A decade ago money seemed to be falling from trees. If you had a pulse and could fog a mirror you could qualify for a mortgage in North America. The US housing market was booming and Canada was following in its footsteps. American lenders were in Canada growing their subprime mortgage business and the big banks were extending amortization periods and actively growing their portfolios with folks who could not prove their income.
A decade later, the US housing market has imploded on itself and after several years of wallowing in the remnants of its greed is only now starting to turn the corner. The Canadian market was a couple of years behind the US and managed to avoid imploding upon itself, but only after Canadian lenders abandoned the loosey goosey lending practices that got the US into trouble.
If you’ve been to your local bank to apply for a mortgage lately you will notice the difference. They are not making exceptions for anything. If you have a blemish on your credit report but have a fool proof explanation that makes sense it doesn’t matter. They are only looking at your credit score. If you’re credit score is within their guidelines great. If it’s not, too bad!
If you are self employed, recently divorced, or work on a contract basis you will find that you are a square box trying to fit into a round hole. You will find yourself pulling your hair out trying to meet their requirements and finding all the documentation they are asking for.
In this market you would be a fool to buy a house without a financing condition. A decade ago you could take this risk but today you would just be foolish. If your realtor tells you otherwise, find another realtor!
This is where planning becomes important. Buying a home is a huge investment yet I find that emotions get ahead of reality. If you’re thinking of buying a house your first stop should not be to an open house or a realtors’ office. It should be to your local bank or mortgage broker. Crunch some numbers, do a credit check, gather all the documents you will need and discuss ALL your financing options in advance. If someone offers you a “pre-approval” without doing a credit check and gathering ALL the documentation needed to verify your income and downpayment you are wasting your time. The “pre-approval” is worth as much as my 1982 hockey card…the one that came with my team photo as a kid.
If I can be of any assistance with a new home purchase please let me know.
Mortgage Broker & Investment Advisor
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