Mortgage FAQ
Here are a few of the mortgage FAQ we see the most from homeowners in Toronto, Etobicoke and Mississauga areas.
Etobicoke and Toronto Housing Market Insights for Homebuyers
Qualification & Mortgage Approval FAQ
The total amount that someone will be able to secure as a mortgage is based on their average annual income of the previous two years. Any financial obligations such as car payment, student loan, credit card, etc. will be considered and will reduce the total amount. If someone doesn’t carry any debts, the rule of thumb is to multiply his/her annual income by 4 – 4.5 times to find the mortgage approval amount.
This depends. The minimum credit score to secure a mortgage in Canada with a major financial institution is around 650. Ideally, a borrower’s credit should be above 680 as this will guaranty him/her to qualify for the lowest mortgage rates. If the borrower’s credit score is below 650, an alternative lender would certainly consider advancing money but the rate
will be higher. Score below 520 would be left with very limited options and possibly having to use a private lender at much higher rate.
The short answer is “Yes” but it will come with some restrictions such as, you will need to have a higher amount of equity tide to the property, at least 20%, in some case it could be as high as 40%. The lower the credit score and the more equity the lender would require you to have. It is also important to know that what appears and is reported on your credit report would have an impact on how the lender will underwrite the deal. If two people have the same credit score and
one of them has two bankruptcies and the other doesn’t have one. The person with two bankruptcies will mostly get declined.
Yes, there are some great self-employed programs available for home buyers. Lenders understand that self-employed people represent a significant part of their potential customers and for that reason several lenders have designed specific program for them. The borrower has to at least two years of business for self. It is important that the borrower has no credit or mortgage delinquencies. The minimum downpayment is 10% of the purchase price.
Yes, alternative lenders would accept to use bank statements to verify the borrower’s income. The minimum downpayment would be 20% and the rates would be slightly higher but it would allow a borrower to secure the financing.
2 Pieces of Identification with photo:
o Driver’s License
o Passport
o Permanent Resident Card
Proof of downpayment:
o 90 Days bank statement, it is important to outline that any deposit over $2,000 may require additional supporting documentation. This is a Federal requirement to prevent money laundering
o Investment Statement
o Gift Letter
Income:
o Letter of employment stating: position, time with the company, full address of the company, contact information of your superior
o 2 Recent Pay Stub
o Previous two years T4 or Notice of Assessment
o Previous two years of T1 General if Self-employed
o 6 to12 month bank statements in some occasions
Property Tax Statement
Purchase and Sales Agreement
MLS Listing
Mortgage Broker FAQ
Securing a mortgage approval takes between 24 and 48hrs once all the documents are provided by the borrowers.
The mortgage broker collects, reviews and assesses all the documents provided by the borrowers. Once he has a full understanding the full borrower’s financial situation, the mortgage broker can select the best mortgage option for his client and submit the deal to the selected lender.
No, all funds have to be directed to the mortgage broker’s brokerage. When the mortgage is with a tier 1 financial institution the mortgage broker gets paid by the financial institution. If the mortgage is with an alternative lender, the mortgage broker will receive a small compensation by the lender but he will also charge the borrower. Finally, if it is a private mortgage the borrower will be responsible to cover the entire broker’s fee.
Yes, the best rates are often offered with lenders that are only available thru mortgage broker. These mortgages also come with better conditions.
Fulfill all the mortgage conditions such as provide an appraisal to confirm the market value. Have the mortgage documents officer review and approve all the supporting documents. Confirm the borrower’s lawyer representative so that the lender can share the mortgage instructions for the official documents to be prepared and reviewed. Once all the documents are signed the borrower’s lawyer will register the mortgage and the transaction will be funded.
Private Mortgage FAQ
When traditional lenders decline an application due to credit, income, or time constraints, a private lender can provide a fast and flexible solution. Many homeowners use private mortgages for short-term needs like refinancing, debt consolidation or stopping a power of sale. Lenders come in a lot of different packages. The private lender is a good choice for situations where the borrower is unable to qualify for a traditional mortgage due to not-so-good credit, self-employment, or other issues. People in the business of house flipping frequently use a private lender because there is a very short period to complete the approval process and to close the deal. There could also be a situation where a family member or close friend is interested in lending money for a real estate purchase as an investment. The lender knows and understands the borrower’s situation and is willing to trust in the results.
Private mortgage rates are typically higher than bank rates and vary based on risk, equity, and property location. They are priced for flexibility and speed rather than long-term savings. Since the borrower frequently does not have a sufficient credit rating, the lender feels they are taking a chance and need to include a little cushion. There are other factors like the location of the property, i.e. whether it is located in a high-crime area or a neighbourhood that has declining property values and the general condition of the house. Fixer-uppers are more of a risk because the homeowner will need additional cash to complete the renovation.
Private mortgages offer quick approvals, flexible qualification requirements, and customized solutions when traditional financing isn’t available. Accessibility is one of the prime reasons. Closings are efficient and speedy. There is significantly less paperwork and private lenders are more considerate of less-than-perfect credit records or situations where it is difficult to substantiate employment records.
Most private lenders will lend up to 75% to 80% of the property’s value, depending on the location and overall risk. The maximum loan-to-value ratio (LTV) is based on multiple risk factors such as, location of the property, type of property, credit history, ability to make monthly payment as well as market environment. Very few lenders go beyond 80%, but rates and fees will be adjusted accordingly to reflect the risk associated with the transaction. Location and type of property are definitely the most important factors that private lenders will consider when assessing the deal.
Yes, private mortgages are commonly used as a short-term solution to access equity while improving credit before moving back to traditional financing. Working with a mortgage broker will allow you to create a personal relationship and have them understand your unique needs.
Most private lenders require basic documentation such as property details, mortgage statements, identification, and sometimes proof of income depending on the scenario. The private lender looks at a number of risk factors. The first is the amount of equity in the property. The lender will also carefully review credit history and the borrower’s income. Because the lender is concerned about recouping his or her investment and interest, he or she will look at other factors like liens or judgments that might take priority over the loan repayment.
Lenders we work with
Private Lenders
