clean it, you can send the sellers the bill. When it comes to mirrors, it depends on whether they were permanently attached to the wall. If they are hanging on a hook, the seller can probably take them.
Lesson: Include a contract clause that says your seller will leave the home in a broom swept condition. Describe everything you expect to remain after closing when you prepare your agreement in the first place.
Oops, we forgot to tell the lawyer.
We recently acted for the seller of a home and when we called the buyer's lawyer on closing day and asked where the money was, he told us we were a week early. The buyer and seller had signed an amendment moving the closing date up one week, but the buyer hadn't told his lawyer. My client agreed to a one-week extension, but the buyer had to pay the lost interest.
Lesson:Whenever a change is made to your contract, make sure that your lawyer knows about it right away.
Doesn't everyone buy and sell on the same day?
That's the problem. Let's say A is buying from B; B is buying from C; C is buying from D and D is buying from E. If A can't close for any reason, none of the other deals close either. Real estate lawyers call these train wrecks.
Lesson: Arrange bridge financing. This means you ask your bank to lend you all the money to close your home purchase and then you pay all or part of it back a day or two later when your sale closes. It is worth the interest for a few days to make sure that you close both deals without stress.

Monday, August 27, 2012

Attention First-Time Buyers! Buying a home with zero-down payment is ending soon!!

New mortgage rules will soon eliminate "cash-back" mortgages, which provide upfront cash to help cover your down payment.  Securing a down payment through a loan or unsecured line of credit is also becoming more difficult to get. 

Qualified home buyers who are deciding whether to buy now or keep saving should take a look at these opportunities now while they are still available.  Why? Buying today means you can take advantage of today's historically low fixed mortgage rates.  And zero-down helps you get into your home now so you can save potentially thousands in rent, and get a jump start on building wealth.  In a recent survey of first-time buyers commissioned by TD Canada Trust, 55% wished they had bought sooner!

A zero-down mortgage is not for everyone but if you have a stable income, good credit and the ability to comfortably handle your monthly mortgage payment and ongoing housing expenses, you may want to consider this time-limited opportunity.  We can review your situation and help you determine if zero down is the right financial decision for you. We'll make sure you are clear on what's involved, and that you understand your closing costs and all of your monthly home ownership expenses.   

If you want to consider this option, you need to act now, before October 31, 2012!