Lethbridge Mortgage Specialist: Get It Right the First Time

Julie Sarich is a local Lethbridge mortgage specialist. If you are looking for a new home, or to refinance your existing home, give her a cal first at 403-331-3974

Are you looking to get a mortgage in Alberta? With the recent downturn in the global economy and all the negative coverage in the news there are many existing and potential homeowners that are feeling nervous about trying to get a new mortgage for their homes. However, for someone seeking to renew or get a new mortgage, right now is one of the best times ever to get credit, if you manage your money responsibly and maintain a good credit history.

There are a lot of myths going around right now about our country’s lending markets. One of the biggest myths is that it is almost impossible to get a loan right now in Canada. While that may well be true of our friends in the united states, the truth of the matter is that Canadian lenders are desperately hungry for new business and are actively seeking and competing for your mortgage business and this has led to the lowest mortgage rates in Canadian history.

So how do you as a homebuyer go about getting one of these amazingly low rate mortgages?

You need to understand the overall mortgage process and it helps to understand how the bank thinks when it is deciding whether or not to lend you money. Having worked in the financial industry in Canada for a number of years, I’ve noticed that most of the clients I’ve dealt with don’t really understand how banks think and why they behave the way they do.

First of all, the banks see lending you money as an investment in the same way that you see taking your money to the bank as an investment. When you shop around for an investment, you want to try and get the best return for your money but you also need to be careful to manage the risk that you might lose your money, sometimes you are willing to trade lower investment returns in exchange for less risk of losing your money.

Just like when you invest, banks are in the business of investing their money to make money. Banks, however invest most of their money in the form of mortgages and loans to individuals and companies. Right now because of what has been going on in the global economy, the big banks don’t want to take on risky investments so they are willing to trade lower returns for safer investments. What that means to you is that if you look like a safe investment to a bank, you are going to get an amazing deal on your rates, and if you don’t look like a safe investment good luck getting a loan.

Here are three really important things that the bank looks at when deciding to lend: credit history, sustainable income, existing debt load, and security.

Credit History:

How long have you had credit for? Credit can be in the form or existing mortgages, lines of credit, loans and credit cards. In general the longer your credit history the better because it shows how well you pay off and manage your debt. It’s important to have long-time open lending accounts that are in good standing, and it’s also important to have past accounts that show that they are paid in full and also in good standing.

Sustainable Income:

Banks want to know that you are going to be able to pay them back with interest, having a good stable job with a reasonable amount of work history at one employer is probably the best form of personal income in their view, but they also consider any other income such as self-employment or investment income if you can prove that it is regular and sustainable. Be prepared to prove your income such as providing several pay stubs (or multiple years worth of tax returns if you are self-employed.)

Existing Debt Load:

You could have the best credit history in the world and a perfectly secure job, but if you can’t afford the monthly payments you will not get the loan. Banks and other lenders don’t want to lend to you if you overall debt burden (which includes your monthly debt payments and other things like property taxes) is too high. In general most lenders in Canada won’t lend to you if your minimum monthly payments take up more than 40% of your gross income.

Security:

What happens if you stop paying your loan back? Many times banks and other lenders require some form of security to protect their investment. Depending on what type of loan you are trying to get and the first three factors they may require different types of security. Because of their size, mortgages almost always use your house as security, although you can often use another property that you own if you have other real estate. Other loans may need other types of security or none at all if if it’s a small loan and you are seen as a low risk.

If you are in the Lethbridge Alberta area and are looking for a great home financing experience make sure to call the Lethbridge Mortgage Specialist Julie Sarich at 403-331-3974.