My name is Trevor Hickey and I am a Calgary Mortgage broker in Calgary, Alberta with Concord Mortgage Group Ltd. The following is a run-through of the general mortgage process, followed by the basis for decision making that most lenders use.<br />General Overview:<br /><ul><li>Application to broker
Funding</li></ul>Remember these mortgage operations may not be the same for all companies; however, for my company in Calgary, Alberta this is how I operate as a Calgary mortgage broker.<br />Application to broker<br />You can make a Calgary mortgage broker application directly to a bank and therefore bypass this step; however, you may not want the bank to know everything that you have to disclose. Some information is illegal for them to discriminate against and a broker can help prevent harmful (but useless) information from going to the lender. <br />An application Calgary refinance application can usually be done over the phone, email, fax or in person. The main categories are:<br /><ul><li>ID
A lot of people think that a Calgary mortgage broker has no right in asking for information such as date of birth and social insurance numbers. In Calgary private lending there is one golden rule that trumps all others “the one with the gold makes the rules”. If the Calgary private lender wants to know your information and you don’t give it to them you are simply declined for the loan. In my experience EVERY SINGLE lender that I have worked with will want your details such as your DOB or SIN, so if your Calgary mortgage brokers or bank asks for it – give it to them.
The Calgary mortgage brokers and lender will need to know how to contact you. Give the Calgary mortgage brokers everything, your home, cell, work, fax, email – what your preferred mode of contact it etc. If it is an emergency you will want your Calgary mortgage brokers to be able to contact you.
What property is it secured against?</li></ul>Verification of information<br />Next the Calgary mortgage brokers will want to ensure you are being honest. It’s okay to be wrong on your numbers by a little bit but try and keep it close. It’s better to quote higher than lower. Don’t say that you have no liabilities when you have a ton of credit cards.<br />Some Calgary private lenders have very little or none of this step. I have heard of some private lenders that don’t check income, credit or even mortgage balances. Usually you pay through the nose in exchange for the lack of questions.<br />Application to Calgary private lender<br />Here is where your Calgary mortgage brokers will transfer the relevant parts of your application and your documents to the Calgary private lenders. The benefit of working with Calgary mortgage brokers is that Calgary mortgage brokers will know what private lender is the best fit and therefore prevent a lot of time being wasted by going to non-relevant Calgary private lenders.<br />Approval<br />Here is where, if your application and documents match, and if they are in line with the Calgary private lenders’ guidelines then you will receive an approval.<br />Funding<br />Here is when the funds are advanced and they are paid to the respective parties ie. To pay off credit cards, fees, lawyer, Calgary mortgage brokers, other previous mortgages etc.<br />Basis for Decision Making<br />Most private lenders use the following for a basis for making a decision on whether or not they should approve a loan or not.<br />TDS/GDS<br />LTV/Equity<br />Income stability<br />Credit<br />TDS/GDS<br />Stands for “Total Debt Servicing/Gross Debt Servicing”. Here is where the private lenders compare your income to your required debts. <br />The only difference between the GDS and TDS is that the GDS does not include debts such as credit cards, car payments, unsecured lines of credit payments etc. and the TDS does include those things. By far the more important of the two is the TDS. <br />Again we are Calgary mortgage brokers so these are conventions in my neck of the woods.<br />How to calculate GDS/TDS (usually 32%/42% or less for bank-type lenders):<br />Income:$100,000.00/year<br />÷12<br />$8,333.33/month<br />GDS = Debts (not including credit cards, auto loans, unsecured loans etc) ÷ Income<br />Mortgage payment:$2,000.00/month<br />Property tax:$200.00/month<br />Credit cards:$350.00/month<br />Auto loans:$350.00/month<br />Total Debts:$2,200.00/month<br />GDS = $2,200.00 ÷ $8,333.33 = 26.4%<br />TDS = Debts ÷ Income<br />Mortgage payment:$2,000.00/month<br />Property tax:$200.00/month<br />Credit cards:$350.00/month<br />Auto loans:$350.00/month<br />Total Debts:$2,900.00/month<br />GDS = $2,900.00 ÷ $8,333.33 = 34.8%<br />LTV/Equity<br />LTV stands for loan to value (total loans secured against property ÷ value of property). Equity is the difference between the value and what is owed (value of property - total loans secured against property). <br />At the end of the process you need a positive equity position ie:<br />Value:$400,000<br />Total loans: $200,000<br />Equity:$200,000 Positive equity position<br />Value:$400,000<br />Total loans:$425,000<br />Equity:-$25,000 negative equity position<br />Good Calgary mortgage brokers know that the lower the equity the lesser the risk. Calgary private lenders like lots of equity because that allows them more insurance in case the client doesn’t pay and the lender has to take the house back. In the worst case scenario the Calgary private lender has not been paid anything (so the private lender is owed even more money than was the case in the beginning), and the house value has dropped either due to the market, vandalism, poor upkeep or all three. <br />There are 2 types of lenders:<br />Institutional ie. Banks<br />Typically, regardless of the equity the lenders will keep their rates the same. So they would give you a rate of ie. 4% whether there is $100,000 in equity remaining or $25,000.<br />Private Lenders – people like you and me who lend out money to other people.<br />This market is more flexible in terms of offering rate discounts as the equity increases; however, they are not as flexible to the market ie. If bank rates increase or decrease these typically don’t move at all.<br />Income stability<br />Calgary private lenders are always looking for stability of income. Private lenders don’t like to lend to people who have sporadic work history and might not be able to service their loans. Calgary private lenders are especially weary of self employed borrowers since they can be unemployed at any time. Typically lenders like 2 years of consistent work history for self employment clients and at 3 months (or until the probation period is finished or waived) for employed clients.<br />Credit<br />Calgary private lenders like to see consistent credit history. There are a few tricks that can help you improve and maintain your credit. The topic is so deep though that I have written a full paper on how to do this. Go to http://www.mortgagebrokercalgary.info/mortgage/trevor-hickeys-free-credit-repair-manual/ for a copy of my free credit repair manual.<br />If you have any questions or you (or someone you know) need financing please contact Trevor Hickey, B.A. at the information below. Thanks!<br />Trevor Hickey<br />Mortgage Associate <br />Concord Mortgage Group Ltd.<br />#107 - 1905 Centre Street NW<br />Calgary, Alberta<br />T2E 2S7<br />Bus: (403) 290-1990<br />Cell: (403) 860-8738<br />Fax: 1-888-587-1426<br />Email: firstname.lastname@example.org<br />Website: www.trevorhickey.com<br />Website: www.mortgagebrokercalgary.info<br />