I am sure that most of you have seen advertisements saying…
QUICK MORTGAGE PRE-APPROVAL, GET PRE-APPROVED IN 10 MINUTES, etc.
KYC is a common acronym in the financial world and it means Know Your Client.
After over a decade as a mortgage broker I can tell you that it takes longer than 10 minutes
to pre-approve a client for their mortgage. In fact, it often takes more than 10 minutes to go
over mortgage basics for a first time home buyer who needs my help to understand the process.
Speak to any realtor and they will tell you the disappointment that a client goes through
when a mortgage pre-approval fails to move to actual approval for the home they
worked so hard to find. Quick pre-approvals lead to missing key pieces of the
mortgage application that may become a barrier once the mortgage approval is requested.
Here are some of the things that can come up in a mortgage application that can be missed.
The source of down payment funds is highly regulated to prevent money laundering.
If you have had all the down payment funds in your bank/investment account for at
least 3 months, then that is usually just fine. Statements for those previous 3 months
are requested and submitted to the lender for review. Any deposits to your account
over those 3 months that are not payroll related is questioned. Some issues that I
have seen cause problems are:
- · Funds recently transferred from the US
- · Funds transferred from a line of credit
- · Cash deposits
- · Funds given from a non-family member
If you are a full time permanent employee who is salaried, using this income is easy.
Part time, temporary or full time with no guaranteed hours is where income qualification
can prevent a mortgage from being approved. If you have been with the same employer
for at least 3 years then we can use an average of your income over the last 2 or 3.
This is often what is done for those who are self employed and we use the personal
taxable income shown on line 150 of the notices of assessments. There are still
“stated income” programs out there to help those who show very little income
after their accountant has worked their magic.
It is my standard practice to access credit reports for every client at the beginning
of the pre-approval process. This is a crucial time to address any problems or issues
that may be on a credit report. Some examples of potential credit report problems are:
- · Old paid out loans showing a balance still owing
- · Collections from any creditor
- · Habitual late payments
- · Credit cards over their limit
- · Previous bankruptcy or foreclosure
I just want to close this newsletter off with a note about mortgage promotions put out by
some of the retail banks. Promotions like “Employee Pricing”, “1.99% Mortgages”,
“Switch Your Mortgage And Get $500” are often not as good a deal as they appear.
Please check with me before applying for one of these promotional mortgages.
If I cannot prove to you that I can obtain a better rate and/or terms for you,
then the promotional mortgage will be the way to go.