The Black and White of Some of the New Mortgage Rules to Qualify....

More and more mortgage lenders are optioning to put in the changes being asked for in regards mortgage qualification rules. Now this is not new news, just that more and more of the lenders are picking up these new ways to qualify your mortgage approval or pre approval. Lots of people are confused over some of these changes, so I am going to try to put it into black and white type. It does however make it more paramount to have a mortgage agent on your side, and not an order taker to make sure you have the best mortgage product and rate that works for your individual or family needs. Someone that knows what is going on in the industry on a regular basis, and knows who does or does not do what. Remember in one of my other posts, when I mentioned, "Jack of all Trades - Master of Nothing"

The things that have changed (and are being put into practice with more and more lenders) are as follows:

1) Unsecured debt is being qualified with a 3% payment based on the balance outstanding. What this means is regardless of if you have a low interest rate credit card or personal line of credit, the payment used to qualify you will be 3% of what you owe. For example: on a $10,000 Personal Line of Credit - maybe your payment with the bank is $150. You will have to qualify on your mortgage application using a $300 payment. 

2) Now the largest change that does affect things is this one. On Unsecured Lines of Credit. Now, some lenders still allow you to use the provable payment amount you have on the outstanding debt. But these lenders are becoming few and far between as more are getting onto this band wagon. What is happening is this. If you have for example a rental property with a $390,000 HELOC balance and a limit of $500,000 and your provable payment is $1250.00 per month. What the lender is requiring now is this, 4.6% of the available limit. So in this same situation, the payment being used on the mortgage application for qualification would be $1916.67 per month payment to qualify.

** you can start to see how this changes the face of how mortgage are being qualified and the purchase prices that can be obtained **

3) No more Cash Back for Down Payment (although there are still cash back options, but you have to prove the min 5% down payment and have A1 Credit to qualify): however keep in mind, that the lenders that are doing this are getting few and far between, and the ones we currently have doing it, require you to meet a tonne of requirements to get the approval.

4) Million and One Dollar purchases, have to have min 20% down to get approved, and most have CMHC or GE backing behind the scenes. Use to be just the sliding scale for a majority of lenders for approval numbers, but the min 20% has changed things. Granted, if you are purchasing a million dollar property you should have some money behind you.. but still, it changes how you move your money around at the end of the day.

5) Stated Income lenders are becoming less and less - and min of 10% down required (5% own funds) and a hefty CMHC premium is added to your mortgage numbers. Going to 4.75% from the usual 2%!

6) Child Tax Benefit is no longer a source of income that can be added (with most lenders)

7) Some lenders are also not allowing Guarantor income on an application unless it is spousal or spousal interest in the property or the guarantor resides in the property

8) Heat Caculation:  it is now done based on $0.75/per sq foot of property. That means if you have a 1500 sq/ft property x $0.75 = $1125/12 months = $94.75 to use in the heat caculation. This does change ratios sometimes; considering we could just use $50-85 prior, unless of course it was Servus Credit Union then we use $200 (which is actually more accurate anyhow)

9) New Builds Property Tax Caculation: the Insurers/Lenders are going to use 1% of the purchase price when Caculating property taxes... this being said I know of one or two lenders currently that are using this model. Unless we can prove what the exact taxes are, the 1% will be used. Of course for existing houses, the property taxes can be proven via mls or solicitor

Now this is not the end of the world, yes it makes it harder to qualify, but in the same breath not really - it lowers what some individuals can qualify for. It means, "Yes" you should be talking to a mortgage agent, whether that be myself or a some other mortgage agent, you need to have someone that is looking out for your best interests and not an order taker. It also means that you need to start looking at your mortgage and your long term goals - which is a good thing, you should be doing that anyhow.  Just because there are now some definite black and white guidelines - it does not mean there are not multiple mortgage products out there for you and your situation.

Give me a call today to talk about your mortgage options. Whether you are just getting into the market as a First Time Home Buyer, or whether you are a seasoned veteran ... these changes do affect you. Get it done right the first time. Make the call.

Shake it Off...

Ok, so yes it is Monday, unfailingly it is the first day of the work week, every week. As a co worker of mine stated, it gets a bad rap being that it is the first day back to work for most of us. Being a mortgage agent however, I work the dreaded 24/7 - so Monday is just another day, except when school is in, I get to look forward to some quiet work time... so Mondays for me are not that bad really. I have learned to "shake it off".. Monday could be the first day closer to Friday, which no matter if you work 24/7 or not, is still the best day... we have been programed to think this. How about this thought; do you think your dog cares what day it is? ... Nope. Live each day to its fullest.. that is what they do. It is a page from my four legged friends book, that I will take advice from today. Hope you do to.

Now onto some interesting news that I know is out there already in regards to rate hikes. Yes they happened, yes they went up,  a lot more than we have seen in the last couple of changes. However contrary to the general consensus, they are not terrible and super high. You can still get a 5 year fixed at 3.29%! or get the cost certainty on a 10 year fixed at 3.99%. The Variable rates are coming back as a strong alternative as well - if you qualify at the 5.14% posted rate. Lenders still have great incentives on the transfer/switch programs, and HELOCS at Prime + 0.5% you can not ask for better. We all knew that rates were going to rise, they always do come July - every time with out fail. If you missed out on the 2.79% boat, I can understand your frustration, however look at it this way - On a $400,000 requested Mortgage Amount that is $1850/month approximate mortgage payment at the old rate....with the new 3.29% the approximate mortgage payment is $1950/month. That is about a $100 difference between rates - now while this is not a small number to scoff at, it breaks down to about $25/week. If you are worried because now you will not be able to "afford" the home or become "house poor" - this is a mortgage amount you should not be looking at in the first place. Think of it. What would you do in 5 years when your term is up; life has usually changed maybe you had a baby and now only have one income coming in, maybe someone has lost a job, maybe you did not get the raise you were banking on, or you just went business for self/contracting, or you just had to spend money on a new furnace, shingles etc - and now at renewal rates are back to the high 4% or even early 5% range (which is where we were before all these super low rates came into play).. that is an increase in your payment of about $300-600 per month - can you afford that? If you are that worried about rates in regards to your final payment for what ever payment frequency you want - then you should be seriously looking at the 10 year rate. If you really like the low rate numbers, maybe now look at the variable rate - you get a low rate in regards to Prime, and it qualifies at the posted rate - which currently at the 5.14% rate, you can be more certain you will be ok come renewal time in regards to payments etc.

So " Shake It Off " - those Monday and rate increase blues. They are both not terrible things and there are indeed options out there and different ways to put together the same puzzle picture. You never know, maybe this Monday will be the best day for you ever - you may talk to an amazing mortgage agent about your mortgage options (wink wink) and have them tailored just for you. Finally having peace of mind in regards to your mortgage future. The glass can always be half full, even if today it is half full of rain. Happy Monday!