30 Jan

Pre-Approvals & Pre-Qualifications

General

Posted by: Trent Glover

 Get a real pre-approval!!

Throughout the mortgage and home buying process, there are many steps and many checkpoints a buyer will need to complete before they can move on to the next one. A buyer will not be able to close on a purchase if they do not have a lawyer. Financing conditions need to be lifted after confirmation from a mortgage broker that a file is broker complete. A buyer should never write an offer on a home until they have a realtor working for them. Most importantly, a buyer should never be looking at property they are considering buying until they have been pre-qualified and pre-approved.

Now, one thing we need to make clear- pre-qualified and pre-approved are two different things. Pre-qualified is when someone completes a mortgage application with a mortgage broker or a bank representative and is told how much they can afford. Pre-approved is when someone has written confirmation from a lender stating they are willing to lend based on what is stated in an application and the applicant’s current credit history.

The difference?

Pre-qualifications are based solely on the knowledge and experience (sometimes even opinion) of a broker or bank rep. A pre-approval on the other hand is backed by the lender actually willing to give you the money. When someone says they are pre-qualified, that means they have taken an application with a mortgage broker or bank and in broker or bank rep’s opinion, they can afford “x” amount on a home. A pre-approval is a written letter from a lender stating based on applicants current credit history, declared income on application and current assets, we will lend “x” amount pending confirmation everything stated in the application is verifiable and the property meets all lender requirements.

As you can probably tell, one can be more reliable than the other, especially if you are working with a mortgage broker or bank rep that is inexperienced in the industry. Pre-approvals also usually come with a rate hold. What a rate hold does is guarantee you the interest rates that lender is offering today for a certain amount of time (usually 120 days), and if you put an offer on a place within that time period, they will give you that previous rate even if they went up. If rates go down, they will allow you to access the lower interest rate as well.

You must always get yourself pre-qualified before you begin looking at homes so you know what you can afford. Once you have and you are actively looking, it is very important you try and get a pre-approval before you write an offer. It will give you that extra confirmation your application is acceptable, and protect you against interest rate increases while you look.

If you require a pre-qualification, pre-approval, or want to speak with someone about your current situation, please give a Dominion Lending Centres mortgage professional a call.

4 Jan

Commercial Mortgage Application: Standard Documentation Required

General

Posted by: Trent Glover

Mortgage Information

Posted by: Randell Toporowski

From time to time businesses need capital to fund the development and acquisition of assets, purchase businesses, and refinance properties.  The capital budgeting process is used to determine the cost of the capital that is needed and is a fundamental process to the borrowing procedure.  Interest rates, loan term, amortization period, administration fees, early payout penalties, corporate taxation rates, leasing alternatives, corporate tax and capital cost allowance all factor into the formula that is used in determining the cost of that capital.  These are the quantitative aspects of the loan process.

In addition to this there are the qualitative aspects of the lending process. They include:

  • Corporate Structure
  • Shareholders and Corporate Share Structure
  • Corporate bylaws and authorizations
  • Guarantees
  • Qualification of lender
  • Financial and Pro-forma financials
  • Municipal Tax Status
  • Appraisals
  • Anti-money laundering laws
  • Legal Documentation and procedures

Your mortgage broker reviews and analyzes the quantitative and qualitative components of your loan application for suitability and completeness.  As well, commercial mortgage brokers play an instrumental role in guiding the entire funding process from lender through to lawyer to ensure that those applications that are approved pass through the system in a timely manner.  It is a matter of fact, that a good commercial broker that is well prepared and efficient will outperform the people and the processes of the commercial lending/credit departments of banks, trust companies and credit unions that offer commercial lending services to the Canadian business community as a walk in or existing client.  Commercial mortgage brokers add value to the capital supply chain for your company and its growth and financing needs.  The broker allows you to go on with managing your business operations and not managing your loan officer’s day!  At Dominion Lending Centres Powerhouse Mortgages we recognize this and employ sound processes so that you as the Owner, Vice-president of Operations or Chief Financial Officer can maintain your focus on your business operations as your loan application passes through the triage and approval process of the lender.

The goal of the commercial mortgage broker is to gather and review the relevant information.  The first step employs gathering documents that identify the type of company, it’s structure and detailed rules for it’s operation.  Secondly, documents must be collected that will produce accurate and complete information about the company’s historical, current and future performance.  Thirdly, documents are gathered that support the purpose of the loan request.  Once these documents have been gathered they are then analyzed by the broker to determine if the company is a good candidate for the borrowing that is requested, and if so, proposals are then submitted to various lenders based upon how well the proposal fits the lenders guidelines.  These four steps are generally completed in 3 to 6 weeks following the granting of consent by the borrower.

The documentation required to process a commercial mortgage application is a heterogeneous group of items.  Your broker will require copies of these documents and others that may be relevant to the loan application process.  These types of documents fall into five general groups:

  1. Consent and Fee agreements
  2. Legal, business, corporate structure and registration documents
  3. Business financial statements and pro-forma financial statements
  4. Tax status and compliance position of the business (Canada Revenue Agency, Saskatchewan Finance and Municipality)
  5. Asset Purchase / Refinance documentation / Asset Existence documents

If you are a client looking for loan or if you are a broker wanting to refer a client to my office what do you need to do to get the process moving forward?  It’s simple, call me! Over the phone we will begin the consultation process with you and we will begin the procedures for creating your mortgage/loan application.