Monday, May 26, 2014
Buy, Finance Realtor.com Feb 26, 2014 |By: Angela Colley
Once you have found a house you like, made an offer and been pre-approved for a mortgage, you might think you are home free. However, you still have an important hurdle to clear: Getting through the loan underwriting process.
Think of the underwriter as a gatekeeper. The underwriter won’t let you in the front door unless you can thoroughly demonstrate your creditworthiness.
The Real Estate Detectives
Underwriters are like real estate detectives. It’s their job to make sure you have represented yourself and your finances truthfully, and that you haven’t made any false or misleading claims on your loan application. Their standards are much higher than loan pre-qualification requirements.
It wasn’t always like this.
During the housing boom in the early-to-mid 2000s, underwriting standards were comparatively loose, allowing many people to take out home loans who lacked the means to repay them. In recent years, loan requirements have gotten tougher. In January 2014 the Consumer Financial Protection Bureau enacted stricter requirements on some mortgages, which included tougher background checks into your bank account, spending and employment history.
Underwriters will check your credit score with the three major credit bureaus: Experian, Equifax and TransUnion. If there’s a red flag on your credit report—from such things as bankruptcies and collections—you will have to provide a letter of explanation with valid reasons for your past mistakes and the steps you have taken to correct the credit blemish. You may be able to overcome past credit problems if you have a solid employment history or agree to make a large down payment.
Part of the underwriting process reviews the appraisal of your prospective home to make sure its value matches the size of the loan you are requesting. This is important, since appraisers are sometimes pressured by buyers, sellers and their representatives to set a value that justifies the loan and clears the path for a sale. A good underwriter will take into consideration the location of the home and how it might be affected by natural disasters, such as floods.
Your Perceived Risk
Your income and the amount of money you owe will be factored in during the underwriting process. Generally, your total monthly debt obligation, including mortgage payments, should not exceed 43 percent of your pretax monthly income. More debt or lack of a sufficient income can increase your perceived risk.
The depth of the underwriting investigation depends on how great a risk you are considered to be. An investigator for the underwriter will contact your employer to verify the job and salary you listed on your loan application. If there is a question concerning your job history, credit report or personal finances, the underwriter will ask for additional information.
The best thing you can do to improve the chance of approval is to respond with prompt and complete information.
Tuesday, May 20, 2014
When you make an offer on a house you have to put down a deposit. Here are some things to keep in mind.
Mark Weisleder Real Estate, Published on Fri May 16 2014
Here are some answers to common questions about deposits when you are buying a house.
When must a deposit be paid?
In Ontario, the standard real estate contract gives the buyer two choices; you can pay the deposit immediately when you make an offer, or you can agree to pay it within twenty four hours after the seller accepts it. Most buyers prefer the second option. If you are in a bidding war, you will be encouraged to come up with the deposit immediately, to show good faith to the seller.
Can the buyer get out of a deal by refusing to pay the deposit?
No. Once the deal is accepted, you can’t change your mind. If you do, the seller can sell the property again and if he gets less money than you were going to pay the seller can sue you for the difference, plus legal fees.
What happens if the deposit is paid late?
The seller has the right to cancel the deal. This is because all time limits matter in a real estate contract and if you are late, even by a few minutes, the seller can try and cancel. I have seen this happen many times, especially when the seller knows that there is another buyer out there who will pay more money. If you need more time to come up with your deposit, say so in your offer.
How much should a buyer pay as a deposit?
This is a tough question, and will largely depend on where your home is located. In Toronto, deposits are now usually up to 5 per cent of the sale price. In Brampton, it is closer to 2 per cent. In some areas of Ontario, deposits can be as little as a few hundred dollars.
Why does the deposit go to the seller’s real estate agent and not the seller?
If the seller goes bankrupt or disappears with the deposit, the buyer is not protected. When the deposit is held by the real estate brokerage, it is in trust and is also protected by insurance so even if the brokerage goes bankrupt, the buyer can get their money back.
If the buyer is unhappy with their home inspection, can the seller refuse to return the deposit?
This happens more than you think. A deposit cannot be released unless both the buyer and seller agree. If a seller believes the buyer did not act in good faith in trying to satisfy their condition, whether it is a home inspection, financing or a condominium status certificate review, they can refuse to release the deposit. This means it stays in the broker’s trust account until a judge decides who gets it, which can take years. As a precaution, buyers should consider making two deposits in their offer, a small one of say one per cent when the offer is accepted, and a second larger deposit once the condition is satisfied.
Understand the rules about deposits before you sign any real estate contract. It is expensive to change your mind later.
Monday, May 5, 2014
TARA PERKINS - REAL ESTATE REPORTER The Globe and Mail May. 02 2014 Canada’s two private-sector mortgage insurers have decided not to match all of Canada Mortgage and Housing Corp.’s recent product cuts.
Genworth MI Canada sent a letter to banks Friday saying that it will not be making any changes to its standards for self-employed borrowers.
Genworth will, however, tighten its rules for second homes slightly. As of May 30, it will only sell second-home mortgage insurance on homes with one unit in them, rather than two (such as duplexes or a self-enclosed apartment in a house).
Up until now, Genworth has been willing to insure second homes with two units, as long as one of those units was occupied by the mortgage holder or one of their immediate family members.
Canada Mortgage and Housing Corp. (CMHC) said last week that, as of May 30, it will stop insuring mortgages on second homes and will stop offering mortgage insurance to self-employed people who don’t have standard documents to prove their income.
“There will be no amendment to the maximum number of Genworth-insured properties per borrower,” Genworth said in its letter to lenders.
Canada Guaranty, the country’s third-largest mortgage insurer, is similarly limiting its second-home insurance to one unit, but not changing its rules for self-employed borrowers.
Mortgage insurance is mandatory in Canada for federally-licensed lenders when a borrower takes out a mortgage with a down payment of less than 20 per. The insurance pays the bank back if the borrower defaults on their loan.