New mortgage rules make it tougher
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The subject of our article today should lay the foundation for all mortgage lenders and administrators to tread softly with their new mortgage applicants. Much more due diligence is required thanks to new mortgage rules.
Some five weeks ago I took a mortgage application from an elderly couple who wanted to buy their first home. Once I had taken the application I conducted my normal credit checks and ascertained that indeed I could get them a mortgage, provided the information presented on the application was true and accurate. I asked our couple to provide verification of their stated incomes, and verification of the down payment (15% of purchase price). Both items are very important under the new mortgage guidelines for lenders,
She had two permanent part-time jobs, while he was a self-employed individual. For her we had to provide letters from her respective employers as well as paystubs. That was not good enough! We also had to send her “Notices of Assessment” for the last three years and a copy of her bank account for the last three months to show her pensions were being deposited directly to her bank account. For him, since he was and is self-employed, the lender required the last three years worth of “Notices of Assessment”.
The down payment was also an issue. New rules dictate that any down payment must be in your possession for at least three months (unless it is a gift from
a direct relative).
His investments, both outside as well as inside an RRSP, were administered by a financial advisor. The reporting statements from the individual investment sources were only sent out every three months. We had the statements for March of 2013, and June of 2013, but nothing newer. He did not know where he had placed the newer statements.
We had to get the financial advisor to request special documents, which were received by e-mail from online sources. These e-mails did not provide the ownership of the investments, they just showed the amounts within. We had to go back to the advisor to request special endorsements to prove ownership.
I can appreciate what the system is calling for, but after showing they had the money, then we had to show the money being cashed in and deposited to their chequing account, then out of their chequing account to the lawyer who was handling the purchase.
What took two hours some two years ago to prove everything took five weeks to secure under the new rules. BE AWARE!
Here is a second example for your perusal.
Wanda has lived in the same home for 22 years. Her husband died five years ago and even though they had life insurance on the mortgage, the lending institution said that her husband’s death was result of a prior medical condition.
Her only visible incomes are survivor benefits and OAS. She has students living with her and paying for board. She does not declare this on her income tax.
Her first mortgage lender asks her to fill out a credit application before they offer her a renewal. She tells them that with the “board income” she can afford to live there. Her lender does not agree and tells her that she will have to sell the house in order to payback the mortgage amount, since they are not renewing.
Thankfully, we found a willing lender for her who would accept sworn declarations from her student tenants that they indeed pay her enough money that she does indeed qualify.
Imagine if Wanda had not read other of my articles in the Ottawa Sun. She probably would be forced to sell the house. Times are getting tougher.
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