OSFI, the regulator of all Canadian financial institutions, has imposed changes that have tightened the lending reins on all regulated lenders and CMHC to encourage prudent residential mortgage underwriting standards. Called the B20 Guidelines, there are actually 17 pages of rules and regulations to follow now.
So if you've applied for a loan lately, that's why there's been an increased amount of information requested. If you're thinking of taking on a mortgage, be sure to work with a mortgage professional right from the start, either through your bank or a broker, to ensure you know exactly what kind of funds are available to you and what you need to provide in order to receive those funds.
Some items to remember mentioned to me from mortgage professionals I work with are:
Mortgage Approval Takes More Time Now
Pre-approval doesn't mean much until you've written an offer on a specific property. Lenders may ask for an appraisal of the property, site survey, minutes and details about stratas, building inspection results and more before you receive final approval. This takes time, so give yourself at least 10 working days for financing subject removal on your offer.
High-ratio Financing (where the client's downpayment is less than 20%) with both Canadian Mortgage Housing Corporation (CMHC) and Genworth is limited to properties valued at less than $1,000,000.
Home Equity Lines of Credit
Loan to Value (LTV) is now 65% down from a maximum of 80%.
Clients seeking variable rates and fixed terms less than 5 years will need to qualify on "the greater of the contractual mortgage rate or the Five-Year Benchmark Rate published by the Bank of Canada" (currently 5.24%).
Clients need to be able to prove that these funds have been in their ownership for at least 90 days.
Cash back should not be considered part of the down payment, which could mean the end of 100% financing in the marketplace.
Proof of Income for Salaried Employees
You'll need to provide 2 or 3 of your most recent paystubs and a Notice of Assessment for the most recent tax year.
Proof of Income for Salary + Commission Employees
You'll need to provide proof of 3 years' income to show average commission earned. Clients can provide 3 years' Notice of Assessment, or 3 years' T1 General or 3 years T4. In any case, Notice of Assessment for the most recent tax year is required.
Proof of Income for Self-Employed Individuals
You'll need to provide 3 years' T1 General and Notice of Assessment for the most recent tax year. If clients own an incorporated company, company financial statements sometimes help, especially for clients who retain most of the profits in the company.
The above are just a few of the basics. Everyone's situation is different and this is by no means a comprehensive list. Work closely with your mortgage broker and/or bank to ensure your transaction is as smooth and stress-free as possible.
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