In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on…
In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on News 95.7, the guys talk about how pre-approvals are for everyone, needing proof of funds for down payments, and discuss using cryptocurrency and volatile investments to purchase property in Canada.
Mortgage 101 with Clinton Wilkins & Todd Veinotte: using cryptocurrency and volatile investments to purchase property – September 2021 Part 3
Don’t feel like watching the video? Check out the transcript below.
Pre-approvals are for everyone
Todd Veinotte: [00:00:00:02] Alright, let’s talk about pre-approvals when it comes to first-time home buyers, why just first-time home owners for pre-approvals? Because everybody you could be, you need a pre-approval no matter what do you not?
Clinton Wilkins: [00:00:10:20] Yeah, I think a pre-approval for everybody is a great idea. Obviously, some borrowers are very confident. They feel like they don’t need a pre-approval. But a pre-approval is not just a pre-qualification.
A pre-approval also really means that we’re underwriting the file. We’re making sure that we have your income, your assets, and your credit all in there appropriately. But the pre-approval also includes a rate hold. So basically we are keeping, you know, a rate in place for you. So if the rates do go up, we know based on that pre-approval the rate is good for 120 days from the date that we submit it.
Todd Veinotte: [00:00:48:00] Is that from one particular lender, or how’s that work?
Clinton Wilkins: [00:00:50:24] No majority of lenders will do a rate hold for 120 days.
Todd Veinotte: [00:00:54:08] No, but I’m saying you do the rate hold and then you shop around.
Clinton Wilkins: [00:00:58:09] Well, we yeah, we do a rate hold with one lender. It doesn’t necessarily mean that when you make an actual purchase, it doesn’t necessarily mean we’re going to go back to that lender. Oftentimes we will, but not 100 per cent of the time.
There’s a lot of changes in the market, as you can imagine. You know, rates change, and maybe the rate that we had on your rate hold isn’t as good as what’s available today.
You don’t have to go with the lender that gave you a pre-approval
Todd Veinotte: [00:01:17:21] And maybe you may have to go with somebody else because they may not want the deal that you have proposed.
Clinton Wilkins: [00:01:22:16] Yeah, that is certainly possible, too.
Todd Veinotte: [00:01:24:15] They might not like the house or whatever.
Clinton Wilkins: [00:01:26:05] Exactly. And maybe the borrower situation has changed, and I think that’s what really makes mortgage lending unique. I’ve said it before. It’s kind of like a snowflake. We look at income, we look at assets and we look at credit and we really drill down on what the best possible scenario is. And that’s for the first-time home buyer, and that’s from a repeat home buyer. It could be someone maybe buying a second home or maybe you’re buying a rental property.
You know, everybody’s situation is different. And I think everybody’s situation kind of at one moment is it’s a snapshot in time. We don’t know. You know, things change from day to day. And that’s why I think it’s so, so important to basically know exactly where you’re going to be. And we can make a really good plan to be able to forge that forward.
Proof of funds for down payments
Todd Veinotte: [00:02:09:16] Do people need a down payment to get a pre-approval, like proof of a down payment?
Clinton Wilkins: [00:02:14:13] We don’t necessarily verify it, Todd. Usually, we’ll take their word for it. But you certainly do need to provide the proof when you have a real live offer. And that proof could be, maybe it’s a gift from family. You know, we’re talking a lot about gifted down payments.
And that’s certainly more prevalent than it has been before. And if it’s a gift from a family, typically there’s a form that we would be able to provide the borrower that they would complete with the person who’s giving the gift. And oftentimes we need confirmation of where the gift came from or confirmation that those gifted funds went into that borrower’s bank account. So that’s certainly one thing.
If the money is coming from your savings, that’s pretty easy. Normally, lenders ask for either 30 days or 90 days history that you’ve had the funds in your account and don’t move the funds around. Keep the funds in one place until we’ve verified, you know, the history.
When there’s a lot of deposits and a lot of transfers between multiple accounts, it makes it very challenging for us, but it makes it really challenging for you. Like, imagine if you had eight accounts, Todd, and you had to provide eight accounts, 90 days history, right? That would certainly be a lot of paperwork for you and certainly a lot of paperwork for me.
We don’t mind doing it, but when you have to verify 90 days history on an account that has a $1000 just to get kind of get to that price point. It certainly can be very sticky and it certainly a lot of friction for borrowers.
“No down payment verification, no mortgage.”
Todd Veinotte: [00:03:33:07] How often do deals break down because the down payment is not what was presented?
Clinton Wilkins: [00:03:38:23] You know what? We request documentation for a down payment, you know, on every purchase file. Oftentimes, we’ll request it up front, maybe when we submit the file for approval because we know we’re going to need it for conditions, right? It would shock you the large deposits in people’s accounts. It would shock you the amount of money that just moves around. And I think sometimes it moves around frivolously.
Like, I’m not really sure why borrowers move it from like a checking to a savings to an investment back to the savings, back to a checking. But oftentimes across multiple financial institutions. And I basically sometimes need to be a forensic auditor to be able to put the documentation together to ensure it’s going to be acceptable to the lender. No down payment verification, no mortgage. It’s really as easy as that.
And it’s all fine for you to say, Yeah, I have the down payment, but we have to prove where it’s coming from. And one of the big reasons we have to do that, Todd, is anti-money laundering. We’re required by law to verify the funds, and at the end of the day, we’re really your advisor, we’re your agents, we’re your broker. We are basically the gatekeeper between the borrower and the lender.
And that’s why it’s important for us to put all the documentation together because we know what’s going to be acceptable and what’s not. And we don’t bother, we don’t come back to people asking for documentation just for the sake of it. We do it to make sure it’s going to be smooth and to make sure that it’s not going to put your approval in jeopardy.
And, you know, sometimes we see things in the bank statements that may negatively impact your approval. And maybe we’re able to make another recommendation, or maybe we’ll be able to change the direction with the approval. And we’ve certainly done that. Lots of questions around cryptocurrency.
Using cryptocurrency to purchase property in Canada?
Todd Veinotte: [00:05:25:23] Yeah, for sure. Is that accepted, by the way?
Clinton Wilkins: [00:05:28:11] It’s not.
Todd Veinotte: [00:05:29:00] It’s not, no.
Clinton Wilkins: [00:05:29:21] It’s not Canadian funds, right? And we can’t prove where it’s been.
Todd Veinotte: [00:05:33:13] That might change, though. Down the road? Ten years down the road.
Clinton Wilkins: [00:05:36:24] It certainly might change. And you know, there’s certainly more noise in the media about people selling their homes, and they’re only accepting crypto. And, you know, it may change. I would say it’s similar to if the funds were offshore in another institution.
The challenge is with crypto, very volatile, and it’s really hard to track the history of those funds. And I’m not saying that crypto is impossible to use. I’m not. What I’m saying is that needs to become negotiable Canadian funds in an account for either 30 days or 90 days before you’re really making an offer on a property. So we have the appropriate history
So, you know, if you’re planning on buying a house, convert those funds in Canadian, you’re going to need it anyway. What are you holding on for another like 30, 60, 90 days? You’re only making your situation more challenging and it’s more challenging for you, which means it’s more challenging for us, which means it’s more challenging for your lender.
And we don’t want to put your financial transaction at risk because of something so silly about like, why don’t you sell your RRSP? Why don’t you sell your investment? Now, don’t do it obviously if you’re going to move money around like what I said. Don’t move any money around until we have done our verification, basically with the exception of crypto, because you need to sell that probably the prudent date is 90 days before you’re even making an offer on a property.
Using volatile investments to purchase property
Todd Veinotte: [00:07:05:02] And I would think with investments as well, if it’s particularly in a volatile investment and you’ve got a number of, or a couple of weeks before closure, and you have that in that vehicle, you could lose that money then, right?
Clinton Wilkins: [00:07:16:29] One hundred per cent and some lenders actually require us to provide confirmation that you’ve cashed that RRSP even as a first-time home buyer as part of the home buyers plan. You can take up to $35,000 each as a first-time home buyer out of your RRSP.
Some lenders require obviously the 90 days history that the funds were in the RRSP, but in addition, they require confirmation that those funds went into the bank account. The reason being Todd is exactly what you said: Volatile. They need to make sure that you still had enough funds in your account to be able to make that withdrawal and that the funds that you’re withdrawing were eligible for withdrawal. So, you know, super, super good points here.
If we’re doing a purchase for you and if one of the conditions is that you need to withdraw that money from your RRSP, we as a firm are not giving a firm confirmation of financing until all your conditions have been satisfied. It’s in your best interest. It’s in the person who’s selling you the home, in their best interest, the realtors, the lawyers, the lenders, everybody.
And we want to make sure that all the conditions have been satisfied because it’s really our job to make sure that we’re protecting you, which is our client. So we really want to make sure that we have your best interests at heart.
If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.