Robert W. May, Realtor/Mortgage Expert Lethbridge Mortgage & Real Estate Info

                                     A credit score of 650 or better is becoming a necessity for applying for virtually any type of financing.  Of course the higher the score the better, but a minimum of 650 is becoming the cut off point for many financing and insurance products.  The credit score is weighted by the following percentages:

35% based upon payment history

30% based upon amount owed

15% based upon length of credit

10% based upon new credit

10% based upon type of credit

 These percentages are based on the importance of the 5 categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.

Payment History

·         Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)

·         Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)

·         Severity of delinquency (how long past due)

·         Amount past due on delinquent accounts or collection items

·         Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)

·         Number of past due items on file

·         Number of accounts paid as agreed

Amounts Owed

·         Amount owing on accounts

·         Amount owing on specific types of accounts

·         Lack of a specific type of balance, in some cases

·         Number of accounts with balances

·         Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)

·         Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History

·         Time since accounts opened

·         Time since accounts opened, by specific type of account

·         Time since account activity

New Credit

·         Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account

·         Number of recent credit inquiries

·         Time since recent account opening(s), by type of account

·         Time since credit inquiry(s)

·         Re-establishment of positive credit history following past payment problems

Types of Credit Used

·         Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

Please note that:

·         A credit score takes into consideration all these categories of information, not just one or two.
No one piece of information or factor alone will determine your score.

·         The importance of any factor depends on the overall information in your credit report.
For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your credit score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.

·         Your credit score only looks at information in your credit report.
However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

·         Your score considers both positive and negative information in your credit report.
Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your credit credit score.

Here are just a few quick tips that can help put you in a better position under the discerning eye of an underwriter!

·  HOT TIP! Do you have past due balances that have been neglected? If they are showing up on your credit report and you want to purchase a home, make sure you bring them up to current status whenever possible.

·  HOT TIP! Do you have outstanding debt that you can afford to pay off right now? Try to get these accounts down to a zero balance, or at least a lower balance. If your cash on hand doesn’t allow you to do this, try to distribute the debt amongst other open credit cards. You can also consider opening a new line of credit and transferring part of the balance off a card that is close to being “maxed out.” If you can get the resulting balances below 50% of the available credit, you’re on the road to improving your credit score considerably in most cases.

·  HOT TIP! Do not close existing credit card accounts, even if you don’t want to deal with the company any more… Believe it or not, the credit history is a good thing to have!

·  HOT TIP! When married couples keep separate credit card accounts, some or all of the balances can be transferred to one spouse’s list of accounts. This gives the other spouse an opportunity to increase their credit score!    

·  HOT TIP! See if your credit provider will increase your available lines of credit. This can, in turn, reduce the overall debt ratio, but only do this if your credit card company can do that without a hard credit inquiry. 

·  HOT TIP! Do you have past dues and charge-offs within the last two years? Pay them off now, if you can! Past dues older than two years will have little to no impact on your credit score if they are paid, but can possibly bring the score down, which is something we don’t want to do... Focus on that 2-year time frame.

·  HOT TIP! Do you see errors in your report? Request the credit bureau delete any outstanding debt that is incorrectly charged to you, or things that should have been removed that you have already paid. They have an obligation to reconcile this within 30 days. If you see items on your report that are less than two years old and you have the money to pay it off now, mark the back of your payment check with the following notation: “Accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit record.” If necessary, you can use this cancelled check as proof of the transaction in the event the outstanding debt is not removed promptly and interferes with the closing of your loan.

Robert May is the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage associate and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as mortgage financing, refinancing/renewals, preapprovals, and home equity financing to Lethbridge and Southern Alberta. He can be found online at www.LethbridgeLoans.com

Robert May is the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage associate and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as mortgage financing, refinancing/renewals, preapprovals, and home equity financing to Lethbridge and Southern Alberta. He can be found online at www.LethbridgeLoans.com

By JULIAN BELTRAME, THE CANADIAN PRESS

OTTAWA -- In a move reflecting the mess facing the economy, the Bank of Canada is almost certain to cut interest rates to the lowest level in nearly half a century today and still wind up disappointing markets.

Private sector economists are almost unanimous in forecasting a half-point chop to the trendsetting bank rate to 1.75 per cent, the lowest since 1960.

But with the recession deepening, economists are advising bank governor Mark Carney to forget the threat of future inflation -- perhaps even welcome it -- and keep cutting borrowing costs in the next couple of months until the rate hits one per cent.

That would take Canada's target rate to the same level as the U.S., although the Federal Reserve rate may be down to zero by then.

"Inflation is still a legitimate risk, but the clear and present danger is a deep and prolonged recession with a remote possibility of deflation," said BMO Capital Markets deputy chief economist Douglas Porter.

"They have to fight the fire that's right in front of them, rather than worry about what's around the corner."

The fire in Canada has spread quickly. After holding up for most of the summer and fall, the economy has retreated in the past month and a half -- from consumer confidence, retail sales, building intentions, car sales and bankruptcies -- topped off by last Friday's news of 70,600 job losses and a rising unemployment rate for November.

The negative news continued yesterday with Canada Mortgage and Housing Corp. reporting that housing starts fell 19 per cent last month compared with October.

And the CMHC expects next year to be worse.

In normal times, lowering interest rates should egg both businesses and consumers into borrowing for needed investments and on purchases, such as homes, thereby jolting a lethargic economy into action.

But the global financial meltdown and fear of the unknown among both lenders and borrowers has limited the impact of monetary policy, say economists, leading to calls on governments to inject further stimulus through infrastructure spending and other measures.

Scotia Capital economist Derek Holt said Carney might be cutting rates even more aggressively, but for the recent clear signals by Prime Minister Stephen Harper and his finance minister, Jim Flaherty, that a major stimulus package will be tabled in the Jan. 27 budget.

Holt said there are signs that in Canada at least, the central bank's interest rate cuts have helped lower real-world interest rates. Interbank funding spreads have narrowed by more than half since mid-October, making it possible for banks to pass on the central bank rate cut to customers in the form of lower prime rates.

Prime is the rate for loans to banks' best corporate borrowers and are the base for lending on everything from mortgages to lines of credit, to consumer and car loans.

But while the bank's rate cutting and additional cash-boosting measures have kept the money markets working close to normal, they have not stopped the Canadian economy from stumbling into a recession.

FLUCTUATING RATES

Key interest rate highlights:

Current: 2.25 per cent

December 2007: 4.25 per cent

August 1981: 21.24 per cent (high)

September 1960: 1.93 per cent

July 1958: 1.12 per cent (low)

Effective today, Genworth has made a dramatic change to their mortgage insurance product for alt-a Business for Self product (also known as BFS).  The change has now made this product unavailable to commissioned income individuals!!!  This is huge!  This change will effect many professions, specifically Realtors, mortgage associates, car salesmen, industrial equipments salespeople, boat and rv salespeople, condo and timeshares salespeople, etc.  Anyone who is self employed and derives their income from commission sales will no longer be able to use this insured product for a stated income mortgage.

Here is the release from Genworth describing their explanation of why this product is being withdrawn:

************

The Following Changes to the Business For Self – ALT A Product are effective December 8, 2008:

• Commissioned Borrowers are no longer eligible under the Business for Self - Alt A program given that commissioned income is provable.
• Refinance applications (1-2 units) are eligible up to 85% LTV (reduced from 90% LTV)
• Lenders should confirm self-employment by one piece of documentation:
  - Business License
  - GST/HST Return Summary
  - T1 Generals with statement of business activities attached prepared by an arms length third-party
  - Audited Financial Statements for the last 2 years, prepared and signed by a CA
  ** Please note: A Business Credit Report will no longer be accepted
• Max 2 units (Primary Residence Only
• Max Loan Amount $750K (GTA/GVA/GCA), $600K (Rest of Canada)
• 80.01 - 85% ltv has new minimum credit score of 650 (from 620)
• Maximum number of Alt A mortgages is decreased to one

Robert May is the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage associate and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as mortgage financing, refinancing/renewals, preapprovals, and home equity financing to Lethbridge and Southern Alberta. He can be found online at www.LethbridgeLoans.com

If you currently have an Exceed, GE Money, Accredited, or Home Trust mortgage in place you should call me or another professional Mortgage associate ASAP and discuss your future plans for this mortgage product. Recent fluctuations and changes to the mortgage and credit granting market in Canada has left many mortgage holders at risk, and only those who are proactive and prepare for this situation will not be inconvenienced by this.

In the past few months, several of the 'high risk' mortgage lenders have withdrawn from the lending market or have altered their lending practices to no longer offer mortgages which fall into the 'high risk' category. Among the first products to disappear was mortgages for non-owneroccupied properties (rentals, second homes, vacation properties, etc), followed by conventional low document and no document products which were designed for self employed individuals. Several insured products of this type are still available however.

The problem arises when a client who holds one of these high risk loans (similar to a US subprime mortgage) comes up for renewal. Your current lender is under no obligation ro renew your mortgage when the term expires. In the case of these high risk lenders, there will be many mortgages not renewed in the next few years, as the lender has left the industry or changed their lending practices. Simply put, when your mortgage term expires, you will receive a letter asking for the full payment of the entire value of the outstanding mortgage or else face the foreclosure process. This will happen to you regardless of how strong your credit is, regardless of your repayment history, and regardless of how prepared you are for it.

If you have one of these mortgage, even if it does not come up for renewal for a couple years, you should prepare for that scenario NOW! If the mortgage associate who sold you that product has not yet contacted you, you should contact our office ASAP so that we can help you prepare. It is your responsibility to be proactive on this. Let us help you before a problem arises. Do not wait until the last minute or it will cost you thousands of dollars.

Here are a few of my favorite past articles from my Lethbridge real estate and mortgage blog you might have missed or wish to recommend them to a friend.

Common Financial Problems - Avoid these financial mistakes
Get Your Credit Score UP - Invaluable insight into your credit score
Mortgage Guidelines Get Tighter - Harder and harder to borrow money
Is Your Mortgage Company Out of Business in 2009? - What to do when your bank goes broke
What is wrong with MLS - Is your info being abused?
Survivor - Real Estate Edition - Let's vote a few more off the island

Robert May is a Realtor, as well as the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage associate and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as mortgage financing, refinancing/renewals, preapprovals, and home equity financing to Lethbridge and Southern Alberta. He can be found online at www.LethbridgeLoans.com

Let me share my 15 years experience in the local Lethbridge real estate and financing market with you! It is the first step towards making a profitable real estate decision.

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Lethbridge mortgage real estate financing alberta mortgages blog

The following article was released today on the CP newswire.  The prediction is for a little bit more downside, but not near as much doom and gloom as others have anticipated.  Only time will tell if they are right or wrong.

Robert May

Robert May is the broker and owner of Rainbow Realty of Lethbridge Alberta. He is also a licensed mortgage associate and financing expert with Canada First Mortgage of Calgary Alberta. He has been in the real estate industry since 1993 and offers full MLS real estate services to Lethbridge and surrounding area, as well as mortgage financing, refinancing/renewals, preapprovals, and home equity financing to Lethbridge and Southern Alberta. He can be found online at www.LethbridgeLoans.com

ReMax says house prices to drop five per cent by 2009 across Canada

By THE CANADIAN PRESS

VANCOUVER — Housing prices will fall about five per cent across Canada by the end of 2009 as the slumping economy takes a bite out of consumer confidence, says the ReMax realtor company.

The biggest drops are expected to come in major cities in British Columbia, where prices have run up the most across Canada in recent years, and in parts of southwestern Ontario hit with automotive and manufacturing job losses.

In a report released Wednesday, ReMax said Canada’s average house price has retreated from 2007’s record high and will fall three per cent this year to $300,000 and another two per cent next year to $293,000. National prices peaked in 2007 at an average of $307,265.

About 440,000 homes are expected to change hands across Canada in 2008, a drop of 15 per cent compared to 520,747 last year. ReMax predicts 2009 sales to be flat.

“The reason for that is purely consumer confidence, it’s shaken terribly right now,” said Elton Ash, a ReMax regional vice-president located in Western Canada.

“There are a lot of questions over job prospects right now.”

The three per cent overall drop in prices predicted for 2008 comes despite gains in 22 major centres across Canada, with the exception of Calgary and Edmonton, where prices are expected to fall one per cent.

Ash said the national drop is driven by smaller centres, such as forestry, oil and gas, mining and manufacturing towns hard hit by a downturn in the economy that has resulted in layoffs and stalled project development.

“It’s the smaller markets that have seen larger decreases as a result of economic performance,” said Ash.

In 2009, the largest drops are expected in both Victoria and Kelowna, B.C., where prices are predicted to fall 10 per cent in 2009 to an average of $440,000 and $378,000 respectively.

Prices in Vancouver, Canada’s most expensive housing market, are predicted to slump seven per cent to an average of $545,000 next year. They are expected to peak in 2008 at $585,000, a two per cent increase from last year. Home prices in Vancouver have fallen 12.8 per cent in Vancouver between May and November this year, after climbing more than 50 per cent since 2004.

“B.C. had the biggest runup in prices nationally in recent years,” Ash said. “When you have that happen there is going to be a greater down cycle.”

The Kitchener-Waterloo, Ont. region is predicted to see house prices drop seven per cent in 2009, to an average of $250,000, followed by a four-per-cent drop in the nearby Hamilton-Burlington, Ont. region, to $268,000. Both areas are impacted by a downturn in the automotive and manufacturing sectors, which have laid off thousands of employees in recent months.

The Greater Toronto area, which includes manufacturing and the struggling financial services sector, is predicted to see a drop in house prices of two per cent to $376,000 next year. In 2008, Toronto house prices are expected to climb two per cent to an average of $384,000, which is a 22 per cent increase since 2004.

House prices in St. John’s, N.L. are expected to jump 12-per-cent in 2009, which ReMax says is due to the “(Newfoundland Premier Danny) Williams effect on the overall economy.” That follows an expected 21-per-cent price increase in 2008.

In Regina, prices are estimated to rise nine per cent next year, while cities such as Ottawa, Edmonton, Calgary, Sudbury and Halifax are predicted to see prices remain flat next year.

Adrienne Warren, a senior economist at Scotiabank, said the ReMax estimates mirror her forecasts, although the bank’s economists are predicting prices to end flat across the country this year compared to 2007 and by five-to-10 per cent in 2009.

“The big risk to the Canadian housing market right now is a more significant recession and more significant job losses as opposed to mortgage-specific related problems we are seeing in the U.S.,” Warren said.

“The price declines are driven by more supply and fewer buyers.”

The U.S. housing market crashed last year as a result of reckless lending practices that covered about one-third of mortgages. They eventually defaulted, which led to the toppling of the housing market and several financial institutions who backed the risky investments.

Merrill Lynch said recently that Canada’s housing market is following the same troubled path that eventually led the US. market into a major downturn, but with a two-year lag. It said Canadian households are so deeply in debt that a “tipping point” is approaching for the overall real estate market.

Many economists, as well as the Canadian real estate industry, disagree the market here will be as bad as in the U.S., where prices have fallen 20 per cent since the peak in mid-2006, and are expected to fall another five per cent next year.

It its outlook released this week, the Canadian Association of Accredited Mortgage Professionals predicts mortgage approval activity (including new mortgages, transfers and refinancings) to fall nearly 12 per cent to $193 billion in 2008, compared to $218 billion in 2007.

Approvals are forecast to fall another 10 per cent to $174 billion in 2009 and another 1.6 per cent in 2010 to $171 billion. That follows a growth rate of about 11.5 per cent annually for the three years ended August 2008.

Putting a positive spin on its report Wednesday, ReMax said the drop in prices is good news for new homebuyers.

“The depreciation of prices is certainly good news from a first-time homebuyers perspective to bring affordability to the picture,” Ash said.

“For people moving from home A to home B, it doesn’t matter as much.”