5 C’s of Credit – Things you need to know when applying for a Mortgage in Canada

Raman Gakhal from Alberta Real Estate School explaining the 5 C's of Credit whihc includes the things to keep in mind when applying for a Mortgage in Canada.

When applying for a Mortgage in Canada, you have to get eligible for a number of criteria’s – the 5 C’s of Credit. Thus, here are the 5 things to keep in mind when applying for a Mortgage in Canada.

To understand the concept of the 5 Cs of Credit, we have to first understand the concept of Credit. When it comes to the Real Estate and Mortgage Brokerage Industry, Credit means borrowing finances (money) or a physical substance that has monetary value. When someone takes a sum of money or a physical property that has monetary value on credit from someone, they take it as a loan. It can be defined as a value given in advance to someone and offer them time to pay that back.

Now, we all know that Money Grows with Time. So, whenever you lend someone a physical thing that has monetary value added to it, at the time of paying back, the person also has to give the added value of time taken to repay the same thing.

For Example

If A borrowed $10 from B today and decided to pay him back the same $10 after 7 days, then we can say that A took a loan of $10 from B. Now, when A is paying back the same $10 to B after 7 days, he also has to pay an extra charge for the time gap he took to return the same $10 to B. This is because, if B had invested the same $10 in a financial reserve, he must have earned some interest on $10 after 7 days. Money grows with time. The same $10 will have more value than its original value of $10 in future. That is why, we have “Present Value” and “Future Value” of Money.

Get the Key takeaways of the blog from the video below –

Financial Institutions like Banks work on the same principle. They lend money to people in need and charge a rate of interest for the time they take to repay the principal amount. Now, giving out money can be riskier if they are not pre-cautious about the situations of the person, they are lending the money. If the lender does not get repaid, he can occur a loss on the sum of money lent.

To check the probability of getting the money repaid, lenders use some tactics to understand the borrower’s capacity to repay the money they have lent. Here comes the 5 Cs of Credit that lenders consider when they have to lend money to the borrowers.

The 5 Cs of Credit are:

Each one of them has their own characteristics and importance while assessing the borrower’s repayment credibility.

[I] Character

Although it’s called character, the 1st C more specifically refers to Credit History, which is a borrower’s reputation or track record for repaying debts. This information appears on the borrower’s credit reports. Generated by the three major credit bureaus (TransUnion and Equifax), credit reports contain detailed information about how much an applicant has borrowed in the past and whether they have repaid loans on time. These reports also contain information on collection accounts and bankruptcies, and they retain most information for 7 to 10 years. Information from these reports helps lenders evaluate the borrower’s credit risk. The credit bureaus use this information to create a credit score, a tool lender use for a quick snapshot of creditworthiness before looking at credit reports. The Credit Scores range from 300 to 850 and are designed to help lenders predict the likelihood that an applicant will repay a loan on time.

[II] Capacity

Capacity measures the borrower’s ability to repay a loan by comparing income against recurring debts and assessing the borrower’s Debt-to-Income (DTI) Ratio. Lenders calculate DTI by adding a borrower’s total monthly debt payments and dividing that by the borrower’s gross monthly income. The lower an applicant’s DTI, the better the chance of qualifying for a new loan. Every lender is different, but many lenders prefer an applicant’s DTI to be around 35% or less before approving an application for new financing.

[III] Capital

Lenders also consider any capital the borrower puts toward a potential investment. A large contribution by the borrower decreases the chance of default. Borrowers who can put a down payment on a home, for example, typically find it easier to receive a mortgage. Down Payments indicate the borrower’s level of seriousness, which can make lenders more comfortable extending credit. Down payment size can also affect the rates and terms of a borrower’s loan. Generally speaking, larger down payments result in better rates and terms. With mortgage loans, for example, a down payment of 20% or more should help a borrower avoid the requirement to purchase additional Private Mortgage Insurance (PMI).

[IV] Collateral

Collateral can help a borrower secure loan. It gives the lender the assurance that if the borrower defaults on the loan, the lender can get something back by repossessing the collateral. The collateral is often the object one is borrowing the money for: Auto loans, for instance, are secured by cars, and mortgages are secured by homes. For this reason, Collateral-backed Loans are sometimes referred to as Secured Loans or Secured Debt. They are generally considered to be less risky for lenders to issue. As a result, loans that are secured by some forms of collateral are commonly offered with lower interest rates and better terms compared to other unsecured forms of financing.

[V] Conditions

Conditions can refer to how a borrower intends to use the money. The conditions of the loan, such as the interest rate and amount of principal, influence the lender’s desire to finance the borrower. Consider a borrower who applies for a car loan or a home improvement loan. A lender may be more likely to approve those loans because of their specific purpose, rather than a signature loan, which could be used for anything. Additionally, lenders may consider conditions that are outside of the borrower’s control, such as the state of the economy, industry trends, or pending legislative changes.

Understanding the 5 Cs is critical to your ability to access credit and do it at the lowest cost. Delinquency in just one area can dramatically affect the credit you get offered. If you find that you are denied access to credit or only offered it at exorbitant rates, you can use your knowledge of the 5 Cs to do something about it. Work on improving your credit score, save up for a larger down payment, or pay off some of your outstanding debt.

Join Alberta Real Estate School for expert help with understanding the concepts of Real Estate and getting uncommon and detailed tutoring sessions summarized as per your needs. Get our personalized Notes designed to get you through the Real Estate Exams in the first attempt! Visit our list of Real Estate Tutoring Sessions for details.

If you have any doubts for Exam Preparation of any of the real estate courses or topics, reach out to us directly at 587.936.7779.

You can also listen to the blog on our Podcast below. We hope you found this blog useful. Happy Realtoring!

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RECA Approved Course Providers – June 2022 Update

Alberta Real Estate School - RECA-recognized Course Providers Update - June 2022

As of June 1st, 2022, RECA (Real Estate Council of Alberta) has divested itself from offering Real Estate Licensing Courses in Alberta. This has been a big news in the Alberta Real Estate Industry as RECA is the direct authority that regulates Real Estate / Mortgage Brokerage – Licensing Services in Alberta.

In reference to the same topic, there has been a buzz about the new “RECA-Recognized Course Providers” for Real Estate / Mortgage Brokerage Education in Alberta. And we are absolutely pleased to announce that we, Alberta Real Estate School, have been approved as a RECA-recognized Course Provider to offer Real Estate Pre-Licensing Courses in Alberta.

Check it out yourself at RECA’s website for the list of approved Course Providers.

First of all, who is RECA?

The Real Estate Council of Alberta (RECA) is the governing body for Alberta’s real estate brokerage, mortgage brokerage, property management, and (New) condominium management licenses.

In other words, RECA licenses and regulates real estate agents, mortgage brokers, property managers, and condominium managers to enhance consumer protection.

What were RECA’s original duties?

Licensed professionals have to meet RECA’s Eligibility Criteria to enter the industry. They’re required to comply with RECA’s rules for doing business along with competently assisting the public of Alberta in buying, selling, or managing a property or condominium, or obtaining a mortgage.

RECA primary role in the industry was to offer:

  1. Education – Eligibility, Courses, Exams: RECA offered Eligibility guidelines for applicants in order to enter into Pre-licensing courses. Self-paced online pre-licensing course materials were offered by RECA. The pre-licensing exams were also under RECA’s administration.
  2. Issuing, Renewing and Cancelling Licenses: RECA is the only body who is authorized to issue, renew or cancel licenses for real estate, mortgage brokerage, property management and condominium management professionals in Alberta.
  3. Information & Resources: RECA is the one-stop shop for all the resources that you may need as a Real Estate / Mortgage Brokerage Professional or client.
  4. Regulation of Bylaws: RECA sets and regulates the functionality of the industry standards and makes periodic checks on the professionals to ensure fair operations are taking place.

Why RECA gave up Pre-Licensing Education?

Couple of years ago, KPMG (Klynveld Peat Marwick Goerdeler) did an audit on RECA and realized that education should be moved away from RECA and should be passed on to other educational institutions.

This created a need to amend the Real Estate Act (REA), Alberta, thereby changing RECA’s role in the Alberta Real Estate Industry to make it more robust and useful to the learners and other industry professionals. Visit the link ahead to get further details on the Amendments to the Alberta Real Estate Act.

The course content is still licensed by RECA. All courses and course providers become recognized by RECA if they pass the application process; Also, RECA’s content can be licensed but some course providers are creating their own materials. All recognized course providers must map their courses to RECA’s competency exam blueprints.

Tip for New Learners

The course materials offered by the various course providers will stick to RECA’s course competency exam blueprints. The exams for the courses will still be offered by RECA in the same format and approach, without making any major changes making it good for the learners.

Steps for becoming a Licensed REALTOR®, Mortgage Broker, Property Manager, Condo Manager in Alberta – After June 1, 2022

The way it would work from June 1, 2022 onwards is –

STEP 1: Register yourself with RECA by meeting RECA’s Eligibility Requirements.
STEP 2: Select a RECA-Recognized Course Provider for the specific courses that you are interested in.
STEP 3: Pass the required number of courses that you need for a specific license you are looking to get.
STEP 4: Join a Brokerage – and that completes the process to get you licensed in any of the industries (real estate, mortgage brokerage, property management or condominium management).

Changes in total that are effective in the Alberta Real Estate Industry since June 1, 2022

  1. RECA’s Education Divestment
  2. Changes in the REA (Real Estate Act)
  3. New Course Providers for Existing Pre-Licensing Courses
  4. Changes in the Condominium Property Act
  5. Introducing Condominium Management Licenses & Pre-Licensing Courses

Benefits of RECA Changes to New Learners & Licensees

  1. Learners will have more options to explore and select the course providers that suits them and will not have to self-study everything by themselves.
  2. All these course providers will be RECA-Recognized.
  3. The base content of the courses offered by the RECA-Recognized course providers will be inline with RECA’s course competency and exam blueprints, making it reliable for learners.
  4. Some course providers will also have the option of offering multiple training options including tutoring or in-person training, thereby making it beneficial for the learners.

Where to find more updates?

Some of these changes are still in-process and are functioning on an ongoing basis. More updates will be posted once there is a confirmation about the news from reliable sources. Keep in touch!

Need help with Exam Prep for Real Estate & Mortgage Brokerage Courses?
Visit our YouTube Channel and watch a demo of our Tutoring Sessions!!

Get our Focused Study Guides, Video Courses and “in-demand” Tutoring Sessions to get you through the Real Estate Exams on the first attempt!

Get in touch with at 587.936.7779 or support@albertarealestateschool.com.

Happy Studying!

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How to get Clients as a New REALTOR®

Becoming a Real Estate Agent is a hectic process, but what after you become one? What do you do after getting your Real Estate License? How will you get clients as a New REALTOR®??

Here’s the time where most new REALTORS® need help and support with. New Agents are already overwhelmed as they take their baby steps in the Real Estate Industry. Let alone getting to know the Real Estate laws, rules, policies and education, they also have to manage their Real Estate business. Real Estate Agents are their own brands and they have to manage branding and marketing of real estate business in order to make it run. And to be successful with it is a big challenge. Let’s see what can we do in this.

An Interview between Experts – Indy Khosah & Raman Gakhal

In the Interview between Indy Khosah and Raman Gakhal today, we will discuss some of the most important strategies that will help new real estate agents find sources to build clientele and run their real estate careers successfully.

Indy Khosah is a veteran Real Estate Agent/Mentor and have been successfully serving the Alberta Real Estate Industry since 12 years now. Raman Gakhal, as we all know is a role model for New REALTORS® , being a successful REALTOR® – turned Tutor – turned Broker for Venus Realty and is now turned MENTOR for New REALTORS® to teach them all the tips and tricks to get running in the Alberta Real Estate Industry.

How to get Clients as a New REALTOR®

Becoming a Real Estate Agent is owning a business. Real Estate Agents can only dream of sitting back and waiting for leads to come to them to give them business. But the fact is, you will have to take necessary steps in order to get business. The first step you can take is:

1. Work on Your Sphere of Influence

Your sphere of influence are the people you already know. Rather than finding new people and marketing yourself to them, first target your connection and let them know that you are a REALTOR®. Not everybody will know that you have got your real estate license. Tell your friends and relatives that you have become a Real Estate Agent and that you can help them with their real estate needs. Ask for their connections who might be in need of any real estate help or advice, and get in touch with them. They already know you as an individual and that can definitely help you to eliminate the first step of marketing yourself from scratch.

2. Target your Community

Your community is the next closest thing to advertise after your circle of networks. Word of mouth spreads faster in small and closed communities – be it religious, cultural or social groups. Once you spread the word in your network, they can help you in socializing your brand within the community.

3. Act as a Real Estate Counsellor rather than a Businessman

As a Real Estate Professional, you can offer some free giveaway(s) and act as a valuable resource of information and advice when it comes to real estate. You can offer Free Home Evaluation to potential clients, Real Estate Investing Tips to close friends and relatives, host seminars or webinars on Facebook groups for free real estate advice like staging tips, or generic information that can help people get into real estate like first time home buyer tips, mortgage pre-approval advice, credit score information, real estate news and updates, and much more.

4. Use the power of Social-Media

Social Media is the biggest tool of marketing in today’s day and age. It can influence your brand to an extent that you might not need any other source of marketing if you can master it. Just post regularly on sites like Facebook, Instagram, YouTube, and Linked, participate on groups, advertise your services on sites like marketplace, Kijiji, etc.

You can create your own organic content like posts, reels, videos, share your projects, experiences, details – basically anything and everything that you do in your business. Apart from this, you can also run ads for promotion.

5. Create a Professional Website

A website these days acts like a business card. All the information about you and your business can be made available on your website. For example, we have made a website for our Real Estate Brokerage – Venus Realty.

All the information related to your work is presented at one place. A website also creates trust and credibility for your brand from a client’s perspective. You can post personal blogs and information that you want to share through the website. It can boost your local SEO, can be a primary source to promote yourself as well as provide you options to get leads through landing pages.

6. Start Email Marketing

The leads that you collect through social media, website forms as well as other enquiries can be used to create a database for your email marketing campaigns. It is a very important tool as it can passively turns leads into conversions and sales. Sending out emails is the best way to stay in touch with your audience. You can send tips insights on various real estate topics on the email. It can remind them about you as a New REALTOR® and increases your chances of getting clients.

7. Top up your Local SEO game

Local SEO includes location-based marketing. If you are serving a particular community, area, or city for your real estate services, you can market yourself as the “Local REALTOR®” of that region. It will help you target your close communities and circles which increases your chances of getting clients that you might already know. It can include – social media marketing targeted on specific location, on-page SEO of the website with location keywords, google-my-business marketing and much more.

8. Networking within the Real Estate Community

It is very important to know updates and inside stories about the local real estate industry within the community you are serving. It gives you real-time updates, access to insider information, and makes you aware of current local case-studies. The information that you get with community networking can help you understand the local market in a much better way and helps you strategize your moves accordingly.

9. Tie up with a Mortgage Broker

Every REALTOR® should work with a Mortgage Broker, especially Buying Agents. The reason being – your clients are home buyers and most of them can be first-time home buyers. When buying a house, along with the type of property, a client has to also keep in mind his mortgage – as without one, it is almost impossible to buy a property. If you as a Real Estate Agent, can offer your clients mortgage services by tying-up with a local mortgage broker, it will give your clients convenience. This will make them want to work with you as they will get most of the necessary services at one place.

By the way, once you have pulled the Certificate of Title, do you know how to read a certificate of title?

Join Alberta Real Estate School for expert help with understanding the concepts of Real Estate and getting uncommon and detailed tutoring sessions personalized as per your needs. Get our personalized Notes designed to get you through the Real Estate Exams in the first attempt! Visit our list of Real Estate Tutoring Sessions for details.

If you have any doubts for Exam Preparation of any of the real estate courses or topics, reach out to us directly at 587.936.7779.

Happy Studying!

We hope you found this information useful. You can also listen to this blog on the Podcast Channel below. Stick to us for our latest updates.

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How to Pull a Certificate of Title?

Raman Gakhal of Alberta Real Estate School has explained in detail about how to Pull a Certificate of Title in Real Estate.

Certificate of Title is a very important document, not only for Buyers/Sellers but for REALTORS® as well. Real Estate Agents have to work to-and-fro around Title Certificates for their clients in order to provide detailed information on the property which cannot be found through any other sources.

But many of the REALTORS® don’t know – How to Pull a Certificate of Title in Alberta. If you are aspiring to be a Real Estate Agent, then this is something you really need to know.

As a REALTOR®, Certificate of Title is required every time we write an offer or when we want to find information about the property before we list the property. It is also a very important topic that you can expect on your real estate exams as well.

We are stressing around one thing here which is – Certificate of Title. But why? What exactly is a Certificate of Title? Why is the Certificate of Title so important for a real estate property? What does a REALTOR® get in a Certificate of Title?

This is where Alberta Real Estate School comes into the picture. Our Tutoring Sessions are the best way to learn the topics in detail. But for now, let’s understand a few terminologies here –

What is a Certificate of Title?

A Certificate of Title is a government issued certificate of ownership of a piece of land that records detailed information about that particular piece of land such as legal description, municipal jurisdiction, ownership and registered interests.

Why is a Certificate of Title important?

Every parcel of land in Alberta is governed by the Land Titles Act and managed by The Land Titles Office. It is part of the Registry Services Division of Service Alberta responsible for housing all registered plans, titles, and documents relating to land and land rights in Alberta.

There are over 160 different types of documents and plans that can be registered against a certificate of title, and all must comply with current legislation, policies, and procedures before they are accepted for registration.

What Information does a Certificate of Title contain?

Current Registered Owners

The certificate of title will reflect the full names and addresses for service of the person(s) who own that particular property.

Type of Land Ownership

The certificate of title will also reflect the form of ownership of the parcel. In Alberta, there are 3 ways a property can be held – Sole Owner, Tenancy-in-common and Joint Tenancy.

Legal Description

A legal address is not the same as a municipal address. The official description of any land is used for legal purposes. Municipalities use Plan, Block and Lot No. for legal land descriptions.

Where can you find a Certificate of Title in Alberta?

The Land Titles Officer no longer issues a paper Certificate of Title, but a paper copy may be available from any Registry Agent in Alberta. An electronic copy is available on the Spatial Information System (SPIN) operated by Alberta RegistriesService Alberta.

What is the Spatial Information System (SPIN)?

SPIN is the land titles’ online database system that allows searches of a wide range of property related documents such as titles, plans, registered interests, historical titles, condominium bylaws. The online system is accessible 7 days a week.

This information can be very useful to REALTORS® as well as homeowners. Now, if you get any questions about pulling a Certificate of Title in Alberta, you know where to go!

By the way, once you have pulled the Certificate of Title, do you know how to read a certificate of title?

Join Alberta Real Estate School for expert help with understanding the concepts of Real Estate and getting uncommon and detailed tutoring sessions personalized as per your needs. Get our personalized Notes designed to get you through the Real Estate Exams in the first attempt! Visit our list of Real Estate Tutoring Sessions for details.

If you have any doubts for Exam Preparation of any of the real estate courses or topics, reach out to us directly at 587.936.7779.

Happy Studying!

We hope you found this information useful. You can also listen to this blog on the Podcast Channel below. Stick to us for our latest updates.

Home » Archives for Raman Gakhal