Many clients made trouble during applying for the mortgage because of lack of enough knowledge of the internal qualification procedures of lenders. In mortgage industry of Canada, there are 4 ways to get the mortgage which are listed below:
- through a licensed Mortgage Broker or Mortgage Agent (also called mortgage planner, mortgage consultant or mortgage specialist) for A-Class and B-Class borrowers
- through directly a branch of a Bank (mostly through mortgage specialist of that bank) for A-Class borrowers
- through few individual financial institutes directly (mostly are B-Type lenders) for B-Class borrowers
- through private lenders or people for B-Class borrowers
All borrowers who have qualified income and credit histories belong to A-Class borrowers and can get the lowest mortgage rate from A-Type Lenders (Banks, Insurance Companies, Trust Unions and other A-Type Financial Institutes). Some A-Type Lenders provide Equity Loan (enough down payment and income usually ignored) to the borrowers. Here the TIPS during the mortgage application are mainly focus on the A-Class borrowers.
– Do Not Apply For Any Mortgage Application Before You Select Right Broker or Bank Finally!!!
Compare, Compare and still Compare! You can compare rates by phone or visit the brokers or bank’s branch. But DO NOT sign any application or credit check consent form before you make the final decision to select the right broker or lender (including banks). Different lenders have different promotion, but mostly the lender provides almost same rates to all broker companies, except the sales volume bonus if the lenders have. Many promotion rates are not only from the lenders, but from the mortgage brokers. Different brokers or agents have different bottom lines based on the broker firms’ different policies and commission split with brokers or agents. So you need to find out the best mortgage broker who can offer you the maximum “Buying Down Rates” and whose commission split is the highest. Mostly the broker’s split is higher than the mortgage agent’s split. The independent broker firm’s commission is higher than the franchised mortgage broker firm’s commission because of no fee involved (membership fee, franchised fee or directly split fee). Theoretically only the principal broker (the owner) of the 100% independent broker firm, like me, can provide the top “Buying Down Rates” to the borrowers. For example, ABC Bank provides 2.89% of 5 year fixed rate to all broker firms. Some brokers or agents may quote you 2.89% (they may have lower split and/or they don’t want to buy down anything.) , some may quote you 2.85%, some may quote you 2.79%, very few brokers may quote you the lowest rate may go to 2.75% (they may be the principal broker and willing to buy down max. rates). The rates below the lender’s rates are a “Buying Down Rate” which means the interest differences will be paid by the commission of brokers. Even the rates quoted from different mortgage brokers are different, the final provider may be the same lender. Many lenders have similar policies that they only accept the first application for the same deal. If you don’t decide to select which broker or lender, and apply for the mortgage, you may lose the chance to get the lower rate through different broker or bank from the same lender. Yes, you may still have chance to change the broker, but it’ll make thing more complicated. Most lenders want the existing broker to cancel the mortgage application first, then accept the second application if this happens. But your credit has been checked twice or 3 times, may be below the qualified minimum credit score because of this double or triple applications. So why do you make trouble for your own?
– Do Not Select Collateral Loan If the Rates’ Difference Is Not Too Much
Many Lenders provide Collateral Mortgage (loan), including some chartered banks and major lenders in the mortgage industry, but they still call this loan as “Mortgage” too. So most people never know what the difference is. If your mortgage is collateral loan, it means you may pay more interest (comparing to the same rate of real mortgage program), you may have more risks for your property and you will pay a legal fee (about $650 to $750) when you plan to switch to another lender when the mortgage agreement is matured. Please click the link for detail.
– Do Not Trust Any Mortgage Agent or Broker Who Quote You A Higher Rate Initially, Then Use “Match Policy”
Every broker or agent has its own personality which leads him/her to have a business strategy and behavior. A agent or broker who quotes you a higher rate at the beginning and then use “Match Policy”, means he/she tries to get more profits from your deal. It’s not a friendly service. Today you know other lower rates, those brokers or agents can match it. How will they quote you if you don’t know the lower rates tomorrow? Are those kinds of brokers or agents still trustable? If you chose those kind of agent or broker, you actually is encouraging those business behavior, offering a chance for them to cheat you next time and killing the opportunity of getting lower mortgage rates now and in the future. So you should support and work with the mortgage brokers or agents who quote you the lowest rates at the beginning. More you support, More opportunities of the lower rates you may get in the future…
— Avoid To Trust Mortgage Broker /Agent Referred By Real Estate Agent or Other Related Business Only
There are lots of mortgage referral business among the real estate industry, investment industry and legal services. The reality is the Referral Fee involved mostly. A real estate agent refers his/her client to a mortgage agent or broker, he/she may get a referral fee paid by the mortgage agent or broker. The referral fee is from the commission of the mortgage broker or agent, and this part of commission may be used for buying down the rate. And this referral fee might be the cost that can decrease your mortgage rate 0.10%. So from another point of view, you may actually pay higher interest for your mortgage because this referral. Yes, the referral is a good business behavior if there is no any referral fee involved. We welcome all real estate brokers or agents refer the mortgage business to the borrowers, but we don’t have any referral fee, because our commission is bought down to the bottom to back to borrowers. So you should compare the rates online, make some phone calls and ask some friends, not just trust this referred mortgage broker or agent only.
– Do Not Just Trust Big Banks & Ignore The Small Lenders
Most mortgage specialists in the banks have no license, because they don’t need a license for dealing their own products. That means there is no place to complain if you have some problems with banks. But for all licensed mortgage broker, there is a provincial government organizations (in Ontario it’s called FSCO) who manage all licensed brokers and agents. If you have any problem caused by the mortgage broker or agent, you can complain there, and you can get a very fair resolve. For mortgage loan, the only thing you need to do is to compare the rates, conditions and contract terms, and promotion frequency of each year, not the size of the banks (lenders), because the risk is not on you, it’s on the lender.