The Value of Good Mortgage Advice

A recent situation arose where a client was preapproved for a new home purchase by their bank.  Great, right?, not necessarily, they owned an existing home and were told by the bank representative that they should sell their home first and then purchase a new one.  They were moving down in price so the client assumed this was a no brainer.  The bank representative did not do the diligence in exploring their current situation.

They proceed to sell their home, agree on a price and then go out looking for a home.  They would have some equity to purchase a home however, were hoping to buy a new home with 5% down payment as pre approved by the bank.  The only catch in this situation is that in Canada an insurer(a 2nd step in the approval) needs to approve the mortgage with less than a 20% down payment.  The clients were not made aware of this and their application was not approved with 5% down payment.  Instead the insurer requested 10% down payment with some conditions that the client had to meet before the bank could get it approved.  The clients are now scrambling to look at options so they can own a home rather than rent.

The moral of this story is as follows:

1)  Get a second opinion after meeting with your bank.  The experience and knowledge of the bank representative may not be as good as you think.  Ask about their experience in mortgages and how many times they have handled a situation like yours.  A mortgage broker with the Accredited Mortgage Professional (AMP) designation is committed to ongoing education and professional development, a great first step in identifying someone who is committed to the consumer.

2)  Speak to your realtor about your options.  A professional realtor will review the options with you and team up with your mortgage advisor to assist you in a smooth transaction.  Making an offer, “subject to sale of your existing home”, may offer you the necessary security to ensure your new home and fianancing is approved before you sell your existing home.

Good advice from a team of professionals acting in your best interest is the key.

Realtors Beware

There has been a lot of discussion in the mortgage brokerage community over the last 2 years about the practice of sending in “dummy” mortgages to CMHC or Genworth for an approval before an offer to purchase is written.  Professional and ethical mortgage agents do not get involved in this practice.  As a realtor, if you ask for this to happen or knowingly are a part of this transaction, you need to be aware of this. 

CMHC is actively investigating these instances and as I understand it, will take necessary action against those who go against the rules.  As an Accredited Mortgage Professional, we need to have an ACCEPTED Offer to Purchase in order to proceed with an application.  Sending in a mortgage application without it is bordering on fraud. 

Realtors may not be aware of this and may become an unknowing party in this type of transaction.  You are now officially aware and will be judged by who you associate with. 

From one professional to another!