The 3 Principles of Highly Successful Mortgage Qualifications

Mortgagenomics Canada

Over the last decade the process of qualifying for a mortgage has increasingly become more cumbersome and frustrating. In fact, some claim it is easier to attain citizenship to another country than it is to secure basic financing for a 1 bedroom condo in Calgary. So why is this? Why all the questions, the excessive document requests and the never ending due diligence? The answer is multi-dimensional and a topic for another newsletter all together (in the meantime refer to Twitter for endless threads on real estate and finance theories). But regardless of the reasoning behind today's challenging mortgage qualification landscape, I've noticed a commonality for all successful approvals that have run across my desk over the years, and I've narrowed it down to three key principles that lead to an optimal mortgage experience. Follow these principles and I promise you that your next mortgage qualification experience will be a walk in the park. And not only will it be stress free, but you will end up with the highest possible mortgage amount with the best possible terms.

The 3 Principles of Highly Successful Mortgage Qualifications:

1. Be forthcoming with information throughout the entire qualification processanswer all the application questions with as much detail as possible: this makes your application desirable to prospective lenders as it is complete and easy to adjudicate

• explain reasons for any recent hardships that you may have experienced that directly impacted your existing credit cards (or other credit products). Don't assume you are doomed and declined if you recently suffered a credit set back. Believe it or not, banks can actually be very understanding and compassionate, but only if they know what your situation is. Be open with your broker as though you are having a conversation with a friend. Disclose all details.
• correct and detailed information can also result in unexpected positive outcomes that you may never have imagined were possible from the onset of your application. What you might have perceived as a negative could have very well been the tipping point to sway your application in the right direction.

2. Provide quality verification documents:

Document Quality:

• send documents in their entirety
• if using your phone camera, make sure the resolution is adequate so the document is legible
• avoid extreme piecemeal document submissions whenever possible (this increases the chance that a document could get overlooked in long email and text threads).

Content Quality:

• whenever possible, make sure your identity and confirmation of ownership can be confirmed from the documents you provide (i.e. bank statements, investment statements, etc)
• be aware that the lender is requesting specific documents to verify specific information in your application. Be patient and understanding with document requests (income verification, self employment verification, etc)

3. Don't obsess entirely about the interest rateacknowledge the product, entirely, rather than focusing on one particular facet of it. For example, many applicants are fixated on the interest rate alone and fail to recognize other critical terms and conditions of the product. Here are some examples of fine print conditions & terms to be aware of in interest rate focused products:

• break penalties vary significantly with all lenders. Often times, deeply discounted interest rate offerings (no-frills mortgages) have higher break penalties than standard offering mortgages (make sure you are aware of your break penalty consequences)
• most mortgages are able to transfer to other properties in the event you re-sell your property ahead of your term, thereby allowing you to maintain your current mortgage rate and the ability to negotiate your penalty into your newly transferred mortgage (or in some cases, outright eliminating it). This feature could possibly be withdrawn in a no-frills type of mortgage product
• some lenders substantially reduce your opportunities to increase your mortgage payment and lump sum extra payments towards your principle
• another common condition is for the lender to instil a condition that you are required to set up your daily banking with them in exchange for the reduced interest rate
• On the flip side, here are some peripheral features worth inquiring about with your current lender choice that are often overlooked when choosing a mortgage:
• online customer portals (some lenders have amazing online servicing capabilities)
• readvanceable mortgage capability (this feature automatically grants you access to the principle you pay down in the form of a Home Equity Line of Credit).
• built-in no fee refinance options (in the event you need to refinance ahead of your mortgage maturity)
• extended amortization options without interest rate premiums (many lenders add a premium to the interest rate when extending to a 30 year amortization)
• substantially reduced break penalty conditions. The formula used by banks to calculate your break penalty varies significantly from lender to lender. Be aware of what your break penalty conditions are and compare it with other offerings.
• In summary, regardless of what your interest rate offering is, always explore the peripheral details - not only of the product terms, but also the extended offerings of the lender itself.

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