Highlighting the various positive contributions people and organizations are making in the greater Hamilton area. This month’s interview is with Mortgage Broker, James Loewen…
Sunshine: What is a mortgage broker and how long have you been in this profession?
James: My profession is finding the right solution strategies for mortgages. I started with the Royal Bank 4 1/2 years ago and I’ve been working for myself now for 2 1/2 years. I work with people going through divorces, first time home buyers, repeat buyers real estate agents, investors and small business owners. I work to restructure debt, existing cash flow issues, refinancing issues and those working to readjust their cash flow to suit their needs better. Oftentimes people have credit card debt, lines of credit and car loans: I sit down with them and evaluate their cash flow. I take a financial planning point of view and help them to roll it into their mortgage at a lower rate to give them a bit more cash flow and perhaps more savings for the future so they can enjoy their lifestyles.
Sunshine: What is the cost to use your services?
James: People don’t pay us at all; it’s the banks that pay us a finder’s or placement fee for our services. This is really what I love about our industry; our clients get services to their benefit for free, the banks are getting mortgages and I’m getting a finder’s fee. It’s a win, win, win situation all around.
Sunshine: How many banks and credit unions do you have working relationships with?
James: I work with all of them; all the major banks, on-line banks such as ING, lenders, brokers, private lenders and investors, second mortgage lenders and commercial lenders.
Sunshine: Do you get a better rate than someone looking for themselves?
James: Absolutely. It comes down to economies of scale. The average person has a mortgage of 250,000 dollars. And that 250,000 they are going to renegotiate once every 5 years. In an average year for my clients, I place 50 million in mortgages. My 250 million every 5 years allows me to be able to demand much better rates for my clients. It’s really a teamwork approach and every client benefits from the next client being part of that whole group to give everyone better rates.
James: What I do with my clients is sit down with them and go through their credit history. All of my clients get to see a copy of their credit report. I explain to them how it works, what they are doing well and if there are any areas that they need to improve on. We can then set in place a plan of action so they can rectify anything on their credit report before they need to purchase a house. That’s the last thing they want to find out, when they finally find their dream home, that they can’t buy it. I take a look through their credit bureau and make sure that they are pre-qualified and pre-approved.
Sunshine: Why is this so important?
James: This gives them an allotted amount that they know they can comfortable afford. I’ll do a budget with them to establish what they can purchase and what is really in their price range. A lot of times clients come in saying they want to buy a 1/2 million dollar home and they can’t afford it. There is one thing to be able to approve someone for a mortgage amount, and it’s another thing for them to actually be able to pay it.
Sunshine: Do banks give people mortgages that are more than they can afford?
James: Sometimes. That’s why I go through a budget with my clients. If you have many children, day care costs, membership fees verses a single person living on their own, what they get approved for and what they can actually pay every month is a very different scenerio. I can also pre-approve people for more than they think they can afford too. I’ve never had a client miss a payment or walk away from their house. And I never want to either.
Sunshine: What are some of the things that people can do to improve their credit ratings?
James: The single most important thing is to make sure they make their payments on time. Maintaining their credit card balances at less than 75% of their limit is very important. Credit card companies allow people to go over their limits. However if they even go over by one dollar their credit rating will suffer.
Sunshine: How do you calculate your credit score?
James: You can obtain your credit bureau score form Equifax for $20 at www.Equifax.ca I offer this free to my clients. Oftentimes people have declared bankruptcy in the past, and need help re-establishing their credit before they can purchase a home and I will take the time, whether it is a few months to a year and a half to help them so they can purchase a home. The credit score, called the Beacon or Fico score is a summation of their credit past. Lenders look for a certain scoring guideline and that’s where I can give advice to people as to how to improve that score. The better the score, the lower the interest rates and the better the products that are available to suit their needs. For example a 1/2 percent lower interest rate means a savings of $20,000 over the life of an average mortgage.
Sunshine: What does having a pre-approval mortgage do for an offer on a house?
James: A pre-approved mortgage allows someone to look for a house within their price range and to waive the condition of finance when negotiating, which can be a great bargaining tool. I can pre-approve someone over the phone oftentimes in 5 or 10 minutes. Sometimes it’s as simple as how much income they have, what kind of debt load they have, and how their credit has been maintained in the past.
Sunshine: If someone was thinking of walking away from their mortgage, what would you suggest?
James: I would talk with them about re-financing. Prime rate is at 4% right now and it would be a great time to renegotiate a mortgage with lower payments.
Sunshine: What else do you help people do?
James: I provide education. My employer is my client and we work as a team. I help people understand mortgage insurance and to understand what they are signing. I help with the entire process to mitigate and reduce stress in negotiations with the banks. I am working with them not against them to help them to be able to pay their mortgages off as fast as possible within their budgets and comfort levels. Mortgages today are dynamic and flexible.
Sunshine: What are your thoughts on home ownership verses renting?
James: What I see are two things; pride of home ownership and forced savings. As their house appreciates, they are building a small nest egg. If they are paying rent, that money is gone. With their own house they own an appreciating asset. Once their home is paid off they can use that asset as leverage to be able to purchase a cottage, send their kids to college or university, purchase an investment home and help their retirement planning. Owning their own home increases their own net worth, as opposed to helping someone else increase theirs.
Sunshine: What about people that are self-employed or just recently employed with no down payment saved?
James: My profession is to find solutions that oftentimes the banks aren’t even aware of. I excel at finding solutions for people when they have been told “No” by the banks or when they are in a really unique situation such as when they can’t provide income evidence or their credit isn’t the best or even if they are self employed. People who are self employed or commissioned can have a really hard time showing their income. We have solutions where they do not need to prove their income. They can purchase a home with as little as 5 percent down. We can use a borrowed or gifted down payment, such as if they have a good job but have not yet saved up for the down payment, yet where I can work with a bank to get them the cash for their down payment.