For A Mortgage...FAST!
The banks will no longer pre qualify people for mortgages because less than 1% of the people stayed with the bank that pre-approved them. At best, a lender will take a quick look at the application for any obvious problems and issue a rate hold. They still call it a pre-approved mortgage, but in reality it is no more than reserving your rate for 90 days or so.
From a consumer's point of view this presents a problem. You could go through the whole process of finding a home and in the end, your mortgage might not come through. It is still a good idea to pre qualify, but the banks are no longer providing that service.
The bank will look at your application in detail only after you have put in an offer to purchase and given them a copy. You might not qualify at all, you might qualify for a lesser amount or you might qualify if you provide additional information. The paper the bank gives you saying that you pre qualify is conditional. If you read it carefully, you will realize that they did not say that you pre qualify. Actually, they say that they want more information which will determine whether you qualify or not.
The approval process may take anywhere from a week to three weeks if the documents are readily available. If you have to go to your accountant or dig up several months of bank statements it will take that much longer.
There has to be another way. You need to know certain things before you go shopping. If the bank won't do it, you have to find another way to pre qualify for a mortgage.
Pre Qualify Yourself
The following discussion will help you understand the bank's point of view. Even though the bank will not spend the time to do a detailed approval of your mortgage to pre qualify you, it is still possible to be 80% sure of approval by using the following guidelines.
If you need more surety than that, an
online approval from a mortgage broker
is your best bet. An experienced mortgage broker will know which bank will accept the type of income,
and downpayment you are using to qualify. Although banks have the final say, a mortgage broker has worked with them enough so he/she will know what will work. In borderline cases, the broker can often persuade lenders to qualify you by considering factors that may not be obvious.
You would be amazed how many times a broker can qualify you for a better interest rate or an approval that would normally not happen. A mortgage broker will take the time to get to know your circumstances and present the facts in the best light to the bank. In many cases, this can make all the difference in the world.
If you have had any kind of credit problems in the past, it is definitely in your interest to get a free opinion from a mortgage broker. It may take some finesse, but
you may still qualify.
What is Your Real Income
From A Bank's Perspective?
If you are an employee who receives a fixed salary, with no overtime or bonuses, your annual salary is your income. Use the total income number from your T4 slip or Notice of Assessment from CCRA (Revenue Canada)in the Canadian mortgage calculators.
If you are paid on a hourly basis, your income is based on the number of hours you are GUARANTEED by your employer in an employment letter. If you work more than the GUARANTEED hours, the bank will consider that as over-time and you will need two years of history before the bank will consider the full number of hours in your income. Use only the income number provided by the employer in the mortgage calculators. However, If you have been in the same company for more than two years, use the two year average income from your T4 slips or Notice of Assessments in the mortgage calculators.
For example, if your guaranteed hours are 20 hours per week and you have always worked more than 30 hours per week for the past year and a half, the bank will still only consider your income to be based on a 20 hour work week. There can be some exceptions to this, so talk to an experienced
before you start making calculations on the Canadian mortgage calculators.
If you are paid a bonus or commission on top of your salary or hourly wage, you will need a two year history before the bank will consider the bonus as income. Use your guaranteed income in the mortgage calculators, taken from T4 slips or Notice of Assessments. However, there may be some exceptions, so discuss your situation with an experienced
before you use any numbers in the Canadian mortgage calculators.
If you are on commission the general rule is that you would have to be with the same company for two years, preferably three years or more.
If you haven't been in the same job for two to three years you will need 25%-35% downpayment and reasonably good credit to qualify for a mortgage because from the bank's point of view your income doesn't count. You don't need Canadian mortgage calculators because you will need to qualify on a "no income" basis. Yes, it can be done, not all banks will do it, but it can be done...and you would still get the best mortgage rate offered by the company.
In some cases, if you have been in the same line of work for two years or more, but are now with a new company, a mortgage broker/agent may be able to use the good relationship he/she has with a lender to arrange the mortgage. The best thing in this case is to pick up the phone and explain the situation to a
and see what can be done.
If you are self employed the first thing you should use the net income figure on your Notice of Assessment from CCRA (Revenue Canada), in the Canadian mortgage calculators. If that gives you enough income to buy your house, great! If not, look at your financial statements or tax returns for the past three years. Add together expenses that you wrote off for tax purposes that would have still been there whether you had a business or not.
For example, some banks will allow you to add back your home office expenses, meals, entertainment and capital cost allowance on your personal vehicle etc. into your total income. Every bank has different rules on what they will allow a business person to use as income. In some cases you may only need two years track record. The only way to be sure is to discuss this in detail with a
If you are not showing enough income, you will need at least 15% downpayment and good credit. If you have 25%-35% downpayment, reasonably good credit may be enough to get you approved. In either case, you won't need mortgage calculators, because you will need to be approved on a "no income" basis. You will have to pay a little higher interest rates if your downpayment is less than 25%, otherwise you may still qualify for the lowest mortgage rate in Canada.
If you receive a fixed salary or hourly wage and are on contract you will be treated like a self-employed person in most cases. If you think your situation is an exception, consult a
Part-time income needs to be there for two years, in the same job, before most banks will consider it. There can be some exceptions, so consult a
if you think you have a case. If you have been in your part-time job for almost two years or more, simply use the income from your T4 slips or Notice of Assessments in the Canadian mortgage calculators.
How To Prove
Where Your Downpayment
Is Coming From
Generally speaking you need at least 5% downpayment plus 1.5% in the bank in order to qualify for a mortgage in Canada. You would use 5% of the purchase price to do your calculations in the mortgage calculators. According to Federal law, banks MUST confirm where the downpayment money is coming from. There is no way around it.
If your downpayment is coming from savings or investments in a financial institution, the bank will require three months of statements as proof that you have accumulated the money.
If you have saved up the money but it is not in a financial institution, you should put the money in a bank or investment as soon as possible so you can provide the required three months of bank statements.
If you don't have money for a downpayment, you will need a gift letter from a relative to show where you got the money. You will also need a photocopy of the cheque and a deposit statement from the bank to show you deposited the money. A gift letter is a standardized document. Your
can provide a proper letter that the banks will accept.
If you are borrowing the downpayment the bank will need to confirm how much your monthly payments will be. These payments will be included in your total debt calculations. Be sure to include them when using the
Canadian Mortgage Calculators.
No Downpayment Required
It is possible to buy a personal residence with no downpayment or 100% financing at a little higher interest rate than normal. If you have good credit contact a
for details. It is a good idea to find out what your
credit bureau report
says before you go to a lender. Your
can help you with that or you can get a FREE online credit bureau report.
No Proof Of Income Required
If you don't show enough income on your income taxes or financial statements and are self employed, you can buy a personal residence for as little as 12.5% downpayment. You will need to show proof of self employment such as Tax documents showing business deductions, Income and expense statements prepared by an accountant, business registration documents or other proof. Contact a
What Will The Bank Use
As Your Monthly Debt Payments?
Generally speaking, banks will use the numbers on your
credit bureau report
as your monthly debt payments. Use these numbers in the Canadian mortgage calculators.
If the Bureau lists a debt but doesn't list the amount of payment, the bank will use 5% of the balance owing as the monthly payment. However, in most cases lenders only charge 3% of the balance every month. The best thing is to look up the minimum payments on your lender's statements and use those numbers in your mortgage calculators.
It is very important to know what numbers a bank will use to calculate your monthly payments. This can make or break a mortgage approval. To find out what your credit bureau reports, get a
FREE online credit report.
or ask your mortgage broker to do the calculation for you.
For a complete description of how banks view the information on credit bureau report, please go to the
section of this website. OR, call a
Canadian Mortgage Calculator
You can analyze many aspects of a property by using the correct Canadian mortgage calculators. The following should answer most of your questions. If you need help or more information, please contact your mortgage broker. Be sure to read the comments in the "Help" box for accurate results.
What is the maximum mortgage you can afford?
Which is better: Rent or Buy?
What is the effect of pre-payment?
How much principal and interest will you pay every year?
Calculate Any Aspect Of Your Mortgage
For Best Results
For best results, use the information on this page in conjunction with the
Free Credit Check