June 2015

Kelly Hudson Mortgage Professional
Dominion Lending Centres Aegis Mortgage Services
Phone: 604-312-5009

In this issue

Pre-approvals, more important and less concrete than ever  
Household debt – an overblown issue?  
About Dominion Lending Centres & DLC Leasing  
Did You Know...  
Homeowner Tips  


Welcome to the June issue of my monthly newsletter!

Summer is here! This month’s edition of the Dominion Opinion talks about mortgage pre-approvals and the possibility of overblown fears around household debt.

Please let me know if you have any questions or feedback regarding anything outlined below.

Thanks again for your continued support and referrals!


Pre-approvals, more important and less concrete than ever


Going through the pre-approval process is more important than ever to both you and your Realtor, but the actual term ‘pre-approval’ is potentially misleading.

You may be pre-approved for a certain mortgage amount, however there are still a number of variables that can enter the picture once an offer is accepted. That’s why it is imperative that one always include a clause in the offer along the lines of ‘subject to receiving and approving financing’. (There are variations to be discussed around the specific wording.)

Often clients are reluctant to write the initial offer on a property without feeling like they are 100% pre-approved.

An understandable desire. The risk, though, is that some may falsely believe that they have a guarantee of financing. They don't.

A lender must review all related documents – not just those of the clients, but also those from the appraiser and the Realtor – as the property itself must meet certain standards and guidelines.

The pre-approval process should be considered a pre-screening – a first step only.

It does involve review and analysis of the client's current credit report; it should also include a list for the client of all documents that will be required in the event that an offer is written and accepted. Clients should also come away from this initial process with a clear understanding of the maximum mortgage amount they qualify for, along with the various related costs involved in their specific real estate transaction. Equally important: with the completed application your broker is able to lock in rates for up to 120 days.

Why won’t a lender fully review and underwrite a pre-approval?

  • Lenders do not have the staff resources to review ‘maybe’ applications – they have a hard enough time keeping up with ‘live’ transactions.
  • The job you have today may well not be the job you have by the time you write your offer.
  • If more than four weeks pass, all of the documents are out of date – by lender standards – and a fresh batch needs to be ordered and reviewed.
  • The conversion rate of pre-approvals to ‘live transactions’ is less than 10%. 

It is this last point that makes it so difficult to get an underwriter to completely review a pre-approval application as a special exception.

The bottom line is that a client's best bet for confidence is the educated and experienced opinion of the front-line individual with whom they are directly speaking - and that's their Mortgage Broker. This individual will not be the same person who underwrites and formally approves the live transaction when the time comes.

This disconnect between intake of application and actual underwriting of a live file makes having a ‘subject to receiving and approving financing’ clause in the purchase sale agreement so very important.

Perhaps the most significant factor in undermining the solidity of a client's preapproval is the relentless pace of change of lending guidelines and policies – changes implemented not only by the Federal Government but also by the lenders themselves. It is very easy to have a pre-approval for a certain mortgage amount rendered meaningless just a few days later through changes to internal underwriting guidelines. Often these changes arrive with no warning and existing pre-approvals are not grandfathered.

It is absolutely worthwhile going through the pre-approval process before writing offers, and in particular before listing your current property for sale or accepting offers. This will give you a good idea of your maximum mortgage amount as well as securing a rate for you. It is a worthwhile endeavour.

Just be aware that aside from the key advantage of catching small issues early and securing rates, a pre-approval is not a 100% guarantee of financing.

But the good thing is, I can help you with this process!


Household debt – an overblown issue?


In a headline that runs contrary to the more inflammatory and regular warnings seen in mainstream media, the Fraser Institute released a report on May 20th titled ‘Concern about Canadian household debt levels overblown when assets, other measures taken into account’.

It cited such key statistics as the growth of assets owned by Canadian households to a current total of $10 Trillion, with household debt growing at a much slower rate to $1.8 Trillion.

In other words, for every $10.00 of assets we own, we owe just $1.80. Hardly a fear-inducing ratio.


As far as the apparent desire of the media to link Canadian household debt data to that of the United States household debt data prior to the U.S. Real Estate meltdown, the Fraser Institute’s report cites the key systemic differences in the two countries lending policies. Namely, the inherent stability of the Canadian structure.

The bottom line is that appreciation of assets is outpacing quite handily the rate at which Canadian consumers are taking on new debt and when measured against our current assets we are clearly in a stronger position than many might otherwise realize.


About Dominion Lending Centres & DLC Leasing

We are Canada's largest and fastest-growing mortgage brokerage!
We have more than 2,300 Mortgage Professionals from more than 350 locations across the country!
Our Mortgage Professionals are Experts in their field and many are ranked among the best nationally.
We work for you, not the lenders, so your best interests will always be our number one priority
We have more than 100 mortgage programs, making it easy to choose the best fit for your unique situation.
We close loans in all 10 provinces and 3 territories.
We can process your mortgage in as few as 7 days.
We are the preferred mortgage lender for several of Canada's top companies.
Dominion Lending Centres' Mortgage Professionals are available anytime, anywhere, evenings and weekends - and we'll even come to you!

There are eight preset dates per year on which the Bank of Canada makes decisions that affect variable-rate and short-term fixed-rate mortgages. Longer-term fixed rates are influenced more heavily by the bond market.

The most recent Bank of Canada meeting was May 27th. For deeper insight from Dominion Lending Centres Chief Economist Dr. Sherry Cooper click here.





Homeowner Tips

Summer Vacation Note:

  • Book that vacation sooner rather than later. Camping sites seem to book up faster than ever each year.
  • Most homeowner insurance policies require that you ensure somebody is checking in on your home a minimum of once per week during your absence. Ideally there an alarm monitoring record of somebody attending the property. If not then at the very least keep a record of email exchanges confirming that your property was viewed at a certain time and date. Perhaps even with a snapshot of the utility room in particular sent your way. A burst hot water tank or even a leaking pipe left unattended for days or weeks on end can result in a denied insurance claim.

With that handled, go and enjoy the great outdoors and make the most of the summer of 2015!