April 4, 2012
Recent studies have shown that self employment is on the rise, making up approximately 15% of the workforce in Canada. However, the trend is making it more difficult for the self-employed and other unique prospective mortgage clients to get a mortgage. Many major lenders have quietly eliminated their stated income programs or are tightening their lending review process for self-employed individuals. This move comes with the growing fear around household debt and CMHC’s recent announcement that they are reaching the $600-billion cap for mortgage insurance set by the Federal Government. The stated income programs were originally introduced to deal with the unique situations that self-employed residents have with the large amount of write-off expenses they have. Since self-employed individuals are able to write-off many expenses such as car payments or housing payments, their claimed income does not really reflect their financial situation. Permanent residents with over 3 years of business operation and a good Canadian credit history were eligible for the stated income program. Based on this program, lenders ask borrowers to state their income instead of providing the traditional forms of proof of income, like pay stubs or income tax returns. By not being able to verify the income claimed by a self-employed borrower, the fear of clients over-committing financially increases. With worries that our housing market will “burst” like it did in America has prompted banks to be more stringent with whom they give mortgages out to. Mortgage regulations around stated incomes had already been tightened in 2010. Self-employed borrowers who received a mortgage through the program were expected to put 10% down instead of the minimum 5% for a conventional mortgage. Refinancing a mortgage through the program was limited to 85% loan-to-value ratio (LTV). LTV represents the amount of the mortgage loan compared to the value of the property. Self-employed individuals should expect a more extensive mortgage review process and be prepared to show documented proof of their income. If you’re self-employed and thinking of purchasing a home, come talk to one of our mortgage specialists to help you find the mortgage that’s right for you.
Good news regarding OSFI rule changes
This is just a quick note to let viewers know that IF you are one of the people with 20% or more down-payment and are in a position that the new OSFI rule changes affect your pre-qualification, that I can extend the current guidelines into the new year by up to 120 days provided that I have an application and am able to get a pre-approval in place with a lender for you before January 1.Read More
OSFI B20 mortgage guideline changes 2017 – Part 2
This is a continuation of the article published here about the OSFI B20 morgage guidline changes for 2017. If you are familiar with mortgage brokers at all (which you probably aren't) you would know that we also have alternative sources of lending for situations where a mortgage borrower will not qualify with a prime institution. We have what we call "B" lenders, who have higher rates but more flexible lending criteria, and we have private lenders, which are individuals and corporations who can lend money on on anything that suits them.Read More
OSFI B20 mortgage guideline changes 2017 – Part 1