Money Mindset

Money Mindset discusses the experiences and opinions of a middle-aged professional on the topic of money, including: financial planners, investment experiences, part-time income sources, real estate investment and private sales, web site income opportunities, changing professions, home office organization, money education for kids, and many other subjects I have experienced first hand or even just thought about.

Saturday, February 03, 2007

Mortgages Can Be Fun...Really!

When investing in Real Estate, the first obstacle people come to that seems to be out of their control is the First Mortgage financing application. (It's not really out of your control unless you aren't aware and prepared.) People generally don’t apply for mortgages very often, so it can be a long, confusing and stressful process if you aren’t prepared for it.

The best way to ensure a smooth application process, and hopefully approval, is to know the banker's requirements and be prepared with all the information they need. Most lenders need at least the following:

- a copy of the offer to purchase

- the year it was built, what type of construction and heating

- an appraisal (which they usually coordinate, but may charge you for)

- a loan application, which takes more than a few minutes to locate all the information and fill it in

- the loan application will usually ask you for your income (which may need to be verified by an accompanying letter from an employer), a net worth statement that includes all assets and liabilities (or debts)

- authorization to do a credit check (which they will do using Transunion - www.transunion.ca or Equifax - www.equifax.ca)

- either leases for the rental property or a signed letter of intent to lease.

If you submit the above information, forms and letters to a banker before they ask for them, they will be very impressed, and will likely find the time to work on your application before the many incomplete applications on their desk. In fact, you could be their most memorable Client if you actually show them you know how to help them get your approval through without any hitches.

NOTE: You'll notice I use the term "banker" above, which could be a bank or a mortgage broker. You don't deal with "Lenders" directly; the bankers do. I'll post another time about the differences between bank loan officers and mortgage brokers.

In Ontario, you can usually borrow up to 75% for a small residential property (or up to 85% with a high ratio insured mortgage).

It’s one of the biggest hurdles, but when done correctly, can be straightforward, and will allow you to build a good relationship with your banker or lender. This is one of the most important parts of Real Estate investing.

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