Are we Pre-Approved? Not what you might think it means…

Many clients think that having a mortgage pre approval puts them in a position to write offers on properties without inserting a ‘condition to receiving and approving financing’ clause.

Nothing could be further from the truth.

Being ‘pre-approved’ can all too easily create a false sense of security.

Although going through the pre-approval process is itself important the actual term ‘pre-approval’ is not exactly accurate.  In fact it should at the very least be called a ‘conditional pre approval’ or more accurately still a ‘rate hold’.

Here is a typical lender response following submission of a file for Pre-Approval;

"Thank you for choosing TD Canada Trust, please note that a rate hold only has been approved at this time. The Rate of X.XX% with a term of X years has been processed. Once clients have a valid signed purchase and sale agreement in place, please resubmit for full credit adjudication and decision. Rate will be held for 120 days. Current credit bureaus will be required at time of re-submission."

An important point to be clear on is although you may be pre-approved at a certain rate (which is typically held for 120 days from the date of application), not much else other than this rate has any degree of certainty.   There remain a number of conditions to be met as well as variables which can enter into the equation when you actually write an offer on a specific property and as such it is imperative that one always includes a condition clause in their offer along the lines of ‘subject to receiving and approving financing’.

Often clients are reluctant to write an offer on a property without feeling that they are 100% pre-approved.  Although this is an understandable desire,  and in some cases clients may be led to believe that this is the case by their lenders, the fact remains that until the lender reviews all related documents not just those that come from the client but also those that come from the appraiser and the Realtor, there is no 100% certainty of approval.

This would be why we always try to insist that clients include, arguably the single most important condition clause in their Offer to Purchase ‘subject to receiving and approving financing’. (I am being repetitive with this statement for a reason)

The preapproval process should be considered more of a pre-screening process than anything. It should always involve review and analysis of the client's current credit report, it should also include a list for the client of all documents that will be required in the event that an offer is written and accepted, (ideally all of those documents should be reviewed and approved by your mortgage broker in advance of the offer being written). Clients should also come away from this process with a clear understanding of the maximum mortgage amount they qualify for along with the various related costs involved in their specific real estate transaction. In the Province of Ontario, the Land Transfer Tax is an important one.  Equally as important; with the completed application, the broker is able to lock in rates for up to 120 days. One specific advantage of an independent Mortgage Broker being that your rate can be locked in with a few different lenders giving you a safety net of one lender has an issue with the property, perhaps over an illegal suite, restrictive covenant, etc.

Why is the lender not fully underwriting my application?

With the Banks, Credit Unions, etc. the actual conversion rate of pre-approvals to ‘actual mortgages is less than 10%.  It is for this reason that an actual live underwriter very rarely completely reviews a pre-approval application.  It is not an efficient use of resources.  Therefore the bottom line is that the client is really only getting the opinion of the front-line individual with whom they are directly speaking. That individual will not be the same person that underwrites and approves the actual transaction. This is true of every mainstream "A" lender channel that I can think of.

It is due to this disconnect between intake of application and actual underwriting of a live application that the ‘subject to receiving and approving financing’ clause in the purchase/sale agreement is so vital.

Another significant factor which over the past four years, and in particular since Nov 1st, 2016  has undermined the solidity of a client pre-approval is the relentless pace of change with regard to lending guidelines and policies implemented not only by the Federal Government, OFSI, but also by the lenders themselves.  In other words it is very easy to walk out of a lenders with a pre-approval for a certain mortgage amount only to have it rendered meaningless a few days later when the banks change internal underwriting guidelines with no warning and very little notice to the general public.

Setting aside these concerns there still exists the general concept that although the client may have excellent credit, an excellent job, and a strong down payment –the bank still needs to approve of the property which the clients wish to purchase.  Is it on lease land, is it an age restricted building, was there a significant special assessment within the previous five years, have there been building envelope issues, is the property it remediated former marijuana grow-op, is the ‘economic life’ of the dwelling too short to meet lender guidelines, is the property subject to a current rezoning or development application, is the home in a floodplain, is it sitting on a log foundation, the list goes on.

This is perhaps the simplest point I can make – perhaps you the client are ‘pre-approved’ but most certainly the subject property is not – and there are several properties that a lender will not touch these days.

Take nobodies word that you are pre-approved, look for an email from your broker stating ‘File Complete’ which should arrive no later than your condition removal date ideally.
Written by Dustan Woodhouse. 

Posted and edited to reflect mortgage lending in Ontario by Steven Porter, Mortgage Agent, Mortgage Architects. Steven can be reached at 905-875-2582 or by email at Steven@1800Mortgages.ca

MAKE YOUR MORTGAGE WORK FOR YOU

Source: www.cmhc-schl.gc.ca

We can offer you several choices to help find you the mortgage that best matches your needs. Here are some of the most common mortgage options: 

Interest Rate Type

You will have to choose between “fixed” or “variable”.

A fixed rate will not change for the term of the mortgage. This type carries a slightly higher rate but provides the peace of mind associated with knowing that interest costs will remain the same.

With a variable rate, the interest rate you pay will fluctuate with the rate of the market.

Amortization Period

Amortization refers to the length of time you choose to pay off your mortgage. Usually, the longer the amortization, the smaller the monthly payments.

Payment Schedule

You have the option of repaying your mortgage every month, twice a month, every two weeks or every week. You can also choose to accelerate your payments. This usually means one extra monthly payment per year.

Mortgage Term

The term of a mortgage is the length of time for which options are chosen and agreed upon, such as the interest rate. When the term is up, you have the ability to renegotiate your mortgage at the interest rate of that time and choose the same or different options.

“Open” or “Closed” Mortgage

An open mortgage allows you to pay off your mortgage in part or in full at any time without any penalties.

Mortgage Brokers have access to multiple lenders, allowing you to get the best options and prices for your mortgage. They work independently, on your behalf, to search out the best lenders who understand and specialize in mortgage financing.

With a Mortgage Broker, you can be confident we won’t leave you alone to find a mortgage that’s right for you. We’re on your side every step of the way.

Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects, a Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR). He can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

 

Is your car lease keeping you from buying a home?

Getting a mortgage can be difficult. Sometimes, to increase the odds of being approved or to qualify for a larger loan, prospective borrowers will pay down debts or eliminate existing loan obligations. Often, the process for doing so is simple, but there’s one type of financing that could trip up your efforts: a car lease. Here’s a breakdown of why — and what you can do to so avoid any snags.

What’s Your Debt-to-Income Ratio?

When you apply for a mortgage, a broker is going tally up all of the monthly payments you make on existing obligations, including credit cards, student loans, personal loans, car debts and other mortgages. That number gets measured against your income. This debt-to-income ratio helps determine your monthly mortgage payment. (So does your credit score. You can see where yours currently stands by reviewing your credit scores, regularly, on Equifax.ca.) Sounds easy and simple enough, right?

Well, the concept is, but if more than 25% of your income is already going towards debts, you may not be able buy as much home as you think. When you have other existing obligations, your ability to borrow can be reduced tremendously. That $300 per month car lease, for example, can be severely hampering your buying power.
Mortgage Tip: Remember, lenders will use only what you’re obligated to pay on existing loans in calculating your debt-to-income ratio. Choosing to pay more on your debts can be a good financial move, but mortgage lenders generally don’t give you any benefit for choosing to do so.

Why a Car Lease Can Trip You Up

Unlike an auto loan, a car lease can be trickier to workaround if you’re trying to pay off debt to qualify for a mortgage. Let’s say your credit report shows a car lease payment at $300 per month. There is a balance on the credit report of $6,000 due, which is the remainder of the lease. If you had a car loan with these exact terms, you could write a cheque to pay off the $6,000 obligation. Case closed.

Unfortunately, that option doesn’t apply to a car lease. You can give the car back and pay the $6,000 balance that is due. However, to qualify for a bigger mortgage, the lender will need to verify there is no obligation due for car. If you give the car back, the mortgage lender may ask what you’re going to drive instead — especially if there is a commute time from where you work to where you plan on residing.

Should you find yourself in this predicament, here are some options to consider.

• Call your car dealer. You can ask if they have any specific options for getting out of the lease. You’ll need to make it crystal clear that you must be out of the lease obligation completely.
• Transfer the lease to someone else. Your mortgage lender should be OK with this option as long as you can show and verify the obligation is completely out of your name and that there is no obligation associated with it. You can search online for options if your car dealer doesn’t have any transfer suggestions.
• Pay out. Give the car back, pay the balance due and either buy a new vehicle in cash, removing any debt-to-income ratio predicament or finance a car that has a lower monthly payment. The key here is that the payments need to be reduced or totally removed if you want to maximize your buying power.
• Consider your priorities. A great deal on your car lease may not matter if you are serious about buying a home, plain and simple. Ask yourself: Is the car more important than the house?

Paying Off Debt for a Mortgage

Paying off debt to qualify for a mortgage usually needs to be documented in the following ways.

• Money used to pay off the obligation cannot come from the reserve requirement your lender almost certainly has. Lenders usually want you to have at least three to four mortgage payments in the bank, called reserves, as a cushion when granting your loan request.
• You’ll need to produce a paper trail showing money leaving your bank account and going to the creditor to pay off debt or a provide copy of the canceled cheque to show you no longer owe the obligation.

All of these steps may seem unnecessary and overly repetitive, but they are a by-product of the current mortgage lending world. Remember, stringent underwriting requirements help to ensure lenders are making good loans and, more importantly, that you can actually afford the house you are looking to buy.

Are you serious about buying a home? Call or email me to review your options. Home ownership may be closer than you think.
Steven Porter is a licensed Mortgage Agent with Mortgage Architects, and Accredited Buyer Representative (ABR) and Seniors Real Estate Specialist. Steven can be reached at 1-905-875-2582, Email steven.porter@mtgarc.ca or apply online at www.1800Mortgages.ca

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

How to buy and sell a home at the same time

You own a home now, but it’s time to make a change. If you’re moving up or downsizing, you probably have questions about how it all works. That is, the logistics of buying another home while you still own your existing property.

Here are 10 facts you need to know about navigating through the two transactions at once - to make the move as smooth as possible...

Get the facts on your existing home

What is your home worth?
Find out the value of your home by asking a Realtor to provide you with a detailed market evaluation. Alternatively, get a detailed estimate of the value by paying for an appraisal by a licensed appraiser. This will give you an idea of what residual funds you will net from the sale of your existing home which will determine how to structure a mortgage for the new home. Be conservative when working with the down payment amount so you have some wiggle room when negotiating the sale of your current home.

Three questions to ask
After you have determined what new mortgage amount you will require, you will then need to contact your current lender to ask them the following 3 questions...

1) Is the mortgage portable to a new property?

If it is and you are moving up, can the new mortgage rate be “blended” - and what will that new rate be in order to avoid paying a payout penalty?

2) If you were to pay the existing mortgage out in order to get a better rate, what would the penalty be?
Be advised that you are required to qualify for any new mortgage whether you “port” the existing mortgage to a new property or get a brand new one, as you are effectively only “porting” the terms of the mortgage

3) How are you going to sell your current home?
Options available to sell your home include for sale by owner, by a Realtor, or somewhere in between the two. I recommend using the services of a Realtor as I personally would like to leave any showings and negotiations with any potential buyers in the hands of a professional.

Ask a Mortgage Professional, Steven Porter, Mortgage Agent, Mortgage Architects

Financing your next home

Securing a pre-approval
Based on your initial findings about your current residence, I recommend obtaining a pre-approval for your next purchase as this will give you an idea of what kind of requirements you’ll need to meet in order to be approved for your next mortgage.


Quick, easy on-line mortgage pre-approval

What if your existing home hasn't sold by the time you take possession of the new home?
Your new mortgage may contain a condition to confirm your existing place has sold. This could be for either down payment or qualifying purposes, or both. See if a back-up plan is possible in case your existing home does not sell by the time you take possession of your new home. Your mortgage professional can work through a few potential scenarios with you until you’re comfortable with the options you have for all possible outcomes.

Investigate the "Home Sale Guarantee" offered by some professional Realtors

Keeping both homes, with one as a rental property
Perhaps you are looking into the possibility of keeping your current home and turning it into a rental property. Some lenders will allow this as long as you can qualify to carry both properties. Talk to your mortgage professional about the option of including potential rental income to help you qualify. Be aware that lenders tend to calculate the inclusion of rental income differently, so if you don’t qualify with your current lender, check others. If you are leaning to keeping both properties, ensure you explore all options in accessing funds for the down payment on the new home. For example, is a gift from a family member a possibility? Do you have sufficient funds in savings? Can you look at refinancing your current residence to access the equity?

What down payment requirements and proof do you need to provide?
If the down payment is coming from anywhere other than the sale of your existing home, the requirements are pretty straightforward; your lender will look for the paper trail to support the source of the funds being used. If the down payment funds are coming from the sale of a property, you’ll be asked to confirm what your equity position is via a current mortgage statement, as well as a copy of a fully-executed sale agreement for your current residence, along with all condition removals related to that contract.

The qualification process
Qualifying for your next home will be similar to getting approved the first time. Your lender will be looking at the usual application aspects - like income, credit, down payment, and the property you’re financing. If your income or credit profile has changed drastically, such as you becoming self-employed or your credit not being as good as it used to be, be sure to have a conversation with your mortgage broker about how the qualifying process could differ from the first time around.

Consider what you'll need for supporting documents
While many of our mortgage rules have changed, document requirements likely haven’t changed too much since you last qualified. What you’ll be asked to provide will be dependent on your current financial profile. Your mortgage professional, along with a mortgage pre-approval, will give you an idea of what you’ll be asked to provide in terms of supporting documents.

What to do when you need bridge financing
If the possession date for the sale property is after your purchase possession date, and you need those funds for a down payment, there is a solution known as bridge or interim financing. The lender will not only finance your mortgage, they will also give you a short-term loan to cover the down payment. This way the seller gets their money and you get possession of your new home even though your old home is still technically yours. Once your existing place has sold, your lender will recover the funds they lent to cover your down payment. It is important to note that you must have an unconditional or firm offer for your existing home in order to qualify for bridge financing. Be aware that not all lenders offer bridge or interim financing and the terms and costs for this service can vary, so double check the conditions before you commit.

Moving confidently from one home to the next
It can be stressful to sell and buy simultaneously. There are a lot of things that need to go right in order for everything to go smoothly for you. The best way to ensure a smooth move is to do your research first. Explore your options until you find one that allows you to confidently move forward into your next home while leaving the last one fondly behind.

Reprint - GoldenGirlFinance

For all your mortgage needs contact Steven Porter, Mortgage Agent/Planner, Mortgage Architects - 1-905-875-2582 or steven.porter@mtgarc.ca
 

Buy A Home With Little Or No Money Down

Maybe you owned a home before and are presently renting; or you're a first time home buyer and need a way to break into the housing market but lack the required minimum down payment; or you you simply do not want to liquidate your financial assets to use as a down payment on a home. Well, regardless of your situation, if you want to get into or re-enter the housing market with a low amount, or even without a cash down payment at all, then this strategy may be just what you're looking for.

Now you can realize the dream of owning your own home with little or no down payment and closing costs.

That's right, zero cash down payment and closing costs. Here's what is required to qualify for the Zero Cash Down Payment Program.

1.  An excellent credit history. 
• No recent history of bad debts. no bankruptcies or consumer proposals.consistent and timely payment of liabilities
2. Limited liabilities.
• You will be required to disclose and will be evaluated on your current and future debt servicing ability. (ie. car loan/lease, credit cards, helocs,etc.)
3. Proof of two years of stable employment, ie. a letter of employment from your employer, CRA Notice of Assessments and three years financial statements for self-employed.
4. Properties under the program have to be average or above average properties. No less than average; fair condition or fixer-uppers
• Acceptable property types: detached or semi-detached home, freehold and condominium town homes
• Maximum 2 units
• Owner occupied only

It is important to note that not all properties qualify for the Zero Cash Down Payment Program. Ensure you get an accurate picture of what properties may or may not be included in this program, in your particular area, contact myself, Steven Porter, Mortgage Agent or your Realtor.

Benefits of the Zero Cash Down Payment Program

No Down Payment

Are you are renting? Why pay your landlord's mortgage? Why not reap the benefit of building your own equity? The general perception of many would-be home buyers and even some Realtors® is that a minimum down payment of 5% is required in order to purchase a home. This is not always true. Many home buyers feel they have to save for years to have enough money for a down payment so they can eventually enter the housing market. In the meantime, they are lining someone else's pockets paying rent went they could start building equity of their own.

Buy a Home Now!

With the Zero Cash Down Payment Program you don't have to wait to purchase a home. If the need for a cash down payment is keeping you from owning your own home, this program offers you an immediate way to get into the housing market.

Approved Lender Program

It is important to know that the Zero Cash Down Payment Program is an approved program through reputable lenders. Review this program with me or your Realtor®.

Note, certain terms and conditions may apply.

Steven Porter, Mortgage Agent - Mortgage Architects, www.StevenPorter.ca

Six Things to Know About Real Estate Deposits

When you make an offer on a house you have to put down a deposit. Here are some things to keep in mind.

When must a deposit be paid?

In Ontario, the standard real estate contract gives the buyer two choices; you can pay the deposit immediately when you make an offer, or you can agree to pay it within twenty four hours after the seller accepts it. Most buyers prefer the second option. If you are in a bidding war, you will be encouraged to come up with the deposit immediately, to show good faith to the seller.

Can the buyer get out of a deal by refusing to pay the deposit?

No. Once the deal is accepted, you can’t change your mind. If you do, the seller can sell the property again and if he gets less money than you were going to pay the seller can sue you for the difference, plus legal fees.

What happens if the deposit is paid late?

The seller has the right to cancel the deal. This is because all time limits matter in a real estate contract and if you are late, even by a few minutes, the seller can try and cancel. I have seen this happen many times, especially when the seller knows that there is another buyer out there who will pay more money. If you need more time to come up with your deposit, say so in your offer.

How much should a buyer pay as a deposit?

This is a tough question, and will largely depend on where your home is located. In Toronto, deposits are now usually up to 5 per cent of the sale price. In Brampton, it is closer to 2 per cent. In some areas of Ontario, deposits can be as little as a few hundred dollars.

Why does the deposit go to the seller’s real estate agent and not the seller?

If the seller goes bankrupt or disappears with the deposit, the buyer is not protected. When the deposit is held by the real estate brokerage, it is in trust and is also protected by insurance so even if the brokerage goes bankrupt, the buyer can get their money back.

If the buyer is unhappy with their home inspection, can the seller refuse to return the deposit?

This happens more than you think. A deposit cannot be released unless both the buyer and seller agree. If a seller believes the buyer did not act in good faith in trying to satisfy their condition, whether it is a home inspection, financing or a condominium status certificate review, they can refuse to release the deposit. This means it stays in the broker’s trust account until a judge decides who gets it, which can take years. As a precaution, buyers should consider making two deposits in their offer, a small one of say one per cent when the offer is accepted, and a second larger deposit once the condition is satisfied.

Understand the rules about deposits before you sign any real estate contract. It is expensive to change your mind later

By:  Mark Weisleder - Toronto lawyer, author, course developer and public speaker for the real estate industry. 

Beat out other buyers to the BEST New Listings. Find out how.

6 Ways to Avoid the Tenant From Hell

 While there’s tremendous success to be had in the world of investment properties, the unsightly truth is that one bad tenant can cause a monumental setback.
It’s hard enough to keep up with wear and tear on your investment property without having to deal with disgruntled residents causing willful and severe destruction to a home. From “Sharpie parties” — where tenants invite friends over to vandalize the home with markers — to “indoor swimming pools,” where renters flood the premises and take a dip, there’s no shortage to the devastation that tenants can create.

Of course it’s not always so dramatic, but the problem of trouble tenants is quite widespread. In a poll conducted by Vancouver-based newspaper The Province, 71 percent of landlords say that they’ve had problems evicting a renter despite justifiable grounds. Late rent payments, broken appliances, and disputes over damage deposits are some of the most common issues that landlords face. The costs involved with repairing damage left by a less-than-upstanding renter, not to mention the time and money that it takes to pursue an eviction, can be enough to strike terror into the heart of even the most seasoned property owner.

The good news is that an ounce of prevention is still worth a pound of cure. While you can’t always foresee issues with renters, there are steps that you can take to drastically reduce the chances of problem tenants gaining access to your rental in the first place.

Having an airtight tenant screening process is one of the best ways that you can protect yourself and your properties from potential devastation. Let’s look at a few tasks that can help you build a metaphoric hedge around your property that helps prevent unsavory tenants from getting in.

1. Require a Tenant Application

The right questions can help you to sift through unqualified tenants at the start. Draft an application form and have it ready for every prospective tenant. Ask each adult to provide basic information, such as name, date of birth, contact information, emergency contacts, and request similar information about any children who live with them.

In addition to asking the date they hope to move in, ask these questions:

• Do you have any pets?
• Do you smoke?
• Have you ever been evicted?
• Have you ever been convicted of a felony?

Be sure to request references, employment information, and a way to contact their previous landlord. Consider asking an attorney look over your form, to ensure both that you’ve covered your bases and that you haven’t asked any questions that could be considered discriminatory or cause legal issues.

2. Start Interviewing

The interview is vital. This is your chance to screen prospective tenants and find out whether or not they’re an ideal match for your property. Good questions to ask include:

• Is your income the same every month, or does it vary?
• Why are you moving?
• Describe your perfect rental space.
• What’s your favorite or least favorite thing about the place you’re living in now?

The interview should give you a good idea about whether or not the prospective tenant will be able to afford the rent and abide by the terms of your rental. This About.Money article, “Ten Questions for Prospective Tenants,” provides a fairly comprehensive list well worth considering for the tenant interview process.

3. Conduct Diligent Research

Always follow through with a check of potential tenants’ references, credit, and possible criminal background. Verify important information that the tenant provides, particularly current employment and previous rental history.

When contacting references, ask how long each person has known the prospective tenant and for their opinion on the reliability and character of the tenant. It’s especially important to get in touch with previous landlords, who may be more likely to paint an accurate picture for you. Current landlords might be desperate for a problem tenant to leave and may gloss over the truth in an effort to get the tenant to move faster.

4. Watch for Warning Signs

Look out for red flags that can alert you to a potential problem tenant. If the applicant makes you feel nervous or seems desperate to move in as quickly as possible, that could be a warning sign.

And watch out for candidates who question every aspect of your rental application process, as this may be an indicator of someone who will be unwilling to abide by your rules when renting. Legitimate candidates understand that it’s important for you to conduct credit and background checks, and most will appreciate the care you take in selecting tenants.

Be sure to compare the application and your notes from the interview to what comes up on the background check. Be extremely wary of any discrepancies.

5. Keep It Legal

Of course, as important as it is to have a solid tenant screening process, it’s also important to ensure that your process complies with the law. While you should watch out for warning signs, never screen tenants based on feelings alone. Be careful to use the same qualifying procedure for all applicants, and treat all candidates equally to prevent accusations of discrimination.

You should also use the same process each time you deny someone, regardless of the reason for denial. A simple e-mail highlighting the reason is sufficient. Doing this properly and in writing can help to prevent any accusations of discrimination. As another legal side note: Be sure to check local laws before collecting application fees or a deposit, as this practice may not be legal in all areas.

6. Get It in Writing

Finally, once you have found a tenant for your property, it’s important to make sure you have a rental agreement in place. This document should contain clear guidelines and will help ensure that you and the tenant are both on the same page, preventing problems from arising later on due to miscommunication. The agreement should include the names of all the residents, occupancy limits, and rental terms, including late fees, acceptable payment methods, and charges if a rent check fails to clear.

While many landlords are hesitant to implement a tenant screening procedure because it’s time-consuming, in the end a solid screening procedure can save time and prevent a world of hassle. You’ll be able to weed out problem renters and save yourself from costly evictions and extensive repairs down the road. Finding a tenant that’s a great match for your property is more than worth the time and effort it takes. You’ll thank yourself later, and your wallet will too. 

by BRENTON HAYDEN, REPRINT