Mortgage 101 – Spring forward with a pre-approval | March 27, 2023

Busy season is on the way for mortgages! How can you prepare? In this episode, Clinton Wilkins and Todd Veinotte talk all about pre-approvals. What should and shouldn’t you do to get pre-approved? What happens if things don’t work out? Read and watch to find out!

Spring is a busy season for mortgages

Todd Veinotte 00:05
Alright, welcome back to Mortgage 101 your guide to homeownership with Cilton Wilkins and myself Todd Veinotte

Clinton Wilkins 00:10
And spring is literally around the corner. Literally. We have our first full day of spring, just right upon us.

Todd Veinotte 00:18
You love spring. Are you a spring guy? You seem to be that guy. You like any time of year don’t you?

Clinton Wilkins 00:22
There’s things that I like about each season. And there’s probably things that I don’t like about each season. The only thing I really don’t like about summer is that it’s too fast.

Todd Veinotte 00:29
It’s too fast. And spring can be a little muddy.

Clinton Wilkins 00:33
Spring can be muddy, the weather can be problematic, but we can have really good weather in Halifax during the spring period.

Todd Veinotte 00:40
Absolutely.

Clinton Wilkins 00:41
And spring typically is one of the busiest times of the year for me, workwise. Traditionally, I should say. Where the last, you know, two years, three years, there has been no real slow down busy time. It’s just been busy all the time. There’s been no, you know, busy season.

Todd Veinotte 01:00
Why spring that -when did spring become the busy market for buying houses? Why spring? I don’t get that.

Clinton Wilkins 01:08
I have a sneaking feeling it might have something to do with military relocation.

Todd Veinotte 01:12
Oh is that right?

Clinton Wilkins 01:13
I think. Now, this is something I can do some research on. I don’t want to speak out of school. But I would love to hear if any of our listeners know why the spring market is the busiest real estate market of the year. Traditionally.

Todd Veinotte 01:26
Well I think I have a theory actually. Well, because people will be looking ahead, they want to get moved for the fall. They don’t want to be doing that in the summer. They want to get in established school districts, whatever it might be for their kids.

Clinton Wilkins 01:37
People want to be in a new home before September And I think traditionally winter is the slowest time. Because people don’t want to move in the winter. And typically, if a home hasn’t sold by the fall, people are reducing their prices.

Todd Veinotte 01:39
Before September, that’s right. So I think that that would be why. And perhaps other impacts like what you discussed as well. Right. So there’s a fall market.

Clinton Wilkins 02:04
There’s a fall market. Summer. Again, summer sometimes isn’t that busy but sometimes we have a lot of closings in the summer, because the transactions that we’re working on in the spring fund in the summer. Typically, when someone makes an offer, we get an approval, and their rate is good for 120 days. So if you’re making an offer today, we’re closing deals that are maybe funding up to July already. So we have transactions that are already in our pipeline that are funding now in March, April, May, June and now July. We do have transactions that are funding beyond July. But those rates in many cases are not set yet. We’ll set them 120 days before funding. So typically, when you’re making an offer, it’s not longer than 120 days from the time the offer goes in.

How to prepare for a mortgage with a pre-approval

Todd Veinotte 02:46
So what advice do you give people when they’re heading into the spring market, because obviously, there’s going to be a lot of competition out there when it comes to bidding. So they want to be as prepared as possible to get their home and fulfill their dreams. So what advice from a mortgage from a lender, mortgage broker, rather do you give them?

Clinton Wilkins 03:03
I think definitely get pre-approved. Don’t change your income, don’t change your credit, don’t change your assets. Improve it, improving it is okay, but don’t make material changes because that can really negatively impact your pre-approval.

Todd Veinotte 03:15
Such as buying a car or something like that.

Clinton Wilkins 03:17
Don’t buy a car. Don’t change your job and then you’re going to be on probation or like go into a worse position, credit wise. Make all your payments, monitor your credit. That’s really important. The other thing is get a really good solid pre-approval from someone that you can fulfill the mortgage financing with. You know, some pre-approvals are a rate hold, some pre-approvals are underwritten at that time, you know. I think, know that your pre-approval is good. And people are asking more and more not to put in a financing condition when they make an offer. When the market was really super, super hot, we’re seeing that a lot. The one concern that I have is around valuation. So if you’re buying a property, and you know you’re putting down 5%, the high ratio mortgage insurer, the Canadian Mortgage and Housing Corporation, sage and or Canada guarantee needs to support that property value. If you’re putting down 20% or more, typically you need an appraisal of the property or the property has to pass through an automatic valuation system. Because the markets kind of been all over the place right now, we’re coming off a very wild time in terms of real estate. And now there’s not as many transactions happening, there might not be as many comparable sales. So my theory is, if you have a very good pre-approval, maybe you make an offer, and instead of putting a financing condition, maybe you put a special condition to say appraisal to be completed by this date, and the value is supported.

Todd Veinotte 04:45
So when you do have a pre-approval that’s from one lender is it? Is that generally how you do it?

Clinton Wilkins 04:59
Typically it’s from one lender.

Todd Veinotte 04:51
So there’s no pre approval that might kind of canvass more than one lender then?

Clinton Wilkins 04:55
Well, the only way you would do that is have several pre-approvals right. And that kind of thing, it works against the theory of hey, you’re pre-approved here, because that lender is basically, you know, parking that money. You’re pre approved. And they’re holding this money at this rate.

Todd Veinotte 05:12
And they’re holding the rate, that’s important.

What happens if rates go down?

Clinton Wilkins 05:14
The interesting thing with a pre-approval, and consumers asked me all the time, what happens if the rates go down between the time you get your pre-approval and the time that you make an offer? We always give the consumer the lower rate, always. And once you even get an approval, and the rates go down, we oftentimes can even float down the rate without even needing to go back through and getting new documents signed. We’ll just the send the revised documents to the lawyer, and you can get them signed there. So for us, we don’t get paid on rate. It’s different with the bank and the branches. The branches, they’re paid on margin, how much money can they make off that mortgage during this period of time. We are paid on volume. So if you take a bigger mortgage, that means I get paid more. So I’m more motivated to lend you more money. And I don’t get paid unless I lend people money. So I have invested interest that way, but it’s not in the rate. So we always want to give the consumer the best rate that we can. Are we always the lowest Todd? I don’t think so. There are some discount brokerages out there. Typically, they’re more online or you know, over a call center, we consider ourselves a full service mortgage brokerage, I believe that we provide a very fair rate. And I think that we are one of the lower in the marketplace. But I won’t say that we’re the absolute lowest every single time. And in some ways, you get what you pay for. right.

The value of a full service brokerage

Todd Veinotte 06:32
So explain, get what you pay for more. Drill down more into that.

Clinton Wilkins 06:35
Well, I think in terms of what we do with full service. We have two brick and mortar locations. We’ll call them branches. And that’s somewhat unusual in this mortgage lending industry. A lot of mortgage brokers are working at home, or maybe at a coffee shop, stuff like that. I’m not saying they all do. But that’s kind of the traditional, you know, work model. And that’s very similar for people that work in the insurance industry, any type of career sales, you don’t typically work from an office, typically.

Todd Veinotte 07:02
You guys answer the phone.

Clinton Wilkins 07:03
And we answer the phone. So we have two people who answer the phone every day. We have a huge, I’ll call it like a workforce of people that want to ensure that you’re being taken care of. It’s not just me. But I do see clients every day. But there’s four other mortgage brokers that we have in our office, we have a business manager, we have, you know, people that collect the documents and order appraisal. So we do have a well oiled machine, which I think sometimes catches clients off guard. I’ve received, you know, emails back to be like, oh I only, you know, put a request on your website a minute ago, and you’re already getting back to us. Well we’re that on it, you know. It’s kind of like Canada Post. You have to keep the mail going because otherwise it starts piling up. And we really pride ourselves in providing really good advice and service. And I think that really differentiates us, you know?

Why do pre-approvals fall apart?

Todd Veinotte 07:55
So the bottom line is have a pre approval you’re gonna go out there.

Clinton Wilkins 07:59
Get a pre-approval from someone that you trust. And know that that pre-approval is going to be solid. Sometimes they fall apart, Todd. Sometimes they fall apart. And guess what? People call us and we pick up the pieces, but don’t call us when it falls apart.

Todd Veinotte 08:13
Why does it fall apart? Why does a pre-approval fall apart?

Clinton Wilkins 08:16
I think maybe they hadn’t verified income, or they hadn’t verified credit, or they haven’t verified assets.

Todd Veinotte 08:20
So that’s not the underwriting process that’s been done at that point, right? So you’re relying on the client to tell you the right information.

Clinton Wilkins 08:27
It maybe it wasn’t fully underwritten. For us, we get a lot of documents upfront. So we do more verification probably than most do because it makes the process easier.

Todd Veinotte 08:36
It makes it easier. But in the end, you’re going to need it anyway.

Clinton Wilkins 08:38
You’re going to need it and you might as well know where you stand. Buying a home is the biggest purchase of your life. And the mortgage is the biggest debt. I say this over and over. Like it’s almost sounds, I sound like a broken record. But it really is. And you want to make sure the process is going to be smooth. Because if it’s not smooth, guess what? You have a lot of other stresses that are not just the mortgage. Especially when you’re buying a home. You have inspections, you’re dealing with a realtor, you’re dealing with a lawyer, you’re dealing with insurance. There’s lots of nuances, so you really need to know that the financing is going to work out.

Todd Veinotte 09:11
Yeah. Alright we got a couple of segments left. What do you want to get to next? What do you think people really need to know about?

Clinton Wilkins 09:16
Well, I think they really need to know like, what’s going on here and the real estate market in Halifax? You know, I certainly want to touch on that. And I want to touch on really where are things sitting with rates.

Todd Veinotte 09:26
Okay, Mortgage 101 your guide to homeownership. We’ll be right back.

Clinton Wilkins 09:38
If you’ve liked what you’ve heard, and you want to learn more, feel free to visit us online at Tim clinton.ca