Mortgage Qualification 101
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The “ins and outs” of qualifying for a mortgage for both employed and self-employed.
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Mortgage Qualification 101
- 1. presents MORTGAGE QUALIFICATION 101 THE “INS AND OUTS” OF QUALIFYING FOR A MORTGAGE FOR BOTH EMPLOYED AND SELF-EMPLOYED.
- 2. A little about Geoff Lee… √ Co founder and Director of the Imani Orphan Care Foundation ● www.imaniorphancare.com √ Over 15 years of real estate experience and investment √ Member of… ● Better Business Bureau ● Chamber of Commerce ● Mortgage Brokers Association of British Columbia ● Canadian Association of Accredited Mortgage Professionals
- 3. √ Mortgage educator/key note speaker for… ● Wealthy Investment Network ● Business Network International √ Regularly sourced for mortgage insights by the … ● Vancouver Sun ● Mortgage Broker News √ Ranked amongst the top 3% mortgage brokers in Canada by CMP magazine √ Finalist in 2013 CMP Canadian Mortgage Awards for Best Customer Service from an independent office
- 4. I’M READY TO BUY!!..., What’s the next step? Determine the following… Are you employed? Do you work for a company? • Receive a consistent paycheck and get a T4 in the spring for tax filing purposes? Or self-employed? Are you one of the following? • Sole Proprietor – one person performs all functions. You pay personal taxes on net income (business expenses deducted) • Incorporation – business is a separate entity. You pay personal taxes on wages/salary given to you from the incorporation. • Limited Company – same as an incorporation.
- 5. If you work for someone else … …YOU MAY NEED TO PROVIDE THE FOLLOWING: • YOUR T4’S FOR THE PREVIOUS YEAR • 2 MOST CURRENT NOA’S • MOST RECENT PAYSTUBS • LETTER TO SHOW EMPLOYMENT • SHOW UP TO 90 DAYS OF BANK HISTORY TO CONFIRM YOU HAVE A DOWN PAYMENT • MONEY (ON TOP OF YOUR DOWN PAYMENT) FOR CLOSING COSTS (USUALLY 1.5% OF THE PURCHASE PRICE)
- 6. If you work for yourself and have a PROPRIETORSHIP… …YOU MAY NEED TO PROVIDE ANY NUMBER OF THE FOLLOWING: • YOUR INCOME TAX RETURNS (T1 GENERALS) FOR THE LAST 2 YEARS • NOA’S FOR THE LAST 2 YEARS • PROOF THAT NO PERSONAL TAXES ARE OWING TO CRA. • SHOW UP TO 90 DAYS OF BANK HISTORY TO CONFIRM YOU HAVE A DOWN PAYMENT • MONEY (ON TOP OF YOUR DOWN PAYMENT) FOR CLOSING COSTS (USUALLY 1.5% OF THE PURCHASE PRICE)
- 7. If you own a CORPORATION and/or collect dividends… …YOU MIGHT HAVE TO PROVIDE ANY OF THE FOLLOWING: • LAST 2 YEARS OF FINANCIAL STATEMENTS • NOA’S FOR THE LAST 2 YEARS • CONFIRMATION OF NO PERSONAL TAXES OWING • SHOW UP TO 90 DAYS OF BANK HISTORY TO CONFIRM YOU HAVE A DOWN PAYMENT • LAST 2 YEARS BUSINESS LICENSES • LAST 2 YEARS OF GST REMITTANCE FORMS • ARTICLES OF INCORPORATION • AT TIMES 2 YEARS, T1 GENERALS
- 8. AS WELL… …the Lender will determine if you can afford monthly payments to buy a home by… LOOKING AT YOUR NUMBERS TO SEE IF YOU QUALIFY FOR A MORTGAGE. THEY WILL LOOK AT YOUR GROSS DEBT SERVICE (GDS) RATIO. AND YOUR TOTAL DEBT SERVICE (TDS) RATIO. GDS = PAYMENT INCOME TDS = ALL PAYMENTS INCOME
- 9. CREDIT PLAYS A VERY IMPORTANT ROLE! Lenders often ask the following questions: • Is the credit score of the borrower considered to be good? • Does the borrow have bankruptcy, late payments, or collections? If so, is there an explanation and are they now in good standing? • Monthly debt utilization • Are credit cards maxed out? The answers to these questions can make a determination as far as the eligibility of a mortgage goes.
- 10. But what if you don’t income qualify? Is there another way? YES!! You can use “Stated Income” which simply means “stating” your income to be REASONABLE and to reflect the time you have been working within that industry.
- 11. For what type of mortgages can I use “stated income”? • REFINANCE • PURCHASE • PRIMARY RESIDENCE • PURCHASE PLUS IMPROVEMENTS OFF PRIMARY RESIDENCE • SECOND HOMES • INVESTMENT PROPERTIES
- 12. There are 3 Insurance companies for mortgages… • CMHC – Canada Mortgage and Housing Corporation (NO LONGER DOES STATED INCOME) • GENWORTH • CANADA GUARANTEE
- 13. What do Insurer’s guidelines say about “STATED INCOME”? GENWORTH AND CANADA GUARANTY • To be a permanent resident of CANADA • MAXIMUM of 2 units in the property • BUSINESS FOR SELF (BFS) for more than 2 years (Exceptions may apply) • Must be the same industry for the last 2 years • Cannot be COMMISSIONED SALES • Established CANADIAN credit
- 14. What do Insurer’s guidelines say about “STATED INCOME”? GENWORTH AND CANADA GUARANTY • GDS and TDS ratios (GDS/TDS) • Credit score of >680 and GDS/TDS ratios of 39/44 • Credit score of <680 and GDS/TDS ratios of 35/42 • 2 – 2 – 2 RULE • Up to 2 years with NO late payments • Minimum of 2 “trade lines” such as a credit card • Minimum of $2,000 dollar credit limit
- 15. What do Insurer’s guidelines say about “STATED INCOME”? GENWORTH AND CANADA GUARANTY • ABSOLUTELY NO PERSONAL TAXES OWING • DP needs to be 10% of purchase price… but • 5% needs to be from own resources • 5% can be gifted from an immediate family member
- 16. What do Insurer’s guidelines say about “STATED INCOME”? GENWORTH AND CANADA GUARANTY • Ammortization • Up to 35 years • Pending on DP and Lender • Loan Amount • Maximum of 750K for property in major urban areas • Maximum of 600K for property in the rest of CANADA
- 17. What do Insurer’s guidelines say about “STATED INCOME”? CMHC and GENWORTH GENWORTH AND CANADA GUARANTY GIVES THE FOLLOWING RATE PREMIUMS: DOWN PAYMENT LOAN TO VALUE PERCENTAGE OF LOAN AMOUNT 10% of Purchase Price 90% 5.45% 15% of Purchase Price 85% 3.35% 20% of Purchase Price 80% 1.90% 25% of Purchase Price 75% 1.15% 30% of Purchase Price 65% 0.9% >35% of Purchase Price 65.01% NO PREMIUM CHARGED
- 18. What do Insurer’s guidelines say about “STATED INCOME”? CANADA GUARANTY EXCEPTIONS… • Statutory Declaration form • Don’t need to show NOAs • Client confirming that they don’t owe any taxes • Income Attestation form • Client confirming that the income on the file is accurate
- 19. “Lack of direction, not lack of time, is the problem. We all have 24 hour days…” Zig Ziglar “Lasting Quote….”
- 20. Get in touch with us…. www.geoffleemortgage.com Twitter: @geoffleeca Linked In: http://ca.linkedin.com/in/geoffleemortgage/ Email: Geoff@geoffleemortgage.com Phone: 1.778.552.3489
- 21. Thanks so much for attending the GLM Mortgage Group workshop – MORTGAGE QUALIFICATIOM 101. If you have any questions please call me at 778.552.3489 or email me at geoff@geoffleemortgage.com. “We specialize in getting you the fastest “YES” at the SHARPEST RATE… GUARANTEED!” - Geoff Lee