Mortgage Marathon

Tracy Head • Aug 26, 2024

Getting across the finish line is sometimes more challenging than getting your initial mortgage approval.


Lenders have different processes for evaluating mortgage applications. With some lenders we need to submit all of your supporting documents upfront; others send out the initial approval with a list of what they want to review.


Process-wise I collect all (or most) of my clients’ documents before I ever submit for an approval. This means we can be flexible when choosing which lender we are going to work with. In some cases when I know it will be a few days before the client is able to provide everything I will work with a lender that sends out their approval then asks for the documents.


There are pros and cons to both lender processes.


For the lenders that need everything upfront, in an ideal situation their approval arrives with very few additional document requests. This feels smoothest for our clients.


Lenders that issue an approval without reviewing all documents are great to work with when we are in a time crunch. If I am pretty confident of the information my clients have provided verbally but am just waiting on certain documents (ie: a T4 or bank statements) I will often use these lenders to make sure we stay on track to meet deadlines like our subject removal for financing.


Sometimes, even after working with clients for months, surprises pop up.


This week felt like a game of Whack-A-Mole dealing with just such surprises on several of my files.

First surprise: my client has a credit score in the high 800s (900 is the highest available) and has been with the same employer for over fifteen years. She is putting down 50 per cent of the cost of her home from savings. A beautiful application all the way around.


Our approval came back requiring confirmation that her cell phone bill has been paid in full. Apparently her Transunion credit report shows she is in arrears with her cell bill.


The back story was that her employer had sent her out to work one of the active fires and she was putting in long exhausting days so it was an oversight.

 

In view of the application I felt this was an absurd ask but the lender would not budge on it. My client was very unhappy being asked to provide this as the mortgage application was with her bank.


Another challenge was after working with clients for almost a year on their preapproval (and having reviewed their credit history ten months ago) they finally had an accepted offer. We pulled their credit history to update their application. There was now an outstanding collection that had not been there before. It was for an old student loan that they assumed had finally gone away.


Even trying to verify basic information can seem daunting. As a prime example, CRA has changed the format of the T4s that clients can pull from their My Account portal. The T4s no longer include the clients’ names. To pull from My Account clients need to do a screen shot that includes their name on the portal. This can be a royal pain for clients to access the information in a format that lenders require.


All this to be said that lately many clients have been frustrated by some of the document requests we are making. From my perspective, if we are asking to borrow hundreds of thousands of dollars I appreciate that lenders are doing their due diligence. Identity fraud and mortgage fraud are out there and in the long run cost us all money.


If you are finding yourself a bit frustrated with the process you are not alone.

There are days where I put on my helmet and flak jacket before reaching out to clients for yet another document. This week there were five days. 


Then there are the days when a particularly challenging mortgage finalizes and my clients now have keys to their dream home. Today is just such a day, and days like this remind me that persistence is worth it in the long run.

Tracy Head

Mortgage Broker

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Navigating Mortgage Decisions: Finding the Right Amortization and Term for Your Situation

By Tracy Head • 07 Oct, 2024
When I am working with clients on their mortgage approvals there are several decisions they need to make. The questions differ a bit based on whether we are working on a purchase, a refinance, or a straight renewal. We talk about amortization, term, and the specific mortgage product. These questions differ a bit based on what we are doing and the clients’ specific situation. Amortization refers to the total length of time required to pay your mortgage in full. Term refers to the length of time you choose to lock into a specific rate. Some of the decisions can be scripted if you are purchasing with less than twenty per cent down and your mortgage requires default insurance. These rules have recently changed (again situation specific) but length of term is up to the individual client. Historically many people choose five year terms because lenders offer lower rates for this term. Over the last two years I’ve had far more people opt to pay a slightly higher interest rate and choose a three year term, gambling that rates will be lower then. Over the last year specifically as home prices have risen at the same time as the cost of living has escalated I’ve had different conversations with clients about the amortization they choose. With the recent announcement of changes coming to maximum amortizations for new builds and first time home buyers it will be interesting to see how these discussions change over the next few months. For clients who were working on refinances or purchases with over twenty per cent down we had the option of extending to a thirty year amortization. Some clients are resistant to stretching out the length of their mortgage and for solid reasons. Our parents’ generation was all about getting their mortgages paid off as soon as possible. This is obviously the choice that made the most sense and was more achievable for them and has been ingrained in many of us. Our current reality is that home prices and cost of living have skyrocketed while wages have not kept pace. I’ve heard the argument that our parents were not enjoying a life style that included $6 coffees every day. Fair enough. However, I have clients that live very frugally and are still struggling. Life happens. Divorce or separation happen. Devastating accidents or illness happen. Childcare bills escalate. Jobs are lost. Stuff happens. Particularly when I am working with clients that are consolidating or buying at a significantly higher price point we have a thorough discussion comparing the difference in monthly payments for (usually) a twenty-five amortization versus a thirty year amortization. Signing for a shorter amortization makes better sense for your long-term financial plan. However, if the higher payment causes you stress month after month and you end up in the same boat again a few years down the road the long term benefit is not there. Every lender offers several ways to make extra payments against the principal of your mortgage. Interest rates will likely be different every time you renew your mortgage. Your income and bills change over time. I will always be an advocate for paying your mortgage off sooner but many of my conversations with clients are pretty raw about the reality of making your payments every month. The positive news is that rates have been trending down over the last month which will help provide a bit of relief. The better news is that by making thoughtful decisions around your choices for amortization and term you may help reduce your overall stress level.

Mortgage Rule Changes

By Tracy Head • 21 Sep, 2024
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