Credit Medic for You & Your Mortgage

Your credit score is a huge factor in getting a mortgage, and it won’t go away. The first thing Lenders do when they look at your application is to look at your credit score. From there, they build your file. It is crucial that you know where you stand with your credit score because so much of your lending availability is based on it. Credit Medic is here to help you. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding the benefits of improving your credit.

The most important step in getting approved for a loan with bad credit is to improve your credit score. If you had a bankruptcy, once your bankruptcy has been discharged, you can apply for a secured credit card. There are companies that will give you a secured credit card if you pay the deposit. In fact, it can take as little as 30 days to turn your credit score around to make an application look more desirable.

Below are some simple steps from Credit Medic to help rebuild your credit…

• Open a savings account and add regular deposits

• Having cash savings is a great way to show credibility to a credit card company. When you put funds into your savings account, it proves to a lender that you can manage your money. Once you have $1000 or so saved up, you can go to your Bank and get your secured credit card.

• The optimum amount for your credit score is to keep your balances at 30%

• Once your balance surpasses that 30%, you jump into a different category. If you get to 80% or higher, then you fall into yet another category that lowers your credit score even more. Obviously, you can’t raise your credit score if you’re late on payments. But that doesn’t mean you should avoid using your credit cards. In fact, having credit cards shows the Lender you can manage credit.

• Have at least two different types of credit cards. For example, a VISA and a Canadian Tire card

• You should have at least two or three active trades (credit card transactions) each month. Too often people pay off their credit cards and then believe it’s best to begin using cash for all transactions. The problem with this strategy is Lenders want to see active trades. Once your credit cards are paid off, try a simple transaction such as filling up your car with gas or buying groceries. Then pay off that balance at the end of the month so you keep your credit card or line of credit current.

• The minimum amount of credit between your trades should be $2000 – $5000

• This may require having a couple of credit cards and/or a loan. The bottom line is Lenders won’t loan to people who haven’t proven they can handle credit. As mentioned earlier, you don’t have to go out and spend the entire limit on the credit card. Just make some sort of transaction that you can pay off right away. The key is keeping your accounts active.

• Rule 2, 2, and 2

• Simply put, there is a basic 2, 2, and 2 rule that you can apply to your strategy to improve your credit. As mentioned earlier, make sure you have at least 2 credit cards from unique sources, make sure they have minimum limits of $2,000, and establish 2 years of credit history.

• Make at least the minimum payment monthly

• The biggest mistake that consumers make with their credit is not making their minimum payments on time! Make sure you set up your payments in a way that you will remember to pay them EVERY month and ON TIME! Not doing so can affect your credit negatively.

• Don’t let your credit be pulled too often

• Limit the number of times you apply for credit in a short period of time. It is a good idea to seek credit only when you really need it.

Another tip from Credit Medic is to check your personal credit report (at least once a year) to make sure you recognize all items reported are accurate on your history. If you practice this, you will most likely notice any discrepancy promptly and be able to fix it.

Think of it as an annual checkup for your financial health! You have the right to dispute any information on your credit report that you believe is wrong. You can ask the credit reporting agencies to correct errors. It’s free.

Credit Medics’ few important things to look out for…

• Mistakes in your personal information
• Errors in credit card and loan accounts
• Negative information about your accounts that is still listed after the maximum number of years is allowed to stay on your report
• Accounts listed that you never opened yourself, which could be a sign of identity theft

Errors in your credit bureau should be taken seriously as they may give the lender the wrong impression of you and your financial health. If you feel you have not been treated properly by a credit reporting agency, you can make a written complaint to the office of your provincial or territorial government that handles consumer affairs.

GLM Mortgage Group | Dominion Lending Centres is available to you for free credit consulting. If you want to purchase a home but feel like you’ve been handcuffed by your credit, don’t be discouraged! We can help. Call us at 604-259-1203. We always return our calls within 90 minutes. Or visit our website www.GLMmortgage.com and fill out our online application.

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Rent to Own Mortgage

A Rent to Own contract could be the answer for someone who is renting but is also having a hard time getting their down payment together. Rent to Own contracts usually are between 1 and 5 years long and can give the client the time they need to implement strategies on increasing their down payment or even improving their credit.  As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Rent to Own Mortgages.

In the Lower Mainland, Rent to Own is becoming more popular as housing prices are increasing, and renting seems inevitable. In fact, there are properties that are being built with Rent to Own financing in mind.

Initially, the contract is signed just between the renter (the buyer) and the Landlord (the seller) that states an agreed price, length of time of Rent to Own, and market rent (typical rent of a similar property) with the excess going toward down payment (usually $200 – $400/month). The lender is not involved yet.

For example, market rent for your property goes for around $1000.00. You agree to pay the Landlord $1400.00/month. The extra $400/month goes into an account that the Landlord has in place for you for the down payment. This is a great example of  a Rent to Own situation.

Regardless of the lender, the Landlord must keep pristine records of the extra money coming in and can show the history of any excess deposit. When the Rent to Own is registered on title, there will be a clear indication as to how much of the monthly payments are directed toward the deposit.

The client will want to work with a team of property purchase professionals that will strategize Action Steps to make a seamless Rent to Own experience. The client`s team would be:

1. MORTGAGE PROFESSIONAL

• Get pre-approved! In the pre-approval process, the Mortgage Professional will be able to advise on improving credit or the need to increase employment income if need be.
• As well, the Mortgage Professional understands lender policies and guidelines for Rent to Own contracts and will be able to advise on how to properly set up the Rent to Own.

2. SOLICITOR/LAWYER

• Make sure that your lawyer is familiar with Rent to Own contracts and that they work closely with the Mortgage Professional who knows what the lender is going to expect. This relationship is very important and one that should not be overlooked.

The down payment continues to grow over the life of the Rent to Own contract. At any time, you can add lump payments to the down payment, simply by giving the Landlord a bigger rent check. Keep in mind, the Rent to Own contract could stipulate that the down payment is non-refundable. Make sure you read the fine print and work closely with your mortgage professional and lawyer so that you clearly understand the terms of your Rent to Own contract.

The bank does not get involved until the time the renter (the buyer) makes an offer to purchase to the Landlord (the seller). The person paying for the rent to own does not have to qualify for a mortgage at this point because the Landlord continues to carry the mortgage on the property.

Rent to Own Properties can also be facilitated through a company such as a condominium developer. For example, the developer could offer a Rent to Own contract when entering a rental lease with an owner-occupied property that the client wants to rent.

The client may be charged a contract fee upfront (for example $10,000) to enter the Rent to Own contract. At times all or a portion of this contract fee can be used toward the down payment pending on what has been negotiated within the Rent to Own contract.

Over the course of the Rent to Own some of the obstacles to financing you will consider are:

• How to improve your credit rating
• Consider applying for an RRSP loan to further establish credit and take advantage of tax benefits
• Consider refinancing any outstanding credit
• Consider job changes to increase employment income
• Consider other sources to increase down payment

Rent To Own contracts are more than just paying rent to the Landlord and applying the rent toward the purchase of the property. There are details that you need to know when entering into a Rent To Own Contract. If you need help setting up a Rent to Own contract or for more information regarding this topic please reach out.

GLM Mortgage | Dominion Lending Centres is here to walk your mortgage planning path with you. Give us a call at 604-259-1486 and find out what your mortgage options are!

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Mortgaging a Property via Assignment

Mortgaging a property via assignment is a contract provision included in some real estate transactions that allow the buyer to resell or transfer a property to another buyer before the deal’s closing date. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Mortgaging a Property Via Assignment.

This product was originally intended to give buyers a legal way of backing out of a purchase if for some reason their circumstances changed after they had put an offer on a property, instead of having to surrender their deposit. The clause was also meant to protect sellers, ensuring a sale would still go forward if another buyer could be found.

To qualify for a product like an Assigned Mortgage, there are some things you will want to first consider:

• Not all lenders offer to finance for Assignment Purchases
• Assignment Purchase products will contain the same features and conditions that you would expect of a traditional standard mortgage qualification
  • This means income and credit score requirements remain the same
• There will likely be additional documentation that will be required
  • Pertaining to the Purchase Contract and Contract of Assignment
• Some lenders will only finance on the original purchase price

The assignment clause allows real estate agents to sell a contract for a single property multiple times at increasingly higher prices as they make a commission on each transfer. Buyers in the middle also benefit by pocketing the difference between what they paid and the resale value. They also don’t pay any land-transfer taxes because the entire transaction happens before the deal officially closes, so the property is never technically in their possession.

The original seller receives less than what the property ends up being worth and the last buyer may be paying an inflated price, with the difference in value going to the real estate agent and the buyers in the middle.

The option of an Assigned Mortgage can be appealing to borrowers for a few different reasons:

1. Depending on how far along the process is, you could possibly be involved in choosing finishes of the property
2. Depending on your local market, you could score a good deal on an assignable property

The risk to individuals and developers, regardless of incorporation or not, is that the CRA is aggressive on assignments and will often investigate GST compliance long after the transaction has occurred. This leaves the taxpayer at high risk with a large tax liability if the sale of an assignment fee was not properly documented for GST purposes. As always, remember to consult a qualified tax professional with regards to your potential exposure and ensure that GST is reported correctly along the sequence of transactions.

Let’s look at this case study on Mortgaging a Property via Assignment together…

A real estate agent’s client reaches a deal to sell a property to an initial buyer for $1 million. The agent then takes that contract and resells it to a second buyer for $1.5 million. The agent in turn goes to a third and final buyer and sells the contract for $1.8 million.

For each transaction, the agent receives a commission. The initial seller receives $1 million minus the agent’s commission. The first buyer who bought the contract for the property for $1 million and sold it for $1.5 million pockets $500,000. The second buyer who bought the contract for $1.5 million and sold it for $1.8 million gets $300,000. The third buyer pays the land-transfer tax on the $1.8 million purchase price.

For any issues with Mortgaging a Property via Assignment please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.

At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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How Mortgage Rates Work

The topic of how Mortgage Rates work is a long, complicated series of moving puzzle pieces that work together perfectly. Today we are going to break it down as best we can. During the process of taking out your first mortgage, you will learn that the interest rate is the “payable fee” your lender has calculated for you in exchange for borrowing their money.

As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding How Mortgage Rates Work.

When applying for a mortgage, the lender you decide to choose may offer various interest rate options. Mortgage rates are constantly changing due to the Canadian economy (Fixed rates) and Global economy (Variable rates). Each time you renew your mortgage term, you re-negotiate your mortgage interest rate… Simply, this means at the time of term renewal, your new mortgage interest rate may cause your monthly payments to increase or decrease.

The lender of your choice will set the interest rate for your mortgage.

Here are a few of the factors that they use to help determine your cost:

• The length of your mortgage term (higher length in the term usually have higher rates)
• Their current Prime and Posted Interest Rate
• If you qualify for a discounted rate
• Type of interest you choose (fixed, variable, or combination)
• Your credit history
• If you’re Self Employed/ Employee

For example, with credit, lenders will assess your bureau report to decide if they will lend you money. They will also use this document to determine how much interest they will charge on the money you will agree to borrow. The better your credit is, the easier it will be for you to get a mortgage. Even if you have poor or little to no credit history, there will always be options like B lenders and private lenders depending on your specific file details.

On the topic of Mortgage Rates, you will very commonly hear three words: Prime, Posted, and Discounted Rates. These are all different. To put it simply, a Prime Rate is the rate the lenders use to determine their posted interest rate. A Posted Rate is the interest rate that the lenders advertise for their products (these can change regularly).

A Discounted Rate is lower than the lender’s Posted Rates. Along with those keywords, there are two more words you will need to know about. These important terms are called Fixed and Variable Interest Rates. A Fixed interest rate will stay the same for the length of your term.

Fixed Mortgage Rates will work the best for you if you need the following:

• Your payments stay the same over the term of your mortgage
• You want to know in advance how much principal you’ll pay by the end of the term
• Keep your interest rate the same because you think market interest rates will go up

A Variable Mortgage Rate can increase and decrease during the length of your term. This means that when you choose a Variable Rate Mortgage, your interest rate may be lower than if you selected a Fixed rate.

This type of Mortgage Rates may be best for you if you can accommodate the following:

• Your interest rate changing
• Your monthly mortgage payments potentially increasing or decreasing

In a Variable Rate Mortgage (commonly referred to as AVRM) the interest rate can go up, meaning more of your monthly payment goes towards the interest and less to the principal. If rates go down, more of your payment goes to the principal, which means you can pay the mortgage off faster.

The best advice on Mortgage Rates is the advice that comes from your Mortgage Broker because they can analyze your needs and start underwriting your information. With their expert advice, together you can create a perfectly “tailored-to-you” plan.

If any of the topics mentioned on Mortgage Rates sound like something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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How to Improve Your Credit Score

Credit is an important aspect of our daily lives. Our credit score and history are an important aspect of a Mortgage Application, and it demonstrates to the lender your financial health and responsibility to repay debts. Typically, lenders will go by the 2-2-2 rule, meaning two tradelines, for two years, with a $2000 limit.

The stronger your credit report is, the easier it will be to get an approval for loans, lines of credit, and lower interest rates when you borrow. 

An important thing to know is your credit score is based on many different factors, and in this blog we want to help you understand what they are and how you can use them to your advantage to have a strong credit profile.

Credit scores are based on these 5 factors:

1. Payment History
2. Credit Usage
3. Age of Credit Accounts
4. Credit Variety
5. New Credit Inquiries

Payment History

When looking at your payment history, it is very important to pay off your debt as soon as possible and avoid late payments at all costs. 

Make sure you create an alert on your calendar or phone so that you know when you need to pay off your credit card and monthly debt payments. You could even set up automatic bill payments from your bank account.

Another option could be to charge all of your monthly bill payments to your credit card, this way you know that all of your payments are paid in one place, and then make a payment on your credit card to clear out this balance.  

Credit Usage

When you look at all your credit cards, they all have a limit that you can go to. When looking at credit utilization, you want to keep it at or below 30% of all your limits combined. 

Let’s say you have 3 credit cards at $3000 each for a total of $9000. 30% of $9000 is $2700. This means that you should try to keep your outstanding balance below $2700. If you go above, then pay your credit off until you are back to that 30% threshold. If you normally go above 30%, but you are always able to pay off your credit card, it may be wise to ask for a limit increase so that you can have a greater credit utilization at 30%.

Age of Credit Accounts

This looks at how long you’ve had your credit accounts. The older your average credit age, the more favorably you appear to lender in terms of managing long standing credit and keeping it in good standing.

Keep your old credit accounts open because it will it help with your credit utilization ratio, but if you close an account with a negative balance, it can negatively affect you for 7-10 years and it can lower your odds of increasing your credit availability in the future. 

Credit Variety

As long as you open them for sufficient reasons, and are able to pay them off in time, having multiple types of credit accounts can be very beneficial. These can range from installment loans, revolving debt, mortgage accounts, and open credit cards. 

Successfully maintaining a diverse mix of types of credit types may positively impact your credit cards. Just be warned, just because having more open can be beneficial, it can also hurt your credit if you do not use your accounts properly and maintain a healthy credit ratio. 

New Credit Inquiries

There are two inquiry types when looking into your credit score; hard and soft inquiries. Soft inquiries could be just checking your credit score with online banking, giving a potential employer a chance to look at it, and credit card companies that check your file to determine if they want to send you preapproved credit offers. These types of inquiries, or soft inquiries, will not affect your credit score.

Hard inquiries on the other hand will affect your credit score. These could include applications for a new credit card, a mortgage, an auto loan, or some other form of new credit. Obviously, these applications are sometimes necessary, and the occasional hard inquiry is ok but having too many in a short period of time can affect your credit score.

Conclusion

Overall, having credit sources can sometimes be overwhelming, and credit scores can be a complicated matter. Credit is an important aspect of a Mortgage Application and following the tips above can help build your score, and overall credit profile so you are able to get the sharpest rates with prime lenders. At GLM Mortgage Group, we have the knowledge and resources to assist with credit and the way it impacts your application – so be sure to reach out with any questions. 

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• Have at least 2 credit lines at all times

 
This means that you should always have 2 “tradelines” going. Whether this be 2 credit cards, a credit card and a line of credit and a car loan etc. You want to show that you can manage credit, and this is one easy way to do it. As an added note, the limit on the credit lines will need to be set at a minimum $2,000.
 
 

• Make your payments on time each and every month

 
No skipped payments! You should ALWAYS make the minimum payment required on all your lines of credit each month.
 

1. Do not let your credit be pulled too often.

This one is something people often forget about. Having your credit pulled for new credit cards, car loans, and other things frequently raises a red flag for lenders and can significantly lower your credit score
 
 

• Do not exceed 50% of the available credit limit on your credit card or credit line.

 
We know this one can be hard to do. One easy way to monitor this is to only use a credit card for certain fixed bills such as a cable/internet bill, cell-phone bill, etc. This way you can easily keep track of what credit you have used and what is available still.
 
 

• If you have missed a payment, get back on track right away.

 
If you did, by chance, miss a payment, do not fret. Instead, get back on track with your month by month payments. Lenders would look at the one missed payment as an abnormality versus a normal occurrence if you are back on track by the following month.
 
 

• Make sure each partner has their own credit.

 
We cannot tell you how frustrating it can be for couples when they realize that all their credit cards and lines of credit are only under one name…leaving the other person with no proven track record of managing credit! We advise clients to both grow their credit by making sure all joint accounts report for you both.
 

7. Do not exceed the Credit limit.

It is important to not go over or exceed the credit limit you have been given. Having overdrawn credit,  shows the lender that you are not able to responsibly manage credit.
 
If you follow these 7 steps and are responsible with your credit, you will have no problem when it comes time to purchase a home! In need of more advice? Contact a Dominion Lending Centres Broker-they will be more than happy to help you.
 

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1. DO NOT CANCEL ALL YOUR CARDS

It may seem tempting, but money lenders want to see that you can handle your credit responsibly. Instead keep your 2 oldest credit cards (trade lines). The longer you have had your trade line, the better it is for your credit.
 

2. FOLLOW THE 2/2/2 RULE

The 2/2/2 rule means that money lenders what to see 2 trade lines, for 2 years with a minimum of a 2k limit. These cards need to be paid on time each month, and they also need to stay within that 2k limit!
 

3. USE WITH CARE-REGULARLY

The 2 trade lines you keep need to be actively in use. If you are concerned about consumer debt, then have a monthly bill such as your cell phone, cable, or even Netflix charge billed to your credit card. Then have that credit card paid automatically each month from your bank account.
 
 
Follow these steps to keep your credit in check and growing.  When it is time to renew or revamp your mortgage, or purchase a new home, your credit won’t hold you back—And you can bet GLM is here to help you get the sharpest rate and the best product.

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1. Get Official Discharge—Quickly!

Start by finding a good bankruptcy trustee. Contact your local BBB or Chamber of Commerce to find out recommendations. A good trustee can help you find the best plan for a complete discharge in the shortest time possible.

2. Review Your Most Recent Credit Score

Pull both Credit Bureaus-Equifax & Transuion Canada Reports for your credit. Make sure there are no surprises and that the debts included in your bankruptcy have been paid off. As a guideline, you should get a copy of your credit report yearly. If there is a mistake, make sure it is corrected by disputing or contacting the Bureau.

3. Re-establish your Credit

A mortgage is much easier to get with good credit. You want to start rebuilding your credit as soon as possible. The first step to do this is to get 2 trade lines (credit cards) as soon as you can. You can reach out to Capital One, Home Trust, Peoples Trust & Secured Credit with as little as $500 down. Follow the 2-2-2 rule that says, two lines of credit, with at least a max limit of $2000 for 2 years. With that said, Pay your bills on time, even minimum payments! Late payments can make a very negative impact on your credit.

4.  Pay any Outstanding Taxes to Revenue Canada

Make sure your taxes to Revenue Canada are paid up! This is the most important aspect of getting a mortgage. If you don’t pay, then no mortgage!
5. Start Saving your Money!
Start saving for a down payment. You could need as much as 10% down or as little as 5% down. It depends on your situation (history, credit score, etc). 
To start saving some extra money this site has some great options!  to learn some amazing ways to save money. Every little bit helps!
 
6. Put Budgeted Savings into an RRSP for Down Payment
If you are a first time home buyer in Canada you can borrow up to $25,000 from your RRSPs. Use those funds as a down payment on your new home. Since contributions to an RRSP generate a larger tax refund you can use your tax refund to grow your savings even faster! Using the government’s money is a smart way to save up a down payment. *NOTE: For every $1,000 dollar contribution you will receive up to $400 back!
 
Finally, make sure you keep all of your Bankruptcy papers. Even though your bankruptcy has been discharged, the lender which you are applying for mortgage with may ask you to provide a copy of the statement of discharge along with copies of the bankruptcy papers showing all the creditors accounts and balances included in your bankruptcy.

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