Professionals in the mortgage arena are cautioning applicants against attempting “to beat the process,” when making an application, pointing out that, in those circumstances, they often end up sabotaging their goal. The professionals are advising persons to follow the process very carefully, and to listen to the advice of their mortgage institution and the experts engaged in the real estate process.
The experts, Chief of Branches at JN Bank, Petal James and Head of Corporate and Public Affairs at the National Housing Trust, Dwayne Berbick, were speaking during a Gleaner Premium webinar recently.
Listen to your mortgage provider
“Many of the ‘stumbling blocks’ that persons come upon are self-imposed, because persons are eager. They want to get ahead, they want to rush ahead and get things going, and there is a process,” commented Ms James, as she responded to a question from a participant in the webinar about the “stumbling blocks” persons sometimes encounter when purchasing property.
“You need to plan ahead. You don’t want to [try] and get ahead of the game, where you just go and make a down payment. Sometimes some persons are so eager, they go and make a down payment.”
“Have a mortgage expert hold your hand throughout the process. Don’t try to get ahead of your mortgage experts or your banker,” she advised.
Plan ahead and get pre-approved
Ms James said the first thing applicants should seek to do is to get pre-approved by their banker. The pre-approval process is an assessment of one’s income and, which consequently will determine the price property they can afford. During this stage of the process, Ms James advised, applicants should be careful about reducing their debt and, in fact, should be looking at how they can improve their income generation by budgeting prudently, in order to improve their eligibility for a mortgage, and preparation to service the loan.
“You get a pre-approval letter today; your pre-approval letter is valid for three months, and you go and take out a loan [during that time period]. You are now causing a ‘stumbling block’ [for yourself] when you are ready to purchase, because you don’t have sufficient income to take care of your [mortgage],” she said.
More hurdles to clear before pay down
After clearing the pre-approval stage, there are several other activities one needs to conduct as part of the due diligence process, she counselled.
“You can’t pay down on a property and you have not yet done a valuation report, and when you have done that valuation report, you are finding out that the value of that property is not similar to the price that you are purchasing,” she explained.
The same goes for a surveyor’s report, she said, underscoring that this has to be done before the deposit is made.
“By the time you look down the road, the bank won’t be financing this property because there is an encroachment and that encroachment has to be fixed before we take on the security,” she said.
Do even more due diligence
Beyond those reports, the mortgage professionals encouraged persons to also investigate whether the vendor owes on maintenance- if the property is a strata- and utility bills, especially water. And they may need to go further.
“Sometimes you’ll need to have someone just check that water meter, because they will clear up the bill you know, but there is a leak, and on month one you say: ‘I don’t even move in good yet, why my bill is $60,000?” remarked Mr Berbick.
Before signing a sales agreement, he said one should also ensure the person selling the property- the vendor- has the permission to do so.
“People sell property they don’t own and sometimes it’s not until you are down the line and… you may have made your deposit already and… you reach the NLA (National Land Agency) and you go: ‘Oh, this is not the owner of the property!’” he said.
Get an attorney
Attorneys are crucial to the selling and purchasing of real estate, both experts also emphasised and they cautioned applicants to retain an attorney, and to listen to their advice carefully. A good attorney will ensure one is making the right decisions and will advise against actions that will take them down the wrong path, both Mr Berbick and Ms James advised.