HOUSE RICH but CASH POOR?

General Lyle Johnson 11 Feb

 

Recently I was referred by a TD branch manager  – a retired couple that was declined for a equity take out as their income was too low to qualify.

They were driving a 20-year-old car, their home needed repairs and they hadn’t been on a vacation in years. It was a classic case of house rich, cash poor.

As the couple was in their 70’s, I immediately thought a CHIP Reverse Mortgage would be suit their needs. After their home was appraised, they were eligible for $100,000 based on the value of their home. They took this money and bought a new car, did some repairs to their home, helped their grandchild with tuition fees,  and took a vacation. With one move, they were able to increase their cash flow, make their home more comfortable, do repairs, enjoy their retirement and help out family.

PRE-APPROVALS & PRE-QUALIFICATIONS

General Lyle Johnson 4 Feb

Great article from my colleague Ryan…check it out!

PRE-APPROVALS & PRE-QUALIFICATIONS

Throughout the mortgage and home buying process, there are many steps and many checkpoints a buyer will need to complete before they can move on to the next one. A buyer will not be able to close on a purchase if they do not have a lawyer. Financing conditions need to be lifted after confirmation from a mortgage broker that a file is broker complete. A buyer should never write an offer on a home until they have a realtor working for them. Most importantly, a buyer should never be looking at property they are considering buying until they have been pre-qualified and pre-approved.

Now, one thing we need to make clear- pre-qualified and pre-approved are two different things. Pre-qualified is when someone completes a mortgage application with a mortgage broker or a bank representative and is told how much they can afford. Pre-approved is when someone has written confirmation from a lender stating they are willing to lend based on what is stated in an application and the applicant’s current credit history.

The difference?

Pre-qualifications are based solely on the knowledge and experience (sometimes even opinion) of a broker or bank rep. A pre-approval on the other hand is backed by the lender actually willing to give you the money. When someone says they are pre-qualified, that means they have taken an application with a mortgage broker or bank and in broker or bank rep’s opinion, they can afford “x” amount on a home. A pre-approval is a written letter from a lender stating based on applicants current credit history, declared income on application and current assets, we will lend “x” amount pending confirmation everything stated in the application is verifiable and the property meets all lender requirements.

As you can probably tell, one can be more reliable than the other, especially if you are working with a mortgage broker or bank rep that is inexperienced in the industry. Pre-approvals also usually come with a rate hold. What a rate hold does is guarantee you the interest rates that lender is offering today for a certain amount of time (usually 120 days), and if you put an offer on a place within that time period, they will give you that previous rate even if they went up. If rates go down, they will allow you to access the lower interest rate as well.

You must always get yourself pre-qualified before you begin looking at homes so you know what you can afford. Once you have and you are actively looking, it is very important you try and get a pre-approval before you write an offer. It will give you that extra confirmation your application is acceptable, and protect you against interest rate increases while you look.

If you require a pre-qualification, pre-approval, or want to speak with someone about your current situation, please give a Dominion Lending Centres mortgage professional a call.

RYAN OAKE

Dominion Lending Centres – Accredited Mortgage Professional