Don’t worry, I understand.
Most of you are going to be very angry at this post because it may seem like I am actually encouraging people to get out there and buy properties.
As a matter of fact, anyone who calls me asking for financing options, the first question I ask them is: “Are you really going to be buying a property in the next 3 months?”
Most of them say “no, but we want to be prepared, we hear rates are low right now, and we want to at least know what is required.”
Being prepared is great. I am a huge advocate of that. So, in most instances we go about talking about how different things are, being stuck indoors, and what will happen once things settle down on the other side of this.
There are still some people who want or need to buy a property now. People who are in situations like
- couples separating
- people downsizing,
- people who see an opportunity,
- people who are renting and their lease is expiring
- people who bought pre-sales that are now coming up for completion.
There are also people who are not able to sell and they require a refinance.
There are a lot of different reasons someone may need help right now.
Here is how things are shaping up with the lenders right now. The following are tips on how to get financed during COVID19.
First – all financing – in this environment especially – requires some level of income. Even “net worth” programs require some form of income confirmation. You have to make payments, and they need to make sure that you have a way to make them. And especially today – we need to not just show SOME level of income, we need to show a sustained and continuous level of income in order to qualify for a mortgage.
The most important question right now is: Are you facing a layoff? Is your company seeing a decrease in revenue? Is your employment guaranteed? Is it secured? What’s the worst-case scenario you can think of and how likely is it?
If you are laid off, and even if you have EI coming in, this is a HARD STOP with all of the lenders.
**update on this, there are now a few lenders that are allowing CERB (Canadian Emergency Care Benefits)** – there are certain stipulations. Give me a call to discuss your specific details.
Once we have established that you are not facing any lay offs, and your job is going to continue, the next step: Okay, give me ALL of your income documents UP-FRONT. More than EVER, we need to have EVERYTHING up front.
As an example, yesterday, I had a couple, both on Salary, Essential Service Jobs, send me their T4, paystub, job letter and 3- months of payroll history. This is exactly how we can help you, by you helping us. That is exactly the kind of stuff we need to see in order to make 100% sure that not only will you be approved but you’re also going to close. At the end of the day, an approval means nothing to you without the keys to your new place, right?
- employment letter
- paystub – within the last 2 payrolls
- 2019 T4 or NOA
- 2018 T4 if I need an average
- 3 months payroll deposits
- And T1 General tax returns to see if we’re using any other income sources
So what if you get me all of that and you all of a sudden experience a layoff? Well the best answer I have been given thus far is: “It’s a case-by-case basis”. The lenders are trying to figure out: how long your layoff is expected to be? Are you eligible for any Government programs? Did we know about this in advance? And truthfully there is no clear answer here. It all … depends. Do you have savings? How is your covenant? How stretched are you after buying this property? Etc, etc.
What if you’re self-employed? THIS is a big one. If you’re a business-for-self employee, the lenders will ABSOLUTELY look at your current type of work. Are you able to work remotely? Are you part of the essential services list? Are you a face-to-face contractor or employee? How likely is it that your line of work will be faced with a reduction in revenue and/or opportunities? So many questions.
- 3 year tax returns
- copy of business licence or articles of incorporation
- last six months business bank account statements
- last six months’ worth of invoices
- website, or, source of business
- a detailed description of how you work, what you do, where you work etc.
The next thing is if you own investment property and are buying another one OR a property for you to move into. Here we go again with the questions! Did tenants pay? Will they keep paying? How leveraged are you? Do you have any HELOC (Home Equity Line) room on your other property(s)?
And finally your down payment. Hey! Guess what! You may or may not have noticed that the stock market is moving up and down lately. It’s more like 1 step forward, 3 steps back. Although the lenders are not concerned with how well your stocks are doing – perhaps it’s time to do a check-up and see for yourself? Don’t be caught holding a bag of stocks that are 2/3rds the value they were when you were planning on buying. (And besides, really? You’re holding your down payment in stocks? GICs or CASH is the ONLY place you should be putting down payment money WELL in advance). Also, don’t be surprised if suddenly your options for down payment go up, too. “65 is the new 80” is said in the alternative and private space. What do I mean? Well, if you need a second mortgage to help you fund your down payment, guess what? The “loan to values” or the amount they will lend vs the value of the property is shrinking. Capital is drying up. This ain’t good for you if you need that help, so, be careful!
- 120 days of your bank history for savings
- your investment accounts
- your RRSP accounts
- Gift letters signed and filled out by Giftor
- (sometimes) a giftor account bank statement
Of course CREDIT still reigns supreme. And more today than ever. I’m seeing lenders have much better rates for applicants with 800+ beacon scores than 680. And for 680 than 600. etc. Finally we are seeing a rational pricing market!
I know things are incredibly in flux right now and maybe the last thing on your mind is your mortgage. I get that. I don’t want to be insensitive to this. However you might make a mistake if you don’t plan this well. This could be for your purchase, or your renewal, or your refinance. So – with the above steps AND a phone call (778-233-2377), we should map this out and see how things are going to end up for you.
Hope this helps!
Thanks for reading and of course, PLEASE STAY HOME.
The Truth about mortgage pre-approvals
Are we Pre-Approved? Not what you might think it means… Many clients think that having a mortgage pre approval puts them in a position to write offers on properties without inserting a ‘subject to receiving and approving financing’ clause in their contract.
April Real Estate Board of Greater Vancouver News
Here is a Quick Summary of the April stats for Real Estate In Greater Vancouver.
2017 Vancouver Real Estate Market
For quite some time now there has been a very limited supply of properties on the market and most Realtors that I speak with on a regular basis are starting to have buyers lineup. With very few properties to show these buyers, we are beginning to see similar trends that we saw a year ago.
Two main Reasons Rates Will Not Hit 5%
High borrowing rates are a relic. Canadian regulators may soon force borrowers to qualify at interest rates two percentage points above the contract rate. With many posted mortgage rates now approaching and even surpassing 3.00% (depending on the term), this means borrowers will soon need to show they can afford payments based on rates…
Value of Mortgage Brokers Greater Than Ever
Mortgage Rule Changes have made Mortgage Brokers even more invaluable. In October of 2016, the entire Country was surprised by reports of considerable changes to mortgage rules announced by the Canadian Government. The Department of Finance Canada announced new mortgage rules that have since had a tempering effect on the market.
Canadian Mortgage Rates- How they are influenced by the U.S.
In the midst of the financial crisis, America’s equivalent of our central bank – the Federal Reserve- opted to lower its short-term overnight interest rates down to zero.Things did not stop there. The goal all along was to lower longer term interest rates, which are market driven and not directly influenced by the central bank…
BC Home Partnership Program
By now I’m sure that you have heard about the announcement by the provincial government yesterday surrounding down payment. This is some good news, although with some challenges that need to be addressed, and once the dust settles, will likely have a very small impact- but still good news nonetheless…
Did Buyers In August Overpay Just To Get a Low Rate?
I came across this article published in the Globe and Mail which I thought did a great job of explaining the phenomenon of people rushing out to buy a house to take advantage of lower rates. It just so happens that many people did this in August. Rates – when compared to historical levels…
Thank You for Paying it Forward
This year, I tried something a little different over the holidays. To each and every one of my clients, I sent out a $5 bill asking them to use this money towards doing something nice for someone….anyone, that they cross paths with – and encouraging them to “Pay it Forward.”
Mortgage Rule Changes – How they Impact the Consumer
All these changes impacted mostly those that have less than 20% down payment and therefore require default insurance (CMHC, Genworth or Canada Guaranty). Unfortunately, there are more changes to come. In fact, many of the lenders are already implementing these changes as I write this blog although these changes are mean to come into effect…