Find Your Home

1. GETTING AN INSURED vs CONVENTIONAL MORTGAGE

First it is important to define the difference between an 'Insured' and a 'Conventional' mortgage.

An 'Insured' mortgage is any mortgage where the down payment on the property is less than 20% of the purchase price. Example: You purchase a home for $900,000 (nine hundred thousand), and your down payment is the minimum of $65,000 (sixty-five thousand) for that purchase price. That down payment is 7.2% of the purchase price. 

A 'Conventional' mortgage is any time that the down payment is 20% or more of the purchase price. That same $900,000 house would require a minimum down payment of $180,000 (one hundred and eighty thousand).

What does this mean when you are applying for a mortgage? 

When you apply for an insured mortgage (less than 20% down), it has to go through a second layer of scrutiny. Not only does the lender review the application, but so will the insurer (CMHC, Genworth, etc.). This means that even though the lender may be satisfied with your application, the Insurer may see something they do not like and flag your application ultimately leading to a rejection.

Avoiding this second layer of scrutiny may increase your chance of getting your mortgage application approved.


2. REVIEWING AND MANAGING YOUR CREDIT SCORE

Credit score is one of the key components a lender looks at when reviewing a mortgage application.

If you are considering purchasing a home within the next six months, it would be wise to request a copy of your credit score from a reputable online source.

That said, if your credit is not exactly where you would like it to be, there are ways to improve it rather quickly. We have successfully coached clients and helped them dramatically improve their credit score in as little as 6 months.

If you fall into the category of "imperfect" credit, I recommend that you Contact Us right away, so we may begin working on a plan immediately. 


3. INCOME REQUIREMENTS and SELF-EMPLOYED INDIVIDUALS

As a Self-employed person, acquiring a mortgage can sometimes be more of a challenge. 

Lenders often give preference to 'T4 Employees', as their income is generally more predictable and is less likely to have large fluctuations.

Also, as a Self-employed person you be applying certain strategies in order to lower your personal income and maximize business expenses wherever possible. While this is a great strategy in order to reduce the amount of personal income tax you are subject to, it may cause some issues when applying for a mortgage.

This is also something, that with preparation, can be dealt with. If you know ahead of time that you will likely be purchasing a property in the next calendar year, you may consider altering your tax strategy in order to maximize the likelihood of receiving a mortgage approval at a competitive rate.


4. CHOOSING THE RIGHT LENDER

In most cases, the ideal situation is to achieve your financing through what is known as an "A Lender". "A Lenders" generally offer lower interest rates and more favourable terms. 

Given the circumstances of the changing market, many people are finding it difficult to qualify with an "A Lender". This is especially true for folks who purchased a new construction property within the last 2 to 4 years when rates were much more favourable.

Many are finding that they no longer qualify and run the risk of losing their deposit, which can be hundreds of thousands in some cases. They may even find themselves facing a lawsuit from the builder if they cannot close.

In this case, it may be necessary to consider alternative lenders. There are higher costs associated with these types of lenders, but those costs may be lower than what you may face by defaulting on an agreement of purchase and sale.