Monthly Archives: July 2022

With rising interest rates, now is a great time to find and buy a home. When you search for a home, get pre-approved for a loan to ensure you can afford to take on the risk of home ownership.

In a buyers market, the more advantages you may get, the better your chances of securing your ideal property.

What is a Mortgage Pre-Approval?

A mortgage pre-approval document is mainly signed by the bank or mortgage broker. With it, you are guaranteed to receive a loan for purchasing a home at a specific interest rate, amount, and term. 

Besides income and assets, lenders are interested in your debt/credit-to-income ratio. You should make sure you are in good standing with your mortgage company before you start shopping for a house.

Here are five ways why getting one can be beneficial for you:

1. Helps You Buy Now and Lock in a Lower Rate

Mortgage rates can go up and down. If you pre-approve a loan, you can buy now before rates go up; then, you can lock your rate in with a 30-day commitment fee or a nominal fee. 

Moreover, you can lock in your rate for up to 10 years. If you wait to get pre-approved until the last minute, you may be less likely to lock in a low rate.

2. Helps You Avoid a Higher Interest Rate

If you are not a ʻqualified buyer,’ you may be required to pay a slightly higher interest rate. Furthermore, ʻqualified buyers’ may be charged a higher interest rate if they are not pre-approved. 

If you do not have enough cash for your down payment and closing costs, you may not be able to obtain a loan. If you are approved for a loan and can’t close, you will have to pay a fee.

However, if you are a ʻqualified buyer,’ it may not be as easy to get a loan as you think. A bank will ask for documentation of your down payment and ample cash for closing costs.  As a first-time homebuyer, your lender may require a larger down payment and more cash for closing costs.

3. Helps Negotiate a Better Deal

Negotiating a better price is simpler if you have previously been pre-approved for a loan and can show your sellers your letter. Your vendors will be more likely to negotiate on price if they know they can count on you to pay them soon after you are “approved.”

On the other hand, ‘unapproved’ buyers may be required to pay a higher price at closing. If your sellers know you are committed to purchasing the home, they will be more likely to help you with a lower price.

4. Gets the First Option to Buy 

By having a pre-approval letter, you can get your offer accepted first. If a house receives many requests, only the pre-approved buyers will be allowed to make an offer. 

When you are ʻapproved,’ they will accept your offer first. If the seller is one of the ʻapproved’ sellers, they will usually ask for a higher price or a lower deposit.

Furthermore, ʻapproved’ sellers might have a higher market demand. Since they have been pre-approved, they may have a faster time selling their home. As a result, they might ask for a higher price.

5. Helps Avoid Foreclosure

Foreclosure is more likely when buyers cannot make their mortgage payments, but they can take measures to avoid it. A ‘short sale’ is one option. 

Your house or property may be worth less to the bank than it currently is. You might be able to work out a better deal with the bank. 

You should, however, be prepared to get an ‘appraisal’ of the property’s worth. Another option is negotiating a better agreement with the bank or selling the property before foreclosure.

Conclusion

Don’t put off being pre-approved for a loan. You might be shocked by how many individuals try to sell their homes before getting pre-approved for a loan. Remember, you are more likely to obtain a better bargain on your ideal house if pre-approved.

At Ottawa Mortgage Services, we realize that you’re seeking a mortgage services specialist who will examine your financial condition and help you get the best mortgage available. We’ll offer you several mortgage options, clarify what paperwork is required to qualify for your mortgage, negotiate with lenders on your behalf, and ensure you’re properly taken care of throughout the process. Take the first move, reach out, and let us know how we can help you!

Millions of Canadians don’t work as an employee and instead are considered self-employed individuals. These people have the freedom of being their own boss. While that sounds amazing at first, it does come with some disadvantages. For many people, one significant setback of being self-employed is not being able to take out a mortgage. However, in this guide, we’ll show you that getting a loan as a self-employed individual is not only possible but can be easy with the right help.

Why Lenders are Strict Concerning Self-Employment

When you’re trying to get a mortgage as a self-employed individual, it’s important to remember that there will be some unique challenges. This is because job stability can be limited. It’s also important to consider that self-employed applicants are more likely to have a spotty credit history. This means that lenders may have more restrictive guidelines for self-employed applicants.

Getting a Mortgage as Self-Employed

In order to be eligible for a mortgage, you will still have to meet your lender’s qualifying standards for income. In other words, you have to have enough income to be able to pay your monthly mortgage payments.

Self-employed individuals don’t always have a stable booking schedule. This makes it hard for them to apply for a mortgage as a self-employed individual because conventional lenders don’t have a way to access the income of someone that doesn’t have an employer. But there is a way to get around this.

How Self-Employed Individuals Qualify for a Mortgage

Self-employed individuals who want to take out a mortgage will find that their lender will need to verify their income. However, the typical methods of proof aren’t always available to those who work for themselves. In order to overcome this, lenders have come up with a couple of options for self-employed persons who want to be able to take out a mortgage. These include:

Business Number Registration

Lenders can rely on сorporate documentation when assessing the income of self-employed individuals. This is because self-employed individuals often register their business with the Canada Revenue Agency (CRA). What this means is that their business number can be used as proof of income when applying for a mortgage.

Bank Statements

As a self-employed individual, you probably have your own bank account connected to your business or personal account. It’s also likely that you have a business account at an institution other than the one that you use for your personal banking. This is even more beneficial because it means you have the option of applying for a mortgage by providing bank statements from one of your business accounts.

Financial Statements

For non-traditional income verification, lenders also allow self-employed individuals to provide financial statements instead of pay stubs. This is usually more effective than other income verification types in this situation.

Notice of Assessment

There is another option for self-employed individuals who want to apply for a mortgage. This involves the mortgage applicant submitting a Notice of Assessment or your T1 General Income Tax Returns for the previous two or three years. This way, the lender can see a complete picture of your income and use it to calculate your mortgage.

Conclusion

This guide has shown you that getting a mortgage as a self-employed individual isn’t impossible. But it may be more difficult than getting a mortgage as an employed individual. The key to getting a mortgage as a self-employed individual is making sure to meet your lender’s requirements for income verification.

If you think you can qualify for a mortgage even if you’re a self-employed individual, then the next step for you is to find a mortgage agent who can help you connect with a lender. This is where Ottawa Mortgage Services comes into play. We provide mortgage agent services for first-time home buyers, self-employed individuals, and commercial clients. Reach out to us today to get your free assessment with no obligation.

If you want to buy your own place, you’ll need to know how much you can afford. Your finances play a big role in this, and getting a mortgage pre-approval will help you understand your buying power.

How Does Mortgage Pre-Approval Work?

A mortgage pre-approval is a process that potential home buyers can use to see how much money a lender is willing to lend them. It is often recommended that buyers get pre-approved before making an offer on the house. The pre-approval process includes assessing the maximum mortgage amount you qualify for, your estimated monthly payments, and your interest rate.

Your mortgage pre-approval locks your interest rate for a set period, usually 90-120 days. If interest rates go up during that time, you’re still guaranteed the original rate. However, if rates fall, you can try to get a lower rate when you’re ready to close on your mortgage.

Remember that some lenders can only offer you a fixed interest rate for the duration of your pre-approval period. Based on the Bank of Canada’s policy rate, variable mortgage rates can change at any time. Pre-approvals are good for 90-120 days, although some lenders may offer them for up to 130 days.

What Are the Requirements for a Mortgage Pre-Approval?

Regardless of which mortgage lender you go to, you’re going to need to provide the following information:

• Your identification
• Letter of employment and proof of income
• Position and length of time with your current employer
• Additional income and assets
• Outstanding debt
• Bank statements
• Down payment
• Notice of Assessment from the Canada Revenue Agency for the past two years (self-employed individuals only)
• Permission to allow the lender to obtain your credit report

How to Apply for Mortgage Pre-Approval

Since it doesn’t cost anything to get pre-approved, comparing offers from different lenders is a good idea. Most lenders will do a hard credit check as part of the pre-approval process, so make sure your credit score is in good shape before you start shopping around. 

Multiple credit inquiries from different lenders within a short period (usually 14 to 45 days) will only count as one hard check on your credit history so it won’t have a big impact on your credit score.

You can contact different mortgage lenders to see how much you’ll be approved for and what interest rates they offer. Or, you could use a mortgage broker who will shop around for you. The lender pays mortgage brokers, so there’s no cost to you.

It usually takes a day or two to hear back after applying. With formal approval, you’ll know exactly how much you can spend. Keep in mind that there are other costs like closing costs, moving costs, and ongoing maintenance. You may not want to spend your entire budget on housing.

Conclusion

Getting pre-approved for a mortgage is a great first step toward buying a house. If you get it done early in your house-hunting journey, you can compare mortgage offers and better plan your budget. The pre-approval process can take a little time and paperwork, but it is worth it when you are ready to make an offer on a home. 

Ottawa Mortgage Services provides mortgage agent services for first-time homebuyers, self-employed individuals, commercial clients, and more. We also help clients with refinancing, pre-approvals, and debt consolidation. If you’re a first-time home buyer in Ottawa, we can help you find the right mortgage in the right neighbourhood. Get in touch with us today and let us know how we can help!

Home loan denials happen, but it doesn’t mean you’ll never be able to buy a home. A lender may not have approved your loan for a variety of reasons. The key to success is knowing why something is happening and what you can do to fix it.

Check out our five probable reasons for a home loan denial. Also, find out what you can do to secure loan approval on your next mortgage application.

1. Low Appraisal

If the property’s appraised value is much less than the purchase price, the loan-to-value ratio (LTV) may be greater than the lender may legally allow.

Potential solution: Property value difficulties, while difficult to fix, is not insurmountable. Try renegotiating if the purchase price exceeds the neighbourhood’s house prices. Make a greater down payment and accept the lesser loan amount if you have the financial resources to do so. Unfortunately, depending on the market, you won’t be able to shop lenders to see if you can get more money. The chances of the house remaining on the market are small. As a result, you might think about renegotiating or making a larger down payment.

2. Poor Credit History

A low credit score often results from not making payments on time, carrying a high balance, or maxing out credit cards. Any of these things can impact your score and make it difficult to qualify for a mortgage.

Potential solution: The first step is to get a copy of your credit report and check for any errors. If there are any, you’ll want to dispute them right away. If everything looks accurate, you may need to take some time to improve your score before applying for a home loan again. This can be done by paying all bills on time, keeping balances low on your credit cards, and only opening new accounts when necessary.

3. Inadequate Employment History

Lenders like to see a steady employment history because it’s an indicator of future earnings potential. So, if you recently switched jobs or are self-employed, you may have a more difficult time qualifying for a loan.

Potential solution: The best way to overcome this issue is by waiting to apply for a mortgage until you’ve been with your current employer for at least two years. If you are self-employed, be prepared to provide additional documentation, such as tax returns and financial statements, to prove your income.

4. Lack of Downpayment

One of the biggest reasons people are denied a home loan is that they don’t have enough saved for a down payment. Most lenders require a down payment of at least 3-5% of the purchase price.

Potential solution: The best way to overcome this issue is by saving up for a larger down payment. You may want to consider setting up a separate savings account and automated transfers to make saving easier. Another option is to look into government-backed loans, like an FHA loan, which only requires a 3.5% down payment.

5. High Debt-Debt-to-income (DTI)

Debt-Debt-to-income is a ratio that looks at how much of your monthly income is going towards debt payments. A high DTI can make it difficult to qualify for a loan because it indicates you may have difficulty making your mortgage payments.

Potential solution: The best way to lower your DTI is by paying down your debts, which can include credit cards, car loans, and student loans. You may also want to consider waiting to apply for a mortgage until you’ve been with your current employer for at least two years, which will give you time to save up and pay down debt.

Conclusion

There are several reasons why your home loan application may be denied. But, don’t despair! In many cases, there are things you can do to improve your chances of being approved the next time around.

If you’re looking to apply for a mortgage, you need to find an agent that you can trust throughout the process. Ottawa Mortgage Services is the perfect partner to help you get that mortgage that suits your needs and your budget. Our team actively deals with lenders and negotiates all aspects of mortgage underwriting to ensure you get exactly what you need for your loan. Apply now and get a free assessment from a professional mortgage agent.