Mortgage Changes Part 3 – Self Employed
Changes to self employed mortgage programs
This set of changes will happen slightly earlier than the other 2, by or before April 9, 2010.
Here is a summary of the changes and impact to self employed individuals and their insured mortgage program:
- New minimum down payment, increased to 10% of the purchase price
- New maximum refinance, reduced to 85% of the property’s current market value
Banks and insurance companies will also now be wanting to confirm the true annual income of self employed individuals. This is in contrast to the past where self employed individuals have been able to “state” an income that did not totally need to be confirmed via third party documentation (program designed to address individuals how have cash component to their business). As such, to confirm income for self employed people, the two (2) most recent years of tax returns (T1 Generals) and Notice Of Assessments (NOAs) will be collected on all deals and the amount of income that is indicated here will be the number that the banks want to work with to determine the amount one can be approved for. Due to these changes it is highly recommended that all self employed individuals push all of their income, even if cash, through their tax returns so they can get credit for it when applying for a mortgage or any other loan for that matter.
If you are self-employed and have equal to or greater than 35% of the purchase price as a down payment, please contact me directly for special programs tailored for this situation.
There are however, two (2) key benefits if a self employed person can verify all of their income when qualifying for a mortgage:
- They may now qualify for a lower down payment (5% vs. 10%)
- They will save on the insurance premium as it will be half what it would have been otherwise
If you are self employed and would like to confirm your mortgage pre-approval or approval, contact me at any time.
(604) 603-2520 – maury@maurylum.com
Mortgage Changes Part 2 – Rental properties and Rental income
New mortgage rules for investment properties and rental income.
By or before April 19, 2010, there will be changes to how non-owner occupied properties (i.e. rental and investment properties) are handled with respect to mortgage insurance (e.g CMHC, Genworth, AIG). These changes will affect people who are looking to both purchase a non-owner occupied property as well as those looking to purchase a new primary residence but have non-owner occupied properties in their portfolio.
The changes fall into 2 categories:
- Down payment
- Rental income
Down payment:
- New minimum down payment for a non-owner occupied property will be increased to 20% of the purchase price
- If you want to buy a non-owner occupied property with less than a 20% down payment, you may be able to through a non-conventional lender. This alternative may involve some fees and a higher interest rate, but could provide a solution for you (contact me directly for further information).
Rental income:
- The percentage of the total amount of rental income each month that can be used in the mortgage qualification and approval process (when either purchasing a rental property or purchasing a new primary residence but have a rental property in one’s portfolio) will be reduced to 50%. This will make it more difficult to get approved for a mortgage with not getting “credit” for all of the rental income that is actually being received.
Note: If you do not require the mortgage to be insured, it is likely that the mortgage rules will be more flexible, allowing a greater percentage of the rental income you are actually receiving each month to be used to qualify for the mortgage. Stay tuned for banks to release their updated guidelines for these situations or contact me for further details.
To confirm you can be approved for the purchase of a non-owner occupied property or for the purchase of a new primary residence if you will have a non-owner occupied property, contact me at any time.
(604) 603-2520 – maury@maurylum.com
Mortgage Changes Part 1 – Qualifying Rate
New rate to be used when qualifying for a mortgage. Could reduce how much you can be approved for.
By or before April 19, 2010, when qualifying for an insured (e.g. CMHC) mortgage and determining how much you can be approved to borrow, a different rate may be used for this process.
Here is a summary of the changes and impact:
- If you want to have a fixed rate with a term less than 5 years OR if you want a variable rate mortgage, you will need to qualify for the mortgage using the posted 5 year fixed rate. This rate could be 1.5%-2.5% greater than the rate you actually get for the product you want. This higher rate will reduce the maximum amount you can be approved for. If you can be approved for much more than you actually need you may not be affected.
- If you would like to have a fixed rate term equal to or greater than 5 years, you can qualify for the mortgage you want using the corresponding, discounted rate that you will ultimately receive for the product you choose. This is essentially how the process is now so no net change here.
- Therefore, if you want or need to be approved for the largest amount possible based on your situation, you will need to select a 5 year fixed rate closed mortgage (because this is the process that can use the lowest qualifying rate).
To confirm how much you can be approved for under the new rules and guidelines, contact me at any time.
(604) 603-2525 – maury@maurylum.com
Documentation For Mortgage Approvals
This is a brief introduction to understanding the documents that will be required in order to confirm your mortgage approval. Banks need to verify all information that is part of the mortgage application via 3rd party documentation.
Categories of documentation include:
- Income (e.g. letter of employment and recent pay stubs for employed people; 2 years tax returns and notice of assessment for self-employed people)
- Down payment (e.g. statements from bank, RRSP, or investment account; details of “gift” if within family)
- Credit History (e.g. credit report)
- Property Details & Condition (e.g. appraisal, strata documents)
Having your documents prepared before you start looking at properties can save you a lot of time once you are ready to proceed with a property, in addition to allowing you to focus just on the property search. Your mortgage will also be approved in a more timely manner when organized and prepared ahead of time. Keep in mind that some of your documents may take some time to get (e.g. your letter of employment if your manager is away or busy, strata documents may need to be ordered).
Contact me at any time to learn exactly what documents you will need and to confirm your pre- approval limit, especially with the new rules coming into affect by or before April 19, 2010.
(604) 603-2520 – maury@maurylum.com
Mortgage Broker Availability – Why its so important
Mortgage broker availability and why it is so important.
Throughout the home buying process, from the time of mortgage pre-approval, through to and even beyond the closing date, having timely access to a mortgage professional is extremely valuable. Everyone has a busy schedule with their professional and personal commitments. However, when purchasing a home or even making changes to one’s mortgage, there can be quite a bit of work that needs to be done between securing a mortgage, making any requested changes, and for purchases actually finding the property.
With all that needs to be done, and the busy schedules we have, it is very unlikely that we can get much of the required work/tasks completed during normal business hours, Monday to Friday. So the value in having access to an independent, Accredited Mortgage Professional (AMP) is that you will be able to get the help and assistance you need throughout the home buying process, in addition to timely answers, when you need them, to the questions you have. Most independent mortgage brokers can also be reached after normal business hours by phone, fax, and email and if meeting in-person was preferred that can also be arranged.
For more information on this topic and/or help and assistance with any mortgage needs, I can be reached at anytime at (604) 603-2520 or at maury@maurylum.com.
For any mortgage related questions, help, and assistance I can be reached at anytime at (604) 603-2520 or at maury@maurylum.com.