Each mortgage application is as unique as the client I am working with. During COVID-19, mortgage enquiries have definitely pivoted; clients are focusing on capturing reduced renewal rates, refinancing for debt consolidation/renovations and new buyers are looking to enter the changing real estate market. Some moves happen by choice, such as a client who is looking for more space for a growing family or a client looking to downsize as empty nesters. In other circumstances, a real estate transaction must take place because of a job transfer, death in the family, divorce or other monumental life change. Your mortgage product should reflect your needs and goals.
If you find yourself preparing to purchase Canadian real estate during these times, you’ll want to ensure now more than ever that you’ve hired the best professionals to work with during your transaction. By working with a qualified mortgage broker, you can ensure your important questions are answered by a specialist, preparing you for an informed financial investment. Consider these important facts when searching for your ideal lender;
The Role of a Mortgage Broker
The strong foundations of a great broker start with a knowledge of all products, lender rules, up-to-date industry information and thorough confidentiality and privacy standards. Any lender can place you with a traditional 5 year fixed mortgage, that my friend is basic lending 101. You want to work with an expert, not a salesperson, who is focused on finding the perfect mortgage product for you and your unique needs, who’s application skills are unmatched and who has your best interest and goals top of mind for the entire process.
Mortgage Lender vs Mortgage Broker
As a consumer, you have mortgage options! Utilizing a broker allows you to tap into a vast range of products, rates and terms that are available to you. Not all lenders are created equally, some are restricted to working with one bank only; which means one set of qualification rules and approval standards. A broker can work with multiple different financial institutions and non-traditional lenders, who cater to unique clients like business-for-self, those re-establishing credit and those investing in specialty properties.
The market is ever-changing, so before you begin shopping in the Shuswap or across Canada, meet with your selected mortgage professional to establish your personal affordability. Ask questions; what will your monthly mortgage payments look like, are there any additional fees you should be ready for and what other financial obligations may come with purchasing a property? Ensure your lender completes a rate hold for the pre-approval and covers any questions you may have about future changes to your mortgage, such a "mortgage port" in the event you sell the property.
The Stress Test
In 2018 OSFI (Canada’s banking regulator) implemented changes to its mortgage underwriting standards that affects the level of mortgage affordability for borrowers. During these times, income verification, down payment proof and financial affordability are under added scrutiny.
To qualify for a mortgage loan at a bank, you now need to pass a “stress test.” You must prove you can afford payments at a qualifying interest rate (based on the greater of Canada’s current benchmark rate or the new contract mortgage rate plus 2%) making qualifying payments higher than your proposed mortgage contract.
With risk appetites of lenders changing, it may seem like your lender is asking for every financial document under the sun. Rest assured; a great financial institution reviews your unique financial situation to ensure you can afford the property you plan to purchase. You can expect a lender to ask you for the following paperwork to establish your affordability;
Identification – confirmation you are who you say you are.
Proof of income – Common income confirmation documents include Notice of Assessments, T4 slips, pay stubs or a signed letter from your employer. Income confirmation will vary depending on whether you’re self-employed, paid salary versus hourly wages or a commissioned-style employee.
Bank account and investment statements – often used to confirm down payment funds, income deposits and proof of invested assets.
Debt Figures – your lender will review with you any vehicle loans, credit cards, lines of credit or other monthly obligations you have that need to be factored into your debt ratio with the new mortgage payments.
Taking the time to get your finances in order before you apply for a mortgage approval will ensure you have a streamlined and enjoyable process. For questions pertaining to your unique mortgage needs connect with me today; firstname.lastname@example.org or 250-804-9874