Mortgage Quiz

I thought I would try and think of a number of questions I often get asked. Hope this helps but if your question wasn’t asked and answered, call or drop by.

a) Can I build a new home on my own? Yes, but not all lenders allow.

b) Can I get financing to buy just land? Generally no, but ask your branch and maybe they will.

c) Do I charge? No, except for “private mortgages”.

d) Once you have had credit problems, does this ever improve? Yes, in fact credit activity is removed after six (6) years with Equifax and seven (7) years with Trans Union Credit.

e) Can I get a mortgage if I went bankrupt? Yes, the minimum you must achieve is two (2) years since you were discharged and one (1) year of re-established credit. Lenders like more than the minimum. Bring in discharge paper and we will review.

f) What is the difference between a co-signer and guarantor? A co-signer is placed on title of the property and is more significant. A guarantor is not on title and plays the role that if the applicant has problems, the guarantor will support the person.

...more questions to come in the future.

So You Think You Want To Build?

If you are considering the possibility of building a new home, the initial discussion should conjure up incredible emotion.  First, think of the effort you will have to put into the design, construction, time and all the decisions you will have to make.  From personal experience, I know that building a home is a great challenge.  The following will describe three methods of how to go about building a home, and which is the best/easiest way to do so.

1. Progress Advance Process

This method assumes you have a contractor who owns the land and builds specific houses.  The contract between the builder and the purchaser establishes the final price.  Progress advance payments go to the builder in steps.  Step one is when the house is framed, the windows are installed and the roof is shingled.  The builder receives, after an appraisal and purchaser visits a lawyer, 35% less and a 10% hold back.  Steps two and three are similar to above, as the money is received after drywall is completed and then when the kitchen and cupboards, etc, are installed. This process is good for the builder because it establishes cash flow; however, not so great for the purchaser because there can be extra appraisal and legal costs.

2. Negotiated Deposit & Payment on Completion

On occasion, a builder is satisfied with a reasonable deposit up front and payment in full when the house is completed.  This is easier for the purchaser, provided the initial deposit isn’t too high.  As long as the construction process is fairly quick, this is also good for the builder.  There is no holdback after each step.  Purchaser saves appraisal and legal costs; therefore, this is a preferred method.

3. Do It Yourself

If you want to be your own contractor, there are two very important issues.  First, the purchaser must already own the land.  Owning land up front is very costly, and you cannot get a mortgage on just land.  If a parent, for instance, can lend you the money for the land, you can finance the building up to 95%, so when building is completed, the purchaser can repay the parent. (Please call for any clarification).  Second, before receiving approval, the lender determines the overall cost by getting an appraiser to value the land, blueprints, building supply list, and subcontractor quotes.  This establishes the value and the mortgage, less the client’s downpayment.  (Note: Not all lenders finance this type of mortgage, so see a broker agent for more details).

Overall, no matter which process you choose, you will invest so much time and effort into creating your new home, that this process becomes both exhausting and exhilarating.