Purchase Plus Improvements Program

I'd like to share a program that has become very popular with many first time home buyers who want the features that come with a new home at the price and benefits of a resale home. The program is called Purchase Plus Improvements.  Here's just a couple of great examples for use of this program:

1) By including $30,000 for upgrades in your mortgage on a $400,000 home purchase gain a kitchen and bathroom that could have only been purchased if you spent $500,000 on a home.

2) By including $40,000 in your mortgage by adding a rental suite, turn a home into an additional source of income.

Overall, if you are looking for a product that offers a greater financing choice for you and your family by building a new home or undertaking a small or large scale improvement to an existing home and increasing the value of the property, this is the product for you!

Some of the features of the Purchase Plus Improvements Program include:

• Availability for new home construction, purchases or refinance with improvements.
• Loan-to-Value (LTV) ratios for purchase transactions: up to 95% for 1–2 unit and 90% for 3-4 unit owner-occupied properties based on as-improved value.
• LTV ratio for refinance transactions: up to 80% for 1-4 unit owner- occupied properties.
• Mortgage loan insurance premium refunds for homeowners who make energy–savings renovations to an existing home.
• For more detailed information get in touch with Steven Porter, Mortgage Agent with Mortgage Architects to explain the technical aspects of this program and fit it to your needs.

Take the first step to creating your own dream home and talk with your mortgage broker. 

Visit http://www.stevenporter.ca/solutions/ShoppingAids and download my easy Mortgage Checklist to begin your home search. Or email me, I'm always available to answer your questions. 

Steven Porter, CRMS ABR SRES CNE is a licensed Mortgage Agent with the Mortgage Architects. Steven is also a licensed, non-selling real estate broker, Accredited Buyer Representative and Seniors Real Estate Specialist with 30 years residential, commercial and investment  real estate experience. Steven works with together with Realtors across the west GTA in a noncompeting capacity, assisting customers and clients achieve financial independence through home ownership. Steven can be reached at 1-905-875-2582 or EMail at steven.porter@mtgarc.ca

Prequalified or Pre-Approved for a Mortgage? The Shocking Facts

The first words of advice you'll hear when beginning your search as a homebuyer are "get prequalified or pre-approved  for a mortgage." The misleading fact about these two terms is that they are not interchangeable. 

When I actively practiced real estate brokerage, many times the terms Prequalify and Pre-Approval were brought up in the same breath by many lenders and so-called real estate industry experts. That meant they were the same thing to many real estate agents who in-turn advised their clients accordingly. 

After leaving real estate sales and entering a career in mortgage lending with one of the major banks, I LEARNED A SHOCKING TRUTH. Although Banks typically tell consumers and Realtors that they do mortgage Pre-Approvals, the fact of the matter is THEY DO NOT! At the very most, the bank will prequalify a potential borrower (depending who you're face to face with) and provide a rate hold certificate. Unfortunately, it's not worth more than the paper it's printed on. 

What does that certificate mean to you, the homebuyer? "Absolutely nothing." Buying a house armed with your new certificate and falsely thinking to yourself you have the mortgage in your back pocket is truly nothing short of betting on a craps shoot. 

"So what is the difference between a Prequalification and a proper mortgage Pre-Approval?" First, it depends on whose doing a prequalification for you. My experience with the bank was if you've got a down payment, a job and a pulse you're prequalified. Here's you guaranteed rate certificate. "What are your really getting?" The bank's current mortgage rate for the next "X" number of days, subject to: "read the fine print below", income and employment verification, down payment confirmation, credit history, etc. etc. Remember banks work for the banks. So, if you come back a month later with your Agreement of Purchase and Sale in hand (by the way this is only when most banks will run the numbers for you) and you don't qualify, you don't get the mortgage. "Next".

Admittedly, very few lenders provide mortgage Pre-Approvals. The process actually involves the lenders underwriter going through the same motions as if you had actually bought a home and applied for a mortgage. Income and employment are confirmed, downpayment, credit history and debt service ratios reviewed, etc. If everything meets the lender's approval. Then, essentially the lender ear-marks the mortgage funds for the prospective borrower to be advanced upon the purchase and closing of a home. With this type of mortgage Pre-Approval, the borrower is pretty much assured he is going to get a mortgage usually subject an appraisal. There is a cost to lenders preforming a mortgage pre-approval. The lender absorbs these costs on the expectation of receiving the future business. However, like many things, due to abuse lenders limit the use of this service typically to preferred brokers. 

There is a common misconception among homebuyers and real estate salespeople that once you're pre-approved for a mortgage, you don't need a "Condition of Mortgage Financing Approval" in your Offer to Purchase. A Pre-Approval does not guarantee you're going to get a mortgage, especially if you've only been prequalified without the benefit of supporting information. There are many variables the lender needs to consider approving you for a mortgage after you've made an offer. Things like the house itself, location, appraised value, etc. 

Congratulations! You were in a multiple offer on a property and you won the bidding. You only paid $10,000. over asking and that's still in the range you were Pre-Approved for. SURPRISE! The appraiser estimates the property is valued $10,000. under what you offered and the lender will only lend against the appraised value. So unless you've got the extra money under you mattress, you're not going to be able to close the deal. My advice to you is include a condition in your offer to purchase subject to you obtaining a mortgage. 

"How long do I need for a condition of finance in my offer?" Good question. This period can vary and is reflective of how well you've completed your mortgage shopping due diligence prior to shopping for a home. For example, the time typically allotted for satisfying a condition of financing approval in an offer is 5 banking days. As a homebuyer, if you have not met with a mortgage planner before to making an offer on a home, that means the broker and the lender only have five days in which to obtain all your necessary supporting documents from you including employment letters, pay statements, tax documents, contracts, appraisal, etc. If you happen to be self-employed the list is even larger and five days may not be enough time to obtain and review everything. Not to mention, if you didn't do your proper due diligence and  your financing is not approved, the seller and the sellers agent won't be impressed and will most likely loose confidence in your real estate agent for not ensuring you did your homework. Compare this scenario if you had gone the Pre-Approval route. You would have already submitted all your documents to the lender through your mortgage broker. Therefore the lenders conditions of mortgage approval would typically be limited to the review of the Agreement of Purchase and Sale, an appraisal of the property if required and approval by the mortgage insurer if it is an insured mortgage. The turn-around for approval in this case could be as quick as 24 hours.

The take-away here is "Buyer Beware". Do your due diligence and plan your home purchase. Start first by sitting with a licensed mortgage broker/agent. They work for you. Ask about the benefits of a proper Mortgage Pre-Approval. At the very least, provide all the necessary documents to your Broker/Agent and have him properly prequalify you. Ask him whether or not you need to include and condition of financing approval in an offer to purchase a home. Ask Why or Why Not? 

Armed with your Pre-Approval Certificate or at least, the confidence of being properly prequalified for a mortgage, find a good real estate agent that actively works in the area you wish to buy in. Better still, if you don't know a good Realtor, ask your mortgage broker/agent for a recommendation. Mortgage Brokers/Agents regularly work together with Realtors and are more than happy to refer you to two or three good Realtors they have successfully done business with in the past.

Visit http://www.stevenporter.ca/solutions/ShoppingAids and download my easy Mortgage Checklist to begin your home search. Or email me, I'm always available to answer your questions. 

Steven Porter, CRMS ABR SRES CNE is a licensed Mortgage Agent with the Mortgage Architects. Steven is also a licensed, non-selling real estate broker, Accredited Buyer Representative and Seniors Real Estate Specialist with 30 years residential, commercial and investment  real estate experience. Steven works with together with Realtors across the west GTA in a noncompeting capacity, assisting customers and clients achieve financial independence through home ownership. Steven can be reached at 1-905-875-2582 or EMail at steven.porter@mtgarc.ca