When I am working through the pre-approval process for any home buyer, a critical last step is to pull their credit report. Making sure that the client has acceptable credit history helps to ensure that bad credit or errors on their report will prevent mortgage approval when the time comes. If your client was pre-approved by their bank or credit union, there is good chance that their credit report was not pulled. The credit reporting agencies do not publish data on their services but there is an industry estimate that over 30% of all credit reports have at least 1 error on it. Most errors are minor and may or may not require action to address.
A very common error that I see is with Regina’s largest credit union failing to properly update their clients credit report when loans and lines of credit are paid in full and closed. While this is only a minor issue and easy to address, it’s another document that the clients need to obtain prior to making an offer on a home.
Whenever I am working with a new client, I am sure to ask who their realtor is and I am sure that all of you do the same with your clients with respect to their mortgage. Paper work required for a mortgage must be timely and not stale dated. Some paper work can be collected at the pre-approval stage like tax returns, T4s, etc. but the rest like pay stubs and letters of employment must be from the last 30 days.
I always instruct my clients to give me a heads up when they are starting the offer process. That allows me the chance to give them a complete list of paper work that will be needed once their offer has been accepted. However, in the excitement of the home buying process they can overlook doing that so I encourage all of you to give your clients mortgage broker/associate/CSR a quick note to expect an accepted offer in the coming days.
One question that you may consider asking your buyers is how much down payment they are planning to put down. If they are putting 20% down then their mortgage will more than likely not be default (aka CMHC) insured. The benefit of an insured mortgage is that the lenders can rely on the insurers property valuation system. Most all lenders have their own internal property valuation systems but clients putting 20% down may need an appraisal on the home if the internal lender valuation is not possible.
Energy Efficient Homes & Mortgage Default Insurance
All three mortgage default insurers have rebate programs in place for clients that buy energy efficient homes. If one of my clients builds or buys an energy efficient home and their mortgage was default insured, I always make sure to send them information on how to apply for their rebate. These rebates are not small either. Depending on the home, the clients can get up to 25% of the mortgage insurance premium that they paid back as a rebate. If you have a client buying an energy efficient home, imagine how happy they would be with their trusted realtor when a cheque for $2,500.00 arrives. In fact, go through your files and see if you have any past buyers that fit this criterion. CMHC will accept rebate applications up to 2 years from funding of their mortgage.
Here are links to all three mortgage insurer energy efficient programs.
Gifted Down Payment
Ever since zero down 100% financing mortgages were discontinued, we have seen an increase in the number of clients getting their down payment from family. That is certainly allowed in the form of a gift from immediate family such as parents, grandparents & siblings. The client is still required to have the closing costs from their own funds. Banks and lenders have adopted a national high-water mark for legal and closing costs of 1.5% of the purchase price. One thing that does add an extra step in the mortgage process is if the person giving the gifted funds gives the real estate deposit from their account. This often results in the need for a copy of the cheque and/or a receipt made out in the name of the party giving the gift. To smooth this process, I recommend that the client obtain the gifted funds into their account in advance of writing an offer and giving the deposit funds from that account. As a side note 100% financing still exists with the Borrowed Down Payment Program that allow buyers to borrow their down payment from a loan or line of credit.