Tips, Advice, and Explanations from a Vancouver Mortgage Broker  

Posts Tagged ‘deposit’

How Self Employed Borrowers get a Mortgage in Vancouver – Rowan Smith Mortgage Broker Explains

Thursday, April 26th, 2012

Transcript of Video Blog:

Hi, everybody. Rowan Smith from the Mortgage Center. I want to talk today about self-employed people and what the banks want to see from you in terms of the income documentation.

Like everybody else, they want to see notices of assessment to prove that you’re filing your income-tax, as in you have no arrears, and they want to see how much your filing on there.

But what about somebody who’s been a plumber for 25 years and finally decides to go out on their own. They go out on their own and they’re making way more money, but they’ve only been doing it for a year and a half.

Here’s the thing, that’s a tricky situation for a bank. The bank wants to see that you’ve got a two-year track record of income. But if you were employed back then and now you’re self-employed, how do they make the connection?

Now, not all banks, but several of them have a much more open idea here. What they’ll do is they’ll look at your historical earnings as a plumber, or whatever your job was. As long as you transitioned into self-employment in the same industry doing the same thing they’ll use an average of income over those years, including your start-up years, but also including your years as a salaried employee.

This is particularly important for a guy who’s been self-employed for only one year but has been doing something for 25 years. Often times they move to self-employment not because they were foolish but because they saw there was a lot more money to be made if they were the boss rather than just collecting a salary.

So, if you know somebody in this circumstance, someone who’s been told, “You haven’t been in business long enough,” but they’ve been doing the same job for a very long time, have them contact me. It’s Rowan Smith from the Mortgage Center.

Down Payment Gift – How to Document It – By Rowan Smith a Vancouver Mortgage Broker

Friday, April 6th, 2012

Transcript of Video Blog:

Hi everybody. It’s Rowan Smith from the Mortgage Centre here today to talk about down payment. Specifically I want to talk about gifts. A lot of times people will go to purchase a home, they will have a mortgage all in place, and then the bank will decline them because of their down payment. People will say, “What does it matter? I have the money. Why can’t I use it?” Because the bank is under an obligation to find out where those funds come from.

It’s just a matter of ensuring that the money isn’t from proceeds of crime or something else that sound fantastic and ridiculous to the average borrower but the bank, nonetheless, has an obligation to ensure that those are legitimate dollars. When you get a gift from a family member, that’s the only time it’s allowed, and it’s typically one step of family away meaning up to your parents or maybe to your grandparents or brother/sister.

Banks generally frown on things like uncle or second cousin twice removed gifting money. They certainly frown upon friends or business associates. They want to see a familial connection because it is considered a gift which means it’s non-repayable and that person that gave you that money will have to sign a letter that says there is no repayment ever required for those dollars.

If you’re looking to get a gift it’s not a problem, we just have to ensure that the people understand they are, in fact, giving you the money, will be signing to that effect, and that the funds are in your account. Those are three individual things. There are a few banks that will want to call and speak to the person to ensure that they’re actually giving you the money as well.

Now, are there ever times when gifts aren’t allowed? Yes. Some of the self-employed programs, stated income programs, and whatnot that exist don’t allow for the full amount of the down payment or sometimes any of the down payment to be gifted. This is a very tricky and important area so if you’re looking to buy something and are self-employed and perhaps you leave a lot of money in your company for tax reasons rather than taking it all out in personal taxes then what you’ve got to do is talk to me in advance.

We can structure this and show how to demonstrate your income to the bank through the manner that they want to see. That’s one of the rules on down payment and gifting.

If you know somebody that’s having a problem because their down payment is gifted and for some reason their bank is not allowing them to do the mortgage give me a call. I can offer you free second opinion, review the scenario, and see what can be done to satisfy the requirement. From the Mortgage Centre, I’m Rowan Smith.

What is Required for Down Payment – Vancouver Mortgage Broker Rowan Smith Explains

Tuesday, March 27th, 2012

Transcript of Video Blog

Hi, everyone. It’s Rowan Smith with the Mortgage Center.

I want to talk about down payment confirmation today. I did a previous post on gifted down payment. This post will be specifically on normal down payment coming from savings. What do the banks want to see?

Well, the general rule of thumb is, they want to see 90 days of bank account history, showing the money in your name. This is just to comply with anti-money laundering rules and proceeds of crime legislation and whatnot. It’s to insure that the funds that you’re using for down payment didn’t come from any illicit source.

Now, what will they accept in those cases for 90 days of proof? Well, 90 days of bank statements is fine. Most banks will accept 90 days online printouts. The important thing is, the online printout needs to have your name on it. It has to show that that’s your account and not mine or somebody else’s.

So, if you print out your statements for 90 days, and you have all the transactions, most institutions, frustratingly, don’t have your name on it. They just have the account number. So, what do you do?

Well, one of two things. You can either give us an older statement so that we can cross-reference the number that’s on the current online ones with your name. Or, you can go into the summary screen.

Now, when you first log in, and it’ll say, “Welcome Rowan Smith. Your account.” And it’ll typically show you a summary of the various accounts that you have. It’ll also usually have the account numbers.

If we have that shot, along with your online statements, that’s generally deemed sufficient to satisfy the lender’s criteria.

Now, if it’s in RSPs, or it’s in term deposits, well, sometimes, those statements only come out annually. We can work with you in those specific circumstances. By and large, rule of thumb, 90 days history on down payment.

If you have any questions on this, give me a call. This is Rowan Smith from the Mortgage Center.

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.

Can I Roll My Other Debts Into My Mortgage?

Friday, February 18th, 2011

Transcript of Video Blog:

Hi everybody, it’s Rowan Smith with the Mortgage Centre. We’re going to do something a bit little different here this week. It’s where I’m going to answer one of the most common questions I receive, which is “Can I roll my other expenses into my mortgage?” So let’s look at exactly how that would go down. Read the rest of this entry »

A “Variable” Mortgage is NOT and “Open” Mortgage – There is a difference

Friday, February 18th, 2011

Transcript of Video Blog:

Hi, everybody. I want to address a very common myth, and that’s that people think their variable rate mortgage, because it is open to fluctuations, is in fact an open mortgage. That’s not the case. There’s a lot of confusion as to what is an open mortgage versus a variable mortgage versus a closed mortgage or a fixed mortgage. Read the rest of this entry »

First Time Home Buyer Rights and Advantages

Tuesday, February 15th, 2011

Transcript of Video Blog:

It’s Rowan Smith from the Mortgage Centre. I want to address a very common myth that I hear about, that clients will come to me and say, “Well, I’m a first-time home-buyer, so don’t I get a better rate on my mortgage?”
Read the rest of this entry »

Down Payment – What is Needed For the Banks Paperwork

Sunday, February 13th, 2011

Transcript of Video Blog:

Hi everybody. It’s Rowan Smith at the Mortgage Centre. What I wanted to address today is one of the more common confused elements with down payment. Down payment is something that’s very important with your mortgage, but proving not only that you have the money but where the money came from is also very important.

Read the rest of this entry »

Down Payment Rules – Source and Seasoning – Document Requirements

Thursday, September 16th, 2010

Transcript of Video Blog:

Hi, everyone. It’s Rowan Smith from the Mortgage Centre. I’m going to rehash some old material because I keep running into problems with it recently.

It regards the down payment. When you’re buying a home, people often think, “Well, I’ve got the down payment, so now I just have to qualify for the mortgage”. But the source of that down payment is oftentimes as important as the source of your income.

Now let me give you a couple examples of things that are acceptable. If a bank sees that you’ve recently sold a property, when you sell it you’re going to be given, from your lawyer or notary that represents you, a statement of adjustments and an order to pay.

This is a document that breaks down where all the funds went: some went to pay out your bank, some went to pay out legal costs, etc., and then the balance will be payable to you.

So let’s say you had $100,000 left over. Now you went and bought another place, and you wanted to put $100,000 down. Well, that’s perfect. It’s a very clear track record that the dollars were yours in your name. They weren’t borrowed, and they weren’t from any proceeds of crime. That’s really what the banks are going to be looking at.

Now another thing that would be acceptable would be bank statements showing the accumulation of funds over time, showing at least 90 days, and 90 days is the industry average. You’re going to be asked for this anywhere you go.

Now if you’re dealing with your own bank, they may not ask you for it, but it’s because they can actually see it on your account themselves. Rest assured, they will be looking for a 90-day history of your down payment to see where it comes from.

There are a couple of institutions out there that make exceptions depending on specific programs, but by and large, 90 days’ bank statements.

Now if you’ve got more money stored in ING and some other money at TD Canada Trust, some at CIBC, and you decide you’re going to shift it all into one account and then you go and do your mortgage application, you’ve made a lot of work for yourself because you’re going to have to get 90 days’ bank statements for all three of those accounts and for whichever account you put it into showing the funds going there.

The banks need 90 days, and they’re going to chase you to see all that flow of funds to account for your down payment.

Now you may be thinking to yourself, “Well, listen. The bank’s got the money. The down payment’s there. What do they care?” They care because the source of your down payment could create contingent liabilities that aren’t really registered on the title.

What I mean is let’s say that a husband and wife, newly married, get some money from the dad of the girl that got married, and then a year from now, everything spins out of control and they end up getting divorced.

Well, technical that money should be split down the middle and go separately. But it really was a gift from the father to the daughter, so perhaps even the husband and wife are OK with that. But it doesn’t clear up the fact that there’s this murkiness as to where those funds came from.

Another issue is if you borrow the down payment. People will come to me and say, “Well, I don’t have any savings, but I’ve got a $20,000 Visa.”

I’m like, “OK, well, you need $10,000 of down payment because you’re buying a $200, 000 home. So you need five percent.”

They say, “OK, I could take $10,000 off of there.”

I say, “Well, wait. This could present a problem. The reason it could be presenting a problem is because now you have to qualify for the mortgage and the credit card debt.”

Credit card debt they look at, and they assume you have to pay three percent of the balance. So on $10,000, that’s $300 a month that they’re looking at. Well, that reduces what you qualify for on the mortgage side by about $70,000 at today’s rates.

So is it cheaper for you to just pay a slightly higher rate and get a cash-back mortgage, or is it cheaper for you to pay the lowest possible rate and borrow some money maybe at 18 percent off your credit card?

Sure, everybody has the best of intentions and they think they can pay that portion back. But oftentimes that isn’t the case, and they end up holding that credit card debt and just rotating it and paying it and paying it on the long-term basis, which isn’t a great plan.

That’s not what the banks want to see. They don’t want to see no accumulation of the savings. They want to see savings behavior.

Again, you’re going to be asked for 90 days’ bank statements. You’re going to be asked to prove that it is your money, that it is not borrowed, and if it is borrowed, we have to factor that payment in.

If it is borrowed from some other source, we’re going to have to factor some sort of a payment in and prove that you’re going to be repaying these dollars.

So don’t think that you can just get a loan from your friend and a loan from your brother and that you’ll repay it back in the years down the road when you sell the property. That won’t really fly.

Now I can work with you to try to find the best way to do this, though. There are exceptions to some of these rules that I’ve explained.

But by and large, you have to leave that up to the professionals who work the with banks, because we know each individual bank, and we know which ones are stickier on this than others, and some that can make exceptions, and some that look at it a little more common sense.

If you’re in that situation, if you’re having trouble with a down payment, call me. It’s Rowan Smith from the Mortgage Centre.