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How Mortgage Brokers Get Paid

Firstly, here at Prime Mortgage Works, we do not charge any retainer or upfront fee for our services. Actually, you don’t pay any fee directly to us for our services, ever! Yes, 100% free, no pressures advise! We are licensed professionals and are governed by provincial bodies, who have you, the clients, best interest in mind.

 

The lender pays us, once your purchase or refinance has completed and you have received your mortgage funds. How do we choose which lender? We take into account many features of a mortgage and your specific needs and wants to advise on the BEST option for you.

 

But, rest assured that it is our mission to guide you through the entire financing process. We are always happy to answer any questions, anytime, whether you have just completed financing, or are three years into your term and considering accessing some of the equity in your home.

Assessments and Appraisals

The value on an assessment notice may vary quite a bit from a mortgage or real estate appraisal. One reason for this may be the timing that the assessment was done; versus the appraisal just done reflecting the most recent value based on the current market conditions.

Home Appraisal

An appraisal provides you with a document outlining an estimate of a property’s current fair market value. Since an appraisal and an assessment are not definitively connected, most lenders will require as a condition, that an up to date appraisal be performed. Lenders use this valuation to base the size of mortgage they are comfortable lending.

Appraisers are highly regulated and provide unbiased valuations who take into consideration the property, home, location, conditions and many other external factors such as nearby amenities and access to public transportation. Some lenders will provide a list of approved appraisers they accept.

It is most often the borrower that is responsible for the cost of the appraisal, which upon completion will be sent directly to the lender. The lender is getting assurance that they are making a good investment for the value of the subject property.

Even though the borrower has paid for the appraisal, they are often now allowed to look at the report –although usually a consolidated version – until after closing. The appraiser performs the report following the parameters defined by the lender. It is the choice of the lender to allow the borrower he see the report. Reason for this strict access on the lenders part is to avoid the borrower taking the report to multiple lenders in search of the best deal.

Some lender may offer to refund the cost of appraisal after funding your mortgage.

Preparing for an Appraisal

  • Appraisals do include pictures of the exterior and interior of a property, so clean up and consider the curb appeal of your property.
  • Make sure to note all upgrades that you have done and the costs associated to assure they are not overlooked.

Look for any small repairs that may affect the value and make repairs before the appraisal is done; it is likely that the appraiser could over estimate the cost, thus having a significant effect on your value.

Self Employed? Get Approved!

As a self-employed individual, taking advantage of write-offs that allow your income to be in a lower tax bracket may seem great. However, this may also hurt your ability to qualify for a mortgage. Lenders generally require two year of Tax Returns; two years Notice of Assessment; two years Financial Statement; statement of bank account activity; and investment income statement. Of note for those self-employed, Tax Returns will show a lower number than actual income, thus hindering them from qualifying based on income necessary to service the mortgage.

Our advice:

Think ahead. Two year prior to seeking a mortgage, make fewer write offs, and work to get your personal taxable income to a larger number.

Work with a certifies accountant, lender will be more inclined to consider financials prepared and submitted by a professional that will consider you financial goals of getting a mortgage.

If you want a mortgage sooner rather than later and haven’t planned for this when filing your taxes, you can use Stated Income so long as you have been in the same profession for at least two years before becoming self-employed. More documents will be required, including bank statements that prove consistent income.

Lastly, you may have to consider a B lender. B lenders will be more flexible in considering your income. Of course, this does come at a cost of a higher interest rate. But, once you have had time to increase your taxable income, in a few years, you may be able move to the A lender space.

How to get a copy of your Credit Bureau

Lenders look to credit reports to assess the risk of a given borrower. Your credit score is a number from 300 to 900 that reflects how you have handled your finances in the past. The lower the number, the more risky you appear to lenders, so you are likely to be offered higher rates. It is always recommended to keep an eye on your credit. In Canada, you can receive a free copy of your credit report once a year from both Equifax and TransUnion. The bureaus refer to your credit report as “client file disclosure” and “consumer disclosure” respectively. Ordering your “free report by mail” does not effect your score. Check your report for errors inconsistent with your true financial history and balances such as late payments; amount owing; or missing accounts. If you do find an error, report it it to the credit bureau to be corrected.

Top 4 Tips for Being Prepared to Buy

1. Strengthen your credit rating. It’s pretty simple: the higher your credit score, the lower your mortgage rate will be. Spend the time now to improve your credit. Check your credit report. Many credit reports have errors, so you need to ensure that your credit bureau is current and correct. Always pay every single one of your bills on time. Set up automatic payments if you have had any late payments over the last couple of years. Spend only 30% of credit limits on credit cards.

2. Find a Mortgage Broker and figure out how much you can afford to spend. The home buyer’s mantra: Get a home that’s financially comfortable. Get Pre-Approved sooner than later!

3. How much home do you need? Buying a cheaper, smaller home might sound like a good place to start, but could end up costing you more if you need to move due to changes in your lifestyle, including a growing family. Then again, buying more house than you currently need will cost you more with higher mortgage payments, higher maintenance, energy and tax costs. Prioritize your housing wish list. The 3 most important things to think about when buying are home are location, location, location.

4. Remember closing costs. While you’re saving your down payment, you need to save for closing costs too. They’re typically 1.5% of the purchase price and due on the completion date. Transfer Tax, Legal Fees, Insurance and Home Inspection are all considered part of Closing Costs.