Open for Business During COVID-19
Christine Buemann • April 22, 2020
If you're thinking about buying a new property, refinancing your existing mortgage, or if your mortgage is up for renewal, you might be wondering if getting a mortgage is even possible amid a global pandemic? Be assured that it is possible, mortgages are being written, and we're open for business (virtually).
Although it may not be business as usual. Mortgage brokers are still brokering, lenders are lending, real estate agents are selling houses, appraisers are appraising (virtually), inspectors are inspecting (some in hazmat suits), while lawyers continue to do what it is that lawyers do. Albeit in a climate of social distancing, with the increased use of technology.
Here are 3 things to consider while you plan for mortgage financing during the COVID-19 pandemic.
Everything is taking more time | Prepare yourself
As almost everyone involved in getting you a mortgage has had to alter the way they regularly do business, entire workforces are shifting from in-person to online. Despite the uptake in technology, things are taking a little longer than usual. Compounded by the fact that lenders are dealing with high submission volumes from clients wanting to defer mortgage payments, processing new mortgage applications can take longer than in previous months.
Your best plan of action is to prepare yourself ahead of time. Everyone is under a lot of pressure, so do everything you can to make sure your proverbial ducks are in a row and that you allow enough time to get everything done. Get as much of your personal documentation together upfront and be as organized as possible, it will go a long way in making for a smooth transaction.
Technology is keeping things running.
While many of the typical steps in the home buying process have been disrupted, with the use of technology, it is possible to buy a home while isolating in COVID-19.
Mortgage, real estate, and lawyer's documents should all be signed online. Although new technology can be scary, e-signatures allow transactions to take place, while doing your part to keep a social distance.
Admittedly, not the same as walking through a property, virtual tours allow you to get a sense of feel for a property more so than simple pictures. A lot of listings should have a virtual tour, while many real estate professionals are hosting virtual open houses, where they can take you on a virtual journey through the property using their phone.
Appraisers aren't required to complete a physical inspection any longer to determine a property's value; instead, everything happens online. An appraiser will use information from MLS data, municipal permits, property assessment information, client or owner information, and any other available source to estimate the physical characteristics of the house interior and the remainder of the property to come up with a valuation.
If you're looking to refinance or renew an existing property, the same is true, with the use of e-signatures and virtual appraisals, you can get a new mortgage, assuming you qualify.
You should expect more scrutiny on your mortgage application!
With over half of Canadians claiming to have lost work due to the COVID-19 coronavirus, it's not surprising that lenders are making a move towards extra scrutiny when assessing your overall application and employment documents. Lenders want to ensure your job stability now but also if things get worse down the line, you have good job prospects in the future.
As far as income goes, in a COVID-19 world, past job performance and income isn't a reliable indicator of future performance and income, everything has changed, and lenders are doing their due diligence. Lenders are becoming more conservative and risk-averse.
Lenders are starting to ask for income documents upfront. There is no use entertaining your mortgage application if they aren't confident about your prospects of employment.
Also, for self-employed borrowers, in addition to the standard required documentation of your past business income, you might be required to provide additional documentation going forward. Including, but not limited to: a description of your business activities, number of employees (including how many are actively working or laid off), current business status (operating or shut down), along with bank statements to prove stable income.
So although it might take a little longer than usual to get a mortgage, and you can most likely expect more scrutiny on your application, with the increased use of technology, mortgage financing is still possible.
If you'd like to discuss your personal financial situation, and how to go about getting a mortgage in these unprecedented economic times, we might not be able to get together in person for a coffee, but I'm open for business virtually and would love to help; please contact me anytime!
RECENT POSTS
If you're not all that familiar with the ins and outs of mortgage financing, the term "second mortgage" might cause a bit of confusion. Many people incorrectly assume that a second mortgage is arranged when your first term is up for renewal or when you sell your first home. They think that the next mortgage you get is your "second mortgage." This is not the case. A second mortgage is an additional mortgage on a single property, not the second mortgage you get in your lifetime. When you borrow money to buy a house, your lawyer or notary will register your mortgage on the property title in what is called first position. This means that your mortgage lender has the first claim against the sale proceeds if you sell your property. If you happen to default on your mortgage, this is the security the lender has in repossessing your property. A second mortgage falls in behind the first mortgage on your property title. When you sell your property, the lawyers will use the sale proceeds to pay off your mortgages in sequence, the first position mortgage is paid out first, and the second mortgage is paid out second. After both mortgages are paid off completely, you get the remaining equity. When you secure a second mortgage, you continue making payments on your first mortgage as per your mortgage agreement. You must also then fulfill the terms of the second mortgage. So why would you want a second mortgage? Well, a second mortgage comes in handy when you're looking to access some of your home equity, but you either have excellent terms on your first mortgage that you don't want to break, or you’d incur a huge penalty to break your first mortgage. Instead of refinancing the first mortgage, a second mortgage can be a better option. A second mortgage is often used as a short-term debt consolidation tool to help provide you with better cash flow. If you’ve accumulated a considerable amount of high-interest unsecured debt, and you have equity in your home, you can secure a second mortgage to lower your overall cost of borrowing. If you'd like to know more about how a second mortgage works, or if you'd like to discuss anything related to mortgage financing, please connect anytime!
If you’ve been thinking about buying a property, whether that be your first home, next home, forever home, or a home to retire into, the current state of the Canadian economy might have you wondering: Is this really the right time to make a move? There is certainly no shortage of doom and gloom in the news out there. The truth is, that’s a tough question to answer in the best of times. It’s nearly impossible to know for sure what’s going to happen next with the housing market in Canada. It could heat up or it could cool down. So here’s some advice. Instead of basing your buying decision entirely on external market factors, like the economy or housing market, consider looking for the answers internally. When you stop looking at the market to determine your timing to buy a home, and instead examine the personal reasons you have for wanting to buy a home, the picture can become much clearer. Here are some questions to consider. Although they are subjective, they will help bring you clarity. Ask yourself: Does buying a property now put me in a better financial position? Do I make enough money now to afford a new home and maintain my lifestyle? Do I feel confident with my current employment status? Have I saved enough money for a down payment? How long do I plan on living in this new home? Is there any scenario where I might have to sell quickly and potentially lose money? Does buying a property now move me closer to my life goals? Do I really want to buy now or am I just feeling a lot of pressure to just buy something? Am I holding back because I'm scared property prices might drop soon? There’s no doubt that buying a home can be stressful, but it doesn’t have to be. Having a plan in place is the best course of action to help you make good decisions and alleviate that stress. If you’d like to have a conversation to discuss your plans, ask some questions, and map out what buying a home looks like for you, we can address many of the unknowns together. The best place to start is to work through a mortgage pre-approval. There is no cost for this service, you’ll learn exactly what you can qualify for, and it will provide a lot of clarity about your situation. You might decide that it’s best to wait before buying, and that’s just fine. You might find that now’s a perfect time for you to buy! If you'd like to talk, please connect anytime. You’re not in this alone. We can work through everything together.
If you’re new to managing personal finance and you want to learn about credit, you’ve come to the right place. Establishing new credit is a bit of a catch-22. To build a credit history, you need credit. But it’s hard to get credit without having a credit history. So, where do you start? Well, the first thing you should know is that building credit takes time. It’s not something that happens overnight. If you’re looking to secure mortgage financing, you will want to have a minimum of two trade lines (credit cards, loans, or lines of credit) with a minimum limit of $2500, reporting for at least two years. If you don’t have any credit yet, the best time to get started is right now. However, that may be difficult because, as we've already identified, without a credit history, most lenders won’t feel confident about taking a chance on you. What’s the solution? Consider a secured credit card. With a secured credit card, you make a deposit upfront that matches the amount you want to borrow. A reasonable amount would be $1000 deposited on a single secured credit card. You then use your secured credit card to make household purchases and regular utility payments, paying off the total balance each month. If you default on the money borrowed for whatever reason, the lender will retain the money you put up as collateral. When looking for a secured credit card, be sure to ask whether they report to the two nationwide credit bureaus, Equifax and TransUnion. If the credit card company doesn't report, the credit card account will be useless for your purposes; move on until you find a company that reports to both credit bureaus. Once your secured credit card begins reporting to the credit bureaus, you begin to have a credit score; usually, this takes about three months. Now you can start to seek out a second trade line in the form of an unsecured credit card. Don’t forget to ensure that this card reports to both of the credit reporting agencies. Another option at this point could be a car loan. From here, you simply want to make all your payments on time! But what happens if you’re looking to secure mortgage financing before you have a fully established credit report? Well, if you have someone who would consider co-signing, you can certainly go that route. The mortgage application will depend on their income and credit report, but your name will be on the mortgage. Hopefully, when the mortgage is up for renewal, you’ll have the established credit required to remove them from the mortgage and qualify on your own. Although establishing credit takes a minimum of two years, it really begins with putting together a plan. If you’d like to discuss anything credit or mortgage-related, please get in touch!
