By David Mandel, Principal Broker and CEO of First Equity Financial Group
Operating a Mortgage Brokerage in Toronto, one thing that I see often is folks who have the dreams and ambitions to own a home. Only, with fast changing economic conditions, Toronto banks and Toronto finance companies often change what they require in order to qualify for a mortgage. In January your financial situation may have been acceptable to the bank but now it’s not.
We refer to this as the ever-narrowing mortgage box. The truth of the matter is that hundreds of loan programs exist in Toronto for people who do not fit the conforming box. Below are a few examples of some specific of problems that Canadian consumers encounter when trying to qualify for a mortgage in Toronto. We have also included some tips how you can overcome these challenges.
1. My debt-to-income ratio is too high
SOLUTION: There are many loan programs on the market today which feature "expanded criteria" allowing higher debt-to-income ratios for qualifying purposes. While some of these programs come with premium pricing, others do not, and offer the borrower a viable source for getting a loan. Mortgage brokerages often have ready access to equity and or private lenders who allow for expanded ratios. However, fees are usually charged for non-conforming mortgages and mortgages arranged where little or no documentation is available or is inadequate. Most of these programs come at a higher price than conforming loans but offer a loan source for individuals who do not qualify through any other program.
2. I don’t claim all of my income on my financial statements
SOLUTION: If you are self-employed or derive some or all of your income from commission or tips, your financial statements may not reflect all of this income, or you may counter-balance this income with expense write-offs. In this instance, a “stated income” or “no-income” verification loan may help you qualify. With sufficient down payment and adequate credit, the lender will not verify the income stated on your application.
3. I have poor credit history
SOLUTION: The “Non-Conforming” or “B /C” market is one of the fastest growing in the mortgage industry. A program exists for nearly every credit problem including bankruptcy and foreclosure. Rates for these programs are typically based on the borrower’s previous 24 months credit history. Mortgages are available at competitive rates.
4. I have little or no money for a down payment
SOLUTION: Insured loan programs and combination first and second mortgage programs allow for residential home purchases with as little as 5% down payment
5. I have little or no established credit
SOLUTION: Many lenders will accept “alternative credit references”. In these instances, the borrower may need to provide references or proof of payment for things such as rent, electric, water, or insurance. Assuming adequate payment history, many first-time homebuyer programs will accept these references as sufficient credit history.
1. My debt-to-income ratio is too high
SOLUTION: There are many loan programs on the market today which feature "expanded criteria" allowing higher debt-to-income ratios for qualifying purposes. While some of these programs come with premium pricing, others do not, and offer the borrower a viable source for getting a loan. Mortgage brokerages often have ready access to equity and or private lenders who allow for expanded ratios. However, fees are usually charged for non-conforming mortgages and mortgages arranged where little or no documentation is available or is inadequate. Most of these programs come at a higher price than conforming loans but offer a loan source for individuals who do not qualify through any other program.
2. I don’t claim all of my income on my financial statements
SOLUTION: If you are self-employed or derive some or all of your income from commission or tips, your financial statements may not reflect all of this income, or you may counter-balance this income with expense write-offs. In this instance, a “stated income” or “no-income” verification loan may help you qualify. With sufficient down payment and adequate credit, the lender will not verify the income stated on your application.
3. I have poor credit history
SOLUTION: The “Non-Conforming” or “B /C” market is one of the fastest growing in the mortgage industry. A program exists for nearly every credit problem including bankruptcy and foreclosure. Rates for these programs are typically based on the borrower’s previous 24 months credit history. Mortgages are available at competitive rates.
4. I have little or no money for a down payment
SOLUTION: Insured loan programs and combination first and second mortgage programs allow for residential home purchases with as little as 5% down payment
5. I have little or no established credit
SOLUTION: Many lenders will accept “alternative credit references”. In these instances, the borrower may need to provide references or proof of payment for things such as rent, electric, water, or insurance. Assuming adequate payment history, many first-time homebuyer programs will accept these references as sufficient credit history.
For more information about how to qualify for a mortgage in Toronto visit http://www.firstequity.ca.
