Lenders You’ve Never Heard Of But Are Good For You

This past weekend one of my longest-standing friends, Ken, got married. I was at the wedding and we got to talking about what we all do for a living (which is inevitable at any wedding) and the topic of mortgages came up. When someone asked which banks I favour I said “oh, those you’ve probably never heard of” until the guest told me where his mortgage was and then I had egg on my face - it was one that he “probably never heard of”. Lucky for him he was smart enough to go with a mortgage broker or agent and not head to directly to the bank for his options. However, chances are that most people have never heard of: First National, MonCana, Merix Financial, Lendwise, MCAP, CMLS, just to name a few. Why? These are what we call in the industry monoline lenders. What that means is that they lend directly thru brokers only. Some have been around forever, some have just recently started, but all come with the financial backing of big-time heavyweights (whether a combination of big-bank funding, investors, pension funds and the like). I often times wonder why people are so overly concerned about who is lending them the money (as opposed to the lender being concerned who they are lending to). Yes the Great Big Financial Crisis of 2008 did put a few people out of business down south but since then we’ve had four major mortgage rule changes in Canada completely eliminating any “exotic lending” that was available here for a very short time. To put those concerns at ease I wanted to write about these Lenders You Have Never Heard Of But Are Good For You.

In the mortgage industry we hold about 25% of the market. Not a huge number but…


Don’t Sweat The Small Stuff

Sometimes, not too often, but sometimes clients of mine get agitated or annoyed about the conditions of a mortgage approval, and ask me “why do they want that?”. It’s a natural reaction, as our private financial affairs are just that - private. However when borrowing hundreds of thousands of dollars I have to say: don’t sweat the small stuff. My role as a mortgage agent is that I’m supposed to act on both the lenders behalf and yours, the borrower. As a result I’m put in the middle between you two and have to reasonably expect that there will be demands placed by either side, and manage those expectations and demands. I try and minimize the amount of documentation needed to make the life of a consumer easier, and NOT to “hide” things from the lender. I know what it is like to amass documentation and that’s why I always say to prepare everything in advance, but reality is that it’s rarely done this way.

Some examples of conditions the lenders may ask me for include:

Adding a T4 or two, or two years’ Notice of Assessments. This holds true especially for hourly-wage income earners. Typically we use a 2-year average for these kinds of clients and as such the lender may ask for back-up of income.

Proof of where down payment comes from. This is a BIG one lately. Some lenders ask for proof of large deposits by way of more statements from the giftor, if it is a gifted deposit. This means you have to ask your parents or giftors to go to their bank and get 90-days history of statements from their account, even when not on the mortgage! Anti-Money Laundering Legislation is the reason behind this, and rest assured it is in-line with reasonability.

So, my…


How To Win A Bidding War

They’re baaaaaaaaaaaaaaaaaaack!

With regret I inform you that bidding wars are happening with more regularity than Jim Flaherty wishes. In hot areas like Roncy, Bloor West, Junction, Leslieville and Riverdale, bidding wars are spiking up home values faster than the snow piled up last week. That’s not to say they will continue but in the short-term, while lending rates remain rock-steady and in the basement, and inventory is extremely low (quality inventory, that is), bidding wars are a fact of life in the Toronto market.

As a seasoned mortgage agent I get many calls from first-time and repeat buyers who are frustrated that this is happening. I have a young couple who just sold their condo through the tough Christmas market and were outbid by $50,000 on a townhouse, where the identical unit sold for only $75,000 less just 8 months ago. I have another amazing couple who earn a great healthy income but because of the new CMHC rules cannot borrow more than a million bucks, even though they can afford to pay off $1.5M. I have a third couple who are renting and biding their time, have been outbid a few too many times and are sitting and laughing with tears. Are those tears of joy? Probably not.

Worry not though! Bidding wars can be won but I have to give you a step-by-step scenarion of how:

First - when entering a bidding war, always always always get pre-approved beforehand to know how high you can go, and never ever ever go as high as your absolute limit. Reason being in today’s lending market you may be surprised to find out that even though the rules state you may borrow up to a limit, the underwriter(s) may disagree. Always leave a bit of a cushion when…


Self-Employed Borrowing

Ever since the mortgage rules have changed there has been an increased pressure for self-employed borrowers to shore up their taxes and declare more income (thus, pay more tax). There are three insurers that lend on self-employed applications but the rules (both official and unofficial) differ, so it’s important to know where to go based on your situation.

For example, CMHC will insure self-employed borrowers but will only accept “stated income” applications (which differ from their actual tax return numbers) if the client is self-employed for less than three years but more than two years. So essentially if you’re self-employed for three years or more you’re having to prove your income via tax returns and line 150 on your Notice of Assessment. In reality this rules out a great majority of borrowers so CMHC is not the best route to go if you’re self-employed.

Genworth, on the other hand, does not have a limit or parameter as to when you can be self-employed. You could have been self-employed for more than three years however there must be a cash-component to your business. This is something that is so against logic that it really bothers me as a mortgage agent. How could Genworth explain to me that a mechanic that earns say $60,000 a year gross, but needs $100,000 per year to qualify and has a cash component can qualify, but someone like a lawyer who does not have a cash component does not? Genworth claims they will look at every file independently but through experience I’ve realized that the cash component part is very important to them.

Canada Guaranty follows both CMHC and Genworth rules, but you must be self-employed for at least two years or more. Canada Guaranty offers 5% down for self-employed applications but CMHC and Genworth…

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