With the recent new Mortgage policy instituted by the central bank of Canada in January 2018, it has become difficult for middle to low income Canadians to obtain a mortgage approval to purchase a home.  I get the banks. I really do. It was a disaster when the 2008 housing crisis hit the banks. Banks gave out mortgages with so little in return. A 5% down payment and sometimes even less was all that was required. Yes, you’d have to pay mortgage insurance, but you’d get 95% as a bank loan. So if you defaulted on payments, all you had to lose was your 5% and of course a messed up credit score which sadly wasn’t in it of itself a significant deterrent for far too many home owners.  Consequently, banks suffered tremendously. The amount of homes that were defaulted really affected the whole banking and insurance industry. Banks were left with billions of dollars of foreclosed homes that they were forced to sell at heavily reduced prices just to minimize liability. In 2008, they were so many bank-foreclosed homes that banks conducted weekly home auctions to sell homes at a fraction from their original price.  The inventory banks had to carry was overwhelming.

So I understand the banks. They need to secure preventive measures that such a catastrophe doesn’t reoccur.  They need much stiffer measures to protect themselves. They need that accountability. But the new system put into play by the Bank of Canada this past January 2018 which counters in anticipated higher interest rates makes it so difficult to get mortgage loans. Would -be buyers go through the whole process of making an offer on a home, doing their due diligence, even having the 20% down payment. But more often than not, the mortgages are refused – even for people who have a steady income and perfect credit score.  Moreover, even if you can prove to the bank that the property you want to buy has a rental income that will support a big portion of the mortgage; it makes little difference in the banks acceptance of a mortgage.

What the banks need to see is that you have enough income from your job to support a mortgage at a much higher rates and that you have little liability such as line of credit, credit card debt, car loans, etc.

Given the above, getting a mortgage is way more complex than it used to be, however; here are suggestions that can assist you in getting your mortgage approved:

Find a family member, close friend or business associate, who is willing to co-sign with you.   Co-signers are individuals who can prove to the bank that they have sufficient income and/or assets to support the requested mortgage amount.  Co-signers guarantee that the mortgage will be paid, if not the bank has the legal right for a lien on the co-signers assets. This route is definitely an easy way to secure a mortgage, but unfortunately, millions of Canadians do not have co-signers.

In that case, here’s plan B.

Search for a starter home.  It can be a condo that is in the preconstruction phase; or even better, find a plex that will provide you with an income.  Most importantly, find a home that has a good resale value, by researching the area, comparative sales, and that the home is near public transportation. Don’t worry so much if this is not your dream home. See it as a home that will build your equity and credibility. For instance, you find a home for $200,00.00. You  already have a 20% down payment which is $40,000 but the bank requests for a larger down payment. In that case, apply for a $25,000 loan at www.bhmfinancial.com. The process is simple. Regardless of your bank ground, poor credit, or little income, show them an acceptable asset (see requirements), and instantly get approved for a $25,000 loan. Yes, the interest of the $25,000 loan is higher than a conventional mortgage, but that’s not the most important aspect to look at. You can now go to the bank with more strength; you have $65,000 as a down payment, which constitutes 43% of the home price. Banks will consider giving you that mortgage now because you have much more at stake.  More likely than not, you will now get approved for the mortgage. You buy your home. The rent helps pay for the mortgage. You have the flexibility to pay off the bhmfinancial loan on your terms. In a few years, you will have built equity and if you bought in a desirable neighbourhood, you can bet the prices of homes have risen. You sell for a profit. You have cash in the bank, and now you can buy a bigger and better home.

In conclusion, getting mortgage approval is no simple feat. Finding a co-signer would be the easier route to take but not necessarily the better one. In the long run, getting that extra boost from bhmfinancial to assist with a more substantial down payment proves to be the more creative and clever way to take, for it will enhance your credit score, build equity, and for future mortgages you won’t have to be reliant on others.

The post Getting a Mortgage: It’s no simple feat appeared first on BHM Financial.