Many of us equate September with back to school and back to reality! To help you reset and get back on your feet, we have some great information about approval roadblocks to avoid, finding your perfect home type and how to talk to your kids about finances!
Five Approval Roadblocks You Should Know
Hearing at the last minute there may be a problem with your file can be extremely nerve-wracking. If you have provided all the requested documents and the lender has not raised any areas of concern, it’s reasonable to assume everything is okay.
A lender will approve financing based on the information provided to the lender at the time of the application. If there have been changes to your financial situation, the lender can cancel your mortgage approval.
There are five major things you must avoid for a smooth transaction:
Changes to Your Employment
When submitting a request for financing, one of the most important aspects the lender looks at is employment. If you worked at Company ABC for five years at $80,000 a year and change jobs before funding your new mortgage, the lender would require proof from your new employer. If you change industries, they will need more evidence that you are capable of keeping the job. The lender often requests a two-year average for employment involving overtime or bonuses, which is impossible in a newer position. Similarly, moving from an employee to a self-employed contractor could also jeopardize your financing. A good rule of thumb is to wait to make any significant employment or life changes until after the deal has gone through.
Proof of Down Payment
Lenders will want to understand the source of your down payment funds. Many options are available, including gifted funds from immediate family members, RSP and TFSA, personal savings, sale of assets, and borrowed funds.
It is critical to identify the source of all real estate monies upfront as part of your approval process. Lenders are suspicious of last-minute gifted funds, which could be part of a “veiled loan.”
You will have to provide three months’ most recent bank statements to show the origination of the down payment money to follow anti-money laundering legislation which ensures the legitimacy of funds.
Existing Debt Load
Shortly before you get the keys to your new house, the lender may elect to update your credit report to check for any changes to your outstanding debt. Making significant purchases before your possession date could stress your affordability to the limit that the lender may cancel the mortgage request. Pay extra special attention to “don’t pay a cent” events with no payments required for an extended period. Lenders will pick up 3% of the approved limit in your affordability – regardless if a payment is required.
Poor Credit Score
A significant roadblock to mortgage approvals is credit card payments. When you are in the process of getting financing or waiting to take possession of your home, your credit score must remain unblemished. If your credit score falls significantly due to late or missed payments, this can cause significant issues with your financing.
Before finalizing your mortgage, the Real Estate lawyer will verify your identity and match the mortgage documents; therefore, it is essential to use your full legal name. Even if you use a middle or nickname, all legal documents should match.
To help avoid last-minute roadblocks and catastrophes with your mortgage application, be sure to keep in touch with me at all times during the mortgage process. If there are any changes from your initial mortgage application, it is essential to advise them well in advance and run those changes by myself to ensure they will not affect your application.
Finding Your Perfect Home Type
When finding your perfect home, there are so many more options for potential homeowners! From a single-family dwelling to a townhouse to a modular home, the choices are seemingly endless. But, before you start widening your search, let’s take a look at what makes home types different – and which one is perfect for you!
A stand-alone house that sits on its lot and is the most common type of home. As these are detached dwellings, they provide more privacy with less noise from neighbours. They also tend to be larger dwellings (complete with a yard!), giving you the space and freedom to make it your own.
Semi-detached homes are often more affordable to both buy and maintain. These homes are suitable for a single-family and are typically attached to another house on one side. With this affordability does come somewhat less privacy and protection from noise due to the shared walls on one side.
These structures contain two single-family units on different levels. They are an excellent option for individuals looking to reduce home purchase and carrying costs – live in one unit, rent the second! This type of home also provides unique flexibility for older families, giving you the option to have adult children or parents live in the second unit. As expected, these units offer less privacy than single-dwelling homes and can sometimes have increased noise through the floor or ceiling.
Townhouse or Row House
These are a row of single-family homes connected to the adjoining house (excluding the end unit connected on one side). Townhouses typically have private yards, but, in some cases, it may be freehold or condo-style with shared ownership rights and responsibilities. However, these homes are typically more affordable and easier to maintain, though you may have to consider strata or maintenance fees. Similar to duplexes, these home types have less privacy and may have noise from shared walls.
These are low- or high-rise buildings containing multiple apartment units. Condos are ideal starter homes for single adults or couples, as they are affordable and require minimal maintenance. Some facilities even have shared amenities, such as a fitness centre or swimming pool or party room. Always check for these amenities and if you would be interested in using them. If not, why pay for them? You might be better off finding a condo with fewer amenities and lower strata fees.
Modular or Mobile Home
Growing in popularity are modular homes, which are prefabricated homes delivered to a home-site for installation. The individual owns these homes, while the land it sits on could be rented or owned outright. These homes are highly affordable and flexible; if you relocate, you can sell the mobile home with the property or keep the house and relocate it! If renting land in a mobile home community, there are also those costs to consider.
Carriage House or Urban Infill
A carriage house is part of a single-family detached house. Similarly, urban infill homes are a modern solution to crowded cities. These homes are often situated in attractive, urban environments and have their character. They are also generally less expensive, but there is potential for noise pollution if you are in a busy location. Due to the size, there is also limited inventory and limited or non-existent yard space. But if you’re looking for something affordable and unique, these are a great option!
Finding the right home means considering your lifestyle and budget now, as well as where you’ll be a few years down the road. Want more information or need help deciding the best option for you? Let’s connect to learn more about your options when it comes to buying and owning a home.
Talking to Kids About Finances
Many parents currently support their children (ages 18-35 years) financially, spending more than $5,600 per year! This extensive additional cost that most parents cannot afford. Over 30% of parents see delayed retirement to help kids with post-secondary costs and face an inability or delayed timeframe to pay off their debt.
All parents want to help their kids as much as they can. Today is the best time to start.
Financial independence is a valuable skill set. Unfortunately, many schools do not teach financial literacy, which puts the onus on parents to ensure their children get a strong foundation in dealing with money.
Change Your Attitude
How is your relationship with money? Are you an avid saver, or are you a reckless impulse spender? Understanding how you deal with money is a critical step in personal awareness and setting an example for your children.
Give Your Children an Allowance
Providing an allowance to your children is an excellent way to teach them about money. A great approach would be to give $1 for each year of age. Therefore, an eight-year-old would get $8 per week. Don’t let them blow it all on candy! Make sure they do something productive with the money.
Teach Your Child to Save
Please encourage them to save part of their weekly allowance. How about saving for something extra special, like a new bicycle? Open their first bank account with them and go to the bank to make a weekly deposit. Celebrate their ability to grow their bank balance.
Involve Your Children in the Family Finances
Involving your kids in your financial planning might be more valuable than you might think. Let them see you opening bills and balancing the chequebook. Explain your approach to managing household income and cash flow and let them be part of the conversation and instill a sense of financial responsibility as they grow up.
Act as the best example for your children. Share your concerns and celebrate your victories, all while promoting financial awareness and independence.