REAL ESTATE IN A NUTSHELL      

PART 3 - “BUT YOU TOLD ME BEFORE…”

So you decided to buy a house. As we established in Part 1 (see here), it’s a good idea to make yourself (on your own first!) familiar with the market by checking online (www.Realtor.ca), through papers and most importantly – open houses.

What’s next? Right, it’s a very good idea to see your bank or mortgage broker and say something like this:

- I made about $60,000 last year and my wife another $30,000. Now we are thinking of buying a house. So what’s our price range?

The answer, which you will usually get right away, will sound close to:

- Based on what you said you can be approved for up to $ …We have a very good deal on a mortgage right now and I can freeze this rate for you for 90 days. OK?

- Sure, no problem!

At this moment you (and 99% of other people) are absolutely sure you are guaranteed the mortgage for that $... amount.

You might be SO positive, that you would consider putting in an offer on a property WITHOUT the subject of financing.

Only to find out later, (after the deal is firm, sellers are packing and you bought new furniture), that you actually aren’t qualified at all, or qualified for a much lower amount or on much worse conditions.

Why??? Because after you bring all the requested forms and verifications to the bank they might say:

- You know, this part of your income doesn’t count; this amount is not correct … and so on and so on.

- … But you (!!!) told me before…

- I told you “based on what you said” and it says clearly “PRE-qualified”, not “qualified”.

At this stage you can lose the very good deal on your dream house, your deposit or/and get a lawsuit from the sellers.

How do you prevent something like this? First, bring ALL the papers which verify your income, etc. to your bank or mortgage broker in the first place. Get qualified, not just pre-qualified BEFORE you start looking for a house.

Second – NEVER EVER write an offer without the subject of financing. (Unless you have enough cash in your bank account to pay the full amount … or if your last name is Gates and you make a living by running a little known software company, named… what was that?... “Microsoft”).

And while we are on the topic…I’m just amazed with people’s approach toward money!

Very often buyers will fight super tough for the best price on their dream house, even lose a REALLY good deal being apart by only $2,000-3,000 (which will make a difference in the mortgage payment of only $8-9 per month or 30 cents a day!!!)…

And after that the same people will easily agree on a mortgage rate 1-1.5%, even 2% ABOVE what they could get.

Guys, you will lose… I know it’s hard to believe, but it’s true:  OVER $100,000 (!!!) on the average priced house in our town during the amortization of your mortgage.

Put at least 5% of your efforts of fighting for the purchase price, to the negotiation of the best possible mortgage rate!  

Some people don’t even know the difference between the posted and the market mortgage rate, which is MUCH lower.

Or just ask a very simple question – what is the penalty for mortgage cancellation and 95% of people will say something like: “Oh, it’s not too bad, just 3 months interest!”

Read the fine print in your mortgage agreement under the words about 3 months interest and very often it will say something like: “or the rate difference, whichever is bigger”. How much “bigger”?

Again, it’s hard to believe, but recently one of my clients was asked to pay… $42,000 and had a very hard time negotiating this penalty down to “only” $25,000.

There are some other questions about the mortgage, like its portability, “transferability”, etc

I’m not a mortgage broker, so can’t advise you on this topic, all I can say is: pay close attention (in advance!) to your mortgage!

Questions? You can ask them either through email victor-k@shaw.ca or by calling 250-751-1223 at any time.