Why You Should Be Honest on Your Mortgage Application

News Source: http://www.canadianmortgageupdates.ca

 As Posted in Realty Biz News

Your income is an important part of your mortgage loan application, and lenders do require specific documentation before deciding to fund you. This includes income tax returns for the past two years, or two years’ worth of corporate tax returns if you are self-employed.

The only exception to this rule is if you are refinancing using a government loan, as in this case it might not be necessary to provide any income documentation. This all seems pretty clear-cut, but an article in aol.com points out there are a few different circumstances where people may decide to omit their income from their mortgage application.

If you are a self-employed borrower then you’ll definitely need to show two years of tax returns which include corporate returns if applicable. Nowadays federal lending requirements don’t allow lenders to choose which income years to use when deciding if you qualify for a mortgage. This means if you had one poor year followed by one exceptionally good year, then they cannot simply ignore the bad year as they will need to take a 24 month average of your income. If you have not disclosed income this also might raise red flags to a lender. They are going to want to know why you are trying to hide income so it’s far better to come clean as this will enable you to get a mortgage.

All cash deposits to your bank account that aren’t part of your normal income must be included and fully documented if you intend to apply for government financing. If you have taken on an additional job in order to save more money, then you’ll need to explain where these additional funds came from. If you are applying for a conventional loan then your lender must be able to source and document any cash deposits that are more than 20% of your monthly income.

If you have a joint application for a mortgage then it’s worth considering which of you has the stronger chance of qualifying. Conventional mortgage lenders are able to take just one borrower’s financial information into account, but it is different for government loans where the debt of one borrower can negatively impact the primary borrower.

The bottom line is that mortgage lenders are looking for borrowers who are able to support mortgage payments. Most will want the mortgage payment and other debt to account for no more than 43% of your income, although occasionally this figure may go as high as 55%.

Thoughts on Real Estate Investing

News Source: http://www.consolidatemydebts.ca/

Whether you’re a seasoned professional or a novice investor there are fundamentals that you should always be paying attention to when investing in real estate. The fundamentals for beginners may be second nature to experienced investors but they aren’t to the beginner. The beginner needs to keep these in mind every step in the process of making his or her first purchase and sale.

Money can be made in any type of real estate market but it takes different strategies that change on a regular basis. There are two basic investment strategies. One is to buy and hold as rentals and the other buy and flip as quickly as possible. Within those two basic strategies are many other options. Today, one of the better buy and hold strategies is the lease option where you hold for a few years but have a plan to sell to the renter at a future date. For those wanting to flip houses, being able to owner finance them (even using other people’s money) is a great strategy. Both of these strategies are working well today because of the tough lending qualifications and because so many people have damaged credit scores coming out of the recession.

Real Estate Investing for Beginners

First and foremost, have an exist strategy. Never buy a house just because you can get it at a good discount. Know exactly what you are going to do with it once you own it. It’s also preferable to have a plan “B” and a plan “C”. Once you have an exit strategy, join an investment club if you haven’t already. Decide on a couple of experienced members that you trust and possibly use the exit strategy you’ve decided on. Invite them to lunch. Explain your strategy to them and ask them to punch as many holes in it as they can. Use the information you learn to improve your plan.

Expert advice for beginners is invaluable. An example of a big mistake one beginner was advised not to make involved a double lot. The beginner had found a double lot at a deep discount in a lower to middle income subdivision. He saw a huge opportunity to buy the lot and then go through the permit process to subdivide it with the intention of more than doubling his investment by selling two individual lots at retail. When he discussed his plan with an expert, the expert suggested that before making the purchase he first look into his ability to subdivide the property. When the beginner did, he learned that it could not be subdivided because of a wildlife habitat issue. The only use the property was suitable for was building a small mansion in the middle of low-end neighborhood. Obviously not a good investment strategy.

Real Estate Investing for the Experienced

If you’re at the top of your game, the best thing you can do to stay there is remain humble. Lack of humility is the biggest problem any businessperson can cause for them self. People simply don’t like doing business with someone that is arrogant. The best deals won’t be made available to you. When you do find a decent deal, negotiations won’t go in your favor when you portray yourself as always coming out on top. Stay humble and you’ll do much better.

Being humble includes offering your experience and knowledge to beginners and others less experienced than yourself. Don’t think of them as competitors and blow off their requests for help. There are plenty of deals for everyone. Occasionally, taking the time to thoroughly think through the strategic basics will also help keep you at the top of your game.