MORTGAGES VANCOUVER  
Tips, Advice, and Explanations from a Vancouver Mortgage Broker  

Archive for the ‘Mortgage Broker’ Category

What Makes a Broker Different Than The Bank – Vancouver Mortgage Broker

Thursday, March 22nd, 2012

Transcript of Video Blog:

Hi everyone. Rowan Smith from the Mortgage Centre. I want to talk today about what differentiates me, a broker, from just walking into your bank. If the only thing in the world you care about is rate then perhaps the bank is the best place for you to go. They may not have the best rate for you, though. I’m just saying that if that’s the only concern you can shop with them first.

However, there’s often many other things that we need to look at. We need to look at prepayment privileges. We need to look at can you get out of the mortgage if you need to? We need to look at how does that stack up against the competition in other financial institutions. We need to know if you’re going to live there for the next few years or if you need a line of credit as part of your package.

We need to know the sources of your income to know if you fit under specific programs that will get you additional discounts. We need to know a lot more information than just what is the best rate. There’s many questions that you can ask us as brokers and what is your very best rate while it is one of those questions it’s often not the most important.

I’m going to give you a case in point. Today I had a client come to me who had been chomping on a couple of different mortgage brokers and was getting pulled in a lot of different directions. When I looked at the situation I realized that many of the options that they were being offered didn’t even apply to them based on how they reported their income. I clarified the situation for them, had the deals packaged and arranged within a couple of hours, sent off to my lenders, and already received a response in the same day.

Now, I can’t promise a same day response every time. There’s just a number of factors that prevent that depending on individual deals. It is possible in a very clean situation. What I can do and the value I provide is not just a great rate, although I’m always going to try to get you the best rate, it’s also advice on the other elements of the mortgage and on your lifestyle. We, as mortgage brokers, are specialists on the debt side of the equation.

We’re looking out for your best interest in a fiduciary duty to try to get you the best terms, rate, and product to satisfy your needs. We’re not product salesmen. We don’t just sell the best rate like a canned product that we take off the shelf and hand to everybody. If everybody qualified for the best rate all the time they wouldn’t need us. There’s a lot of us out there for a reason and that’s because we can help provide an immense amount of value in selecting a good lender or getting a deal done in a timely fashion or under specific guidelines or times of day that your bankers can’t match.

If you or someone you know would like additional advice and would like an independent third party, which is what we are, to look at the situation please have them see me. It’s Rowan Smith from the Mortgage Centre.

Why We Brokers Ask For So Much Paperwork – It Isn’t Our Choice!

Friday, March 19th, 2010

I frequently take calls from clients confused why the bank is asking for so much paperwork. You have to realize, they are lending you like hundreds of thousands of dollars, and have to do their due diligence to make sure you qualify, and that nothing is amiss. There is a LOT of fraud out there, so expect a lot of questions. That said, it’s pretty standard from bank to bank, and this video explains what you’ll need.

Transcript of Video Blog:

Hi, everybody — Rowan Smith at The Mortgage Center. Not a day goes by that somebody doesn’t say to me, when I give them my list of paperwork requirements, “Why is it so much?”

Well, you’re borrowing a lot of money. You can expect the bank is going to ask pretty much the same questions at every institution. Here is a list of paperwork you’re going to need for your first home purchase, or any home purchase. You may want to jot these down.

First, you’re going to need something to confirm your income. Now, this can take varying degrees and varying forms. It’s a little tricky, but basically, if you earn an hourly rate and you work full-time hours, we’re going to need a job letter that specifies that and tells what your job title is.

If you earn varying amounts of money — because maybe there’s overtime, bonuses, incentives, profit sharing, something like that — if you need that money to qualify, then we’re going to need to document it somehow. We have to show a track record of that extra money.

Generally, two years is what they’re going to be looking for. If you’ve only been on the job for six months and even though it looks like you’re going to make a lot more, they’re just going to use your base. They’re not going to use that higher figure.

For income, you’re going to want to get the last two years’ T4s, or notices of assessment, and a recent pay stub. It’s generally a good idea to get your two most recent pay stubs, because sometimes we can make that fly with certain lenders.

If you’re self-employed, we need proof that you’re self-employed, for at least two years. If you haven’t been self-employed for two years, that’s fine; but we have to show you’ve been in the industry for two years.

You have to have at least been doing something for the two years. It gives them something to fall back on, to let you know you’ve been in this business — whether you’ve been an employee or self-employed — for at least a two-year period of time. That’s the breakpoint for self-employed people.

You can expect us asking for things like articles of incorporation, or the last two years of T1 generals that show you filing as a self-employed person, assuming an accountant has prepared those documents. Or a business license, a GST return — something to just show us that fact.

That’s for income. If you’re buying a home, you’re going to need the contract, and if it’s in DC, the property condition disclosure statement. That answers all of the questions, such as, “Was it a former grow-up? Was it a meth lab? Is it connected to sanitary and sewer?” and all that other stuff.

You’re going to need the multiple listing servicing, the MLS deal sheet. That outlines all the specifics of the property — the square footage, heating, taxes, etc., maintenance fees, if applicable.

For down payment, you can be expected to be asked for about 90 days of bank statements showing that money. Now, if it just shows up in your account a month ago or a week ago, you have to show us where it came from.

If it came from the sales of another home, that’s fine. We just need to show that sale document and that contract. That shows that you actually did sell a home, and that’s how you got the funds.

So you’re looking at down payment, income, and property.

The property is also appraisal. The appraisal is required 100 percent of the time; however, sometimes we do it behind the scenes, electronically. You don’t ever see it. That’s a little bit complicated and it’s more of a topic for one of my prior blogs, where I covered off when appraisals are required.

There you are: Income, down payment, and property. If you can satisfy those things, or at least get those documents in motion before writing your offer, it will make the subject removal period — that period where you get to firm up your financing — much easier.

For the Mortgage Center, I’m Rowan Smith.

How Are Mortgage Brokers Compensated in Canada?

Friday, September 25th, 2009

I read an article today that really made my blood boil. It was an article that talked about the difference between buying a home through your bank, and buying a home through a mortgage broker.

If you want the direct link it is:

http://homebuying.about.com/cs/mortgagearticles/a/home_lenders.htm

Here is the quote that upset me as it talks about Mortgage Broker Compensation:

Mortgage brokers are professionals who are paid a fee to bring together lenders and borrowers. They usually work with dozens or even hundreds of lenders, not as employees, but as freelance agents.

Think of mortgage brokers as scouts. They find and evaluate home buyers, analyzing each person’s credit situation to determine which lender is the best fit for that person’s needs. The broker submits the home buyer’s application to one or more lenders in order to sell it, and works with the chosen lender until the loan closes. A good mortgage broker can find a lender for just about any type of credit.

The mortgage broker working to secure your loan is earning a fee for the transaction and the better deal they achieve for a lender, the more they are paid. Don’t be too anxious to disclose to a broker the interest rate you are willing to accept–let them tell you what terms they can secure. Shop around to make sure the terms are reasonable.

It’s the line that I have highlighted, bolded, and underlined that has me upset. It says, “the better deal they achieve for a lender, the more they are paid.”

This is completely FALSE!

In Canada, if a mortgage broker is working with a client, they have a fiduciary duty (duty to protect the financial best interests) to their client. Offering a higher rate, and getting paid more, would be a direct contravention of this rule.

In fact, the banks don’t allow it! If you are paying a higher rate, we don’t get paid more, as a general rule.

As a mortgage broker, I try to find the best mortgage rate for my clients. There are four reasons for this:

  1. The lower the rate, the more affordable the payments, the better it is for the clients
  2. I have a fiduciary duty to protect the financial interests of my client
  3. If I don’t get them a great rate, they won’t be happy and refer future clients to me
  4. I am paid the SAME at most financial institutions!!!!

As a Canadian mortgage broker, I am paid almost the exact amount from lender to lender regardless of the terms my clients accept. If they get a deal for 4.09% at one bank, I am likely getting paid the same (or damned close to it) at most other lenders for a similar rate and product. The difference isn’t substantial enough for us, as brokers, to go running around for an extra $50 here or there. In fact, we are more “service” driven that compensation driven. It profits a mortgage broker nothing to get 20% higher commission at lender A over lender B if lender A is unable to deliver fast approval and fast review of documents.

I am very open with my clients. If you want to know how I’m paid on a mortgage deal, I’m happy to tell you, and compare that to what I’d get paid at other institutions so you can rest assured you are getting a fair deal.

Until next time, happy house hunting!

Why Use a Mortgage Broker? How are Mortgage Brokers Paid?

Thursday, December 18th, 2008

Through all my writing and explanations about mortgages and products, I’ve forgotten the fundamentals. Why use a mortgage broker? How are mortgage brokers paid?

I’ll address this in two forms:

1. Why use a mortgage broker

2. How are brokers Paid? Do I (the borrower) pay them? The banks?

WHY USE A MORTGAGE BROKER

First, and most importantly, we are skilled and educated professionals. We are familiar with many lenders in the market (if not ALL lenders), all the unique rules and policies of the lenders, and can best advise you which lender will give you the best rate, service, and pre-payment priviledges.

A lot of people get hung up on rate. “What is the best rate you have?” asks many a caller when they find my website. This is a very short-sighted and narrow view of your mortgage. The rate is equivalent to the “price” you pay. However, focusing exclusively on rate, is like staring at the sticker price on a 1979 AMC Gremlin for $1,000 and saying, “that’s the car for me!” The fact that the underlying car is a piece of garbage, and doesn’t suit your needs, is just (if not more) important than the price. You need to balance rate with other factors such as:

- Speed of approval
- Service after funding
- Pre-payment priviledges
- Flexibility of payments (skip-a-payment, etc…)
- Penalties to refinance or pay out
- Portability

With over 30 lenders in the market, and each having 5+ products, that is over 150 products that you need to know about to make an ideal choice. As a registered mortgage broker, I am able to navigate these murky (and often changing) waters and provide you with UNBIASED THIRD PARTY ADVICE. We are paid by the lenders, and are essentially paid the same at most lenders. Where your mortgage ends up only matters to me insofar as it is the ideal product for YOU in YOUR unique situation.

Mortgage brokers are mobile, available at non-traditional hours, and can come to your home on evenings and weekends to make the process more convenient.

Last reason to use a mortgage broker: our services are FREE! More on this below….

HOW ARE MORTGAGE BROKERS PAID

When dealing with your “garden variety” mortgage that is done through a bank YOU PAY NO FEE FOR THE SERVICES OF A MORTGAGE BROKER. We are paid by the banks.

Do you pay a higher rate by using a broker?

Answer: No. You often pay less.

Why?

Because mortgage brokers are paid a one time commission for sourcing out a mortgage. The bank only has to underwrite and approve the file based on the supporting paperwork. All the client “touch” and education is done by the brokers. Once the mortgage is done, the bank continues to collect the interest, but the broker is paid and no longer on the payroll. With a branch mortgage, the bank has to pay the employee, rent, and other overhead even after the mortgage funds.

You do NOT pay a higher rate when using a mortgage broker.

The mortgage broker’s commission is NOT built into the rate or fee you pay the bank.

On a typical transaction for a typical home there is NO FEE for a broker’s services.

The only time there are fees (for a reputable broker) are in non-standard situations dealing with private lenders due to bankruptcy, dismal credit, foreclosure, or other mitigating factors. In these situations the banks CAN’T lend the money (and thus pay the broker).

THE BOTTOM LINE

By using a mortgage broker you get a better rate, better service, and education in the process, and all this comes with NO FEE. It is truly a win win situation for both the client and the broker.

If you would like to receive true broker service and rates, please call me, 7 days a week, 365 days a year at 604-657-6775 and I will attend to your situation personally.

What is a TRUE Mortgage Broker? What is a “Rover” or Mobile Lending Specialist?

Sunday, October 19th, 2008

I’ve been made slightly crazy this week with clients telling me they have been working with a “TD Mortgage Broker” or a “RBC Mortgage Broker.” Why is this making me crazy?

Because, they are NOT Mortgage Brokers!

The very essence of a Mortgage Broker and our service, is that we are independent, not tied to any one lender, and able and willing to access lenders with the best rate, product, and service to fit a client’s unique situation. If you are dealing with someone from TD or Royal Bank or BMO who is a “Mobile Lending Specialist” or Business Development Manager, THEY ARE NOT A BROKER. They are just the same as the person in the branch. They are there to drive business to their respective institution, but they are given a slightly different mandate: They can come to you, at your house, or in a move convenient location. However, they are, and always will be, working for the institution with their parent company’s best interests ahead of your own.

A true mortgage broker does not deal with only one lender (or even two or three!). A true mortgage broker acts as a third party who has a fiduciary duty to their client. This is a duty to look out for the financial best interests of their client. If TD is offering a rate of 5.55% for a standard 5 year closed mortgage, and, all other things being equal, we can get you the same product at Scotiabank but at a rate of 5.25%, a mortgage broker will ensure that your mortgage gets done at Scotiabank. A TD “Rover” or Mobile Lending Specialist is only equipped (and heavily incented) to send the business to their own company.

Now, there are exceptions to this rule. I have seen TD Mortage Specialists that can’t get a deal done at TD, and then end up using a broker-channel lender once TD has declined the business. However, the business still gets first shot at TD.

I am naming TD here, not because of any inherent dislike of them, but rather because their TD Rovers and mobile lenders are often confused with mortgage brokers because many of them work out of real estate offices, and work non-traditional hours. Naturally, they don’t want to change this image of themselves as independent brokers, so they say little to contradict the rumour that their client is dealing with a mortgage broker.

Be very wary when dealing with a mobile lender that deals exclusively (or primarily) with one lender. As a true, independent, mortgage broker, I take your mortgage “to market” and shop for the best rate and terms at ALL lenders (except RBC, Coast Capital, and BMO because they won’t deal with mortgage brokers and have their own mobile lending staff which they feel is more cost effective). I have over 30 institutions that I can take your mortgage to: many you will have heard of, and many that you will not have heard of.

Lastly, a mortgage broker is a licensed individual, who is overseen by FICOM (Financial Institution Commission) who regulates and assures ethical practices amongst its member brokers. Most mortgage brokers also are members of their provincial and national broker associations. In my case, I am a Member of the Canadian Assocation of Accredited Mortgage Professionals (CAAMP) as well as the Mortgage Broker Association of British Columbia (MBABC). Lastly, I hold my AMP designation making me an Accredited Mortgage Professional, and this is the highest level of education, oversight, ethical training, and continuous education in the country for lending professionals. Your local bank employee rarely has any of the the above certifications that attempt to ensure ethical practices and ensure proper training and oversight.

When dealing with me, you can be sure that you are getting truly independent advice. I don’t favour one lender over another (unless they have the best rate or product in the market at that time) and always send my deals to whichever institution offers the best overall package. Rate is a very important part of the package, but it is by NO means, the only issue. Term, ammortization, pre-payment priviledges, flexibility, portability, assumability, and many other concerns need to be given equal consideration along with long-term plans, career aspirations, and credit worthiness.

Don’t mistake your local banks’ mobile staff members as brokers. They aren’t. Deal with a true broker, and you will receive superior rates, service, and product selection. Call us up, you’ll be glad you did.

What Makes a BAD Mortgage Broker?

Wednesday, April 23rd, 2008

I recently attended an industry function along with around 700 other mortgage brokers from Vancouver and all across the country. It was the annual MBABC Mortgage Broker Conference and all the lenders from all over Canada had trotted out their newest and innovative mortgage products, in-house talent, and marketing materials.

The event followed a typical industry format: trade show, dinner, and private parties at all the most exclusive restaurants in town. The following day was much of the same with me hearing a lot from lenders and brokers about “what makes a GOOD mortgage broker.” People talked about integrity, disclosure, fiduciary duty, and all manner of vaunted and eloquent terms, but no one really wanted to address the question: “What Makes a BAD Mortgage Broker?” I’m not talking about ethics or morals, as these are pretty clear in most cases. I’m talking about what makes a broker “bad” to deal with, and gives the clients a bad experience, and therefore taints the public view of a broker.

I got to thinking about it, and spoke with a couple of my fellow broker friends, and what we decided was that it was best to figure out where we get most of our deals from. As younger, GOOD brokers in the business, often competing against people with 20+ years in the business, little drive to build new business, and a large and established list of quasi-loyal clients, we wanted to know how we managed to steal these clients on a regular basis from the competition. In other words, what were they doing WRONG?

The single most important thing that I offer, and that I make mention of to clients to expect is SPEED. In a time when people want everything sooner, faster, now Now NOW, the ability to get answers quickly, or at the very least RETURN THEIR CALLS quickly, is an invaluable asset. Clients should expect a fast call back time of no more than two hours if they have to leave a message. A bad broker, and one that I would avoid, is one that is low and takes a long time to return calls, get answers, or return emails. The fact is that in the mortgage and finance business, time is very critical as buyers often have looming subject removal deadlines, closing date deadlines, or othe time sensitivities that warrant (and demand) a fast turnaround. If your broker is not offering you same day callbacks (at the very least), same day emails, or 24 hour turnarounds on getting an approval, then you should start looking elsewhere and find another broker.

The next atribute that a BAD broker exhibits is inaccessibility. With the absolute myriad methods of communicating available (telephone, in-person, email, fax, blackberry, SMS, websites, Blogs, etc…) there is NO REASON that you can’t get hold of your broker in a timely fashion. Is there anything more aggravating than calling and calling and calling a banker or broker and just getting voicemail over and over over? If you’ve had the same experiences as me, you’ve been calling for days, and getting a new voicemail each day that is always up-to-date with the day of the week mentioned, and a polite message saying they will call you back “as soon as possible” followed by hearing nothing from them for days…. if at all. This behavior is unacceptable. Every broker that I know has not only a cell phone, fax, and email, but also usually has a BlackBerry, I-Phone, TREO, or some other wireless device. The fact is, they ARE getting your messages, but just don’t value your business, time, and feelings of stress and worry as much as they should. If you are getting this treatment, then it is time to find another broker. I know, I know…. Everyone is “busy,” but at the very least they could make a quick call to you so that you know when you CAN expect to hear from them in a more in-depth manner. If you are not getting your calls or emails returned, find another broker.

Another attribute that many young or inexperienced brokers exhibit is what I will term, for lack of a better term, as “flakiness.” Perhaps you’ve had the experience of speaking with a banker or broker, getting told “I’m fairly sure this will get done. You can start looking for a home,” and you subsequently spend weeks shopping for a house (chewing up many hours of a realtor’s time) only to have everything unravel when you finally find that perfect home and write an offer. Perhaps you’ve gotten statements and lines from your banker or broker such as, “they declined the deal,” with no explanation of why. Or perhaps you have gotten statements such as, “well you said you make X dollars and really you only make Y dollars…” Or perhaps it’s 4pm on the subject removal day, and you get a call from your broker asking for a lot more documentation or paperwork that simply cannot be obtained in time. This situation is unacceptable on a personal and professional level. Your broker should be able to clearly tell you, before you spend time looking for a home, what you can and can not afford (or what they can or can not get approved). Brokers are well versed in all the rules that the banks and lenders have, and they should be 99% sure of whether or not a mortgage will be approved before they even send it to the bank. If your broker is “flaking out,” or not giving you a clear picture of whether or not they feel your mortgage is going to get approved, then find another broker.

In summary, clients should avoid brokers that are slow, inaccessible, and flakey. While this might sound like obvious advice, if you have experienced any of the situations that I have described above, then you need to FIND ANOTHER BROKER…. or just give ME a call.