Ok. I get it.
I know that most of you are going to be very angry at this post because it may seem like I am actually encouraging people to get out there and buy properties.
As a matter of fact, anyone who calls me asking for financing options, the first question I say is: “Ok, are you really going to be buying a property in the next 3 months?”
And most of them say “no, but let’s chat anyways” to which we go on talking about how bad life is and what they can do eventually when things get better.
However, there are some people who still want or need to buy a property now. This could be: couples separating, people downsizing, people who see an opportunity, people where leases are expiring, people who can’t sell and need a refinance, or any other situation or scenario we can think of. So let’s talk to those people because hey! They might need help.
So here’s how to get financed during COVID19.
First – all financing today* requires some level of income. Even “net worth” programs need to know if you’ve got income coming in. And especially today – we need to not just show SOME level of income, we need to show a sustained and continuous level of income in order to qualify for a mortgage. The first thing I ask is: Are you facing a layoff? Is your company seeing a decrease in revenue? Is your employment guaranteed? Is it secured? What’s the worst-case scenario you can think of and how likely is it?
Once we get past this point, we go to: Okay, give me ALL of your income documents UP-FRONT. Right now is not the time to sit on documents. Today I had a Government employee fire me his T4, paystub, job letter and 3- months of payroll history. Bingo! That is exactly the kind of stuff we need to see in order to make 100% sure that not only will you be approved but you’re also going to close. What’s an approval without the keys?
- employment letter
- paystub – within the last 2 payrolls
- 2019 T4 or NOA
- 2018 T4 if I need an average
- 3 months payroll deposits
- And T1 General tax returns to see if we’re using any other income sources
So what if you get me all of that and you all of a sudden experience a layoff? Well the best answer I have been given thus far is: “It’s a case-by-case basis”. The lenders are trying to figure out: how long will your layoff be? Are you eligible for any Government programs? Did we know about this in advance? And truthfully there is no white and black answer here. It all … depends. Do you have savings? How is your covenant? How stretched are you after buying this property? Etc, etc.
What if you’re self-employed? THIS is a big one. If you’re a business-for-self employee, the lenders will ABSOLUTELY look at your current type of work. Are you able to work remotely? Are you part of the essential services list? Are you a face-to-face contractor or employee? How likely is it that your line of work will be faced with a reduction in revenue and/or opportunities? So many questions.
- 3 year tax returns
- copy of business licence or articles of incorporation
- last six months business bank account statements
- last six months’ worth of invoices
- website, or, source of business
- a detailed description of how you work, what you do, where you work etc.
The next thing is if you own investment property and are buying another one OR a property for you to move into. Here we go again with the questions! Did tenants pay? Will they keep paying? How leveraged are you? Do you have any HELOC (Home Equity Line) room on your other property(s)?
And finally your down payment. Hey! Guess what! You may or may not have noticed that the stock market is moving up and down lately. It’s more like 1 step forward, 3 steps back. Although the lenders are not concerned with how well your stocks are doing – perhaps it’s time to do a check-up and see for yourself? Don’t be caught holding a bag of stocks that are 2/3rds the value they were when you were planning on buying. (And besides, really? You’re holding your down payment in stocks? GICs or CASH is the ONLY place you should be putting down payment money WELL in advance). Also, don’t be surprised if suddenly your options for down payment go up, too. “65 is the new 80” is said in the alternative and private space. What do I mean? Well, if you need a second mortgage to help you fund your down payment, guess what? The “loan to values” or the amount they will lend vs the value of the property is shrinking. Capital is drying up. This ain’t good for you if you need that help, so, be careful!
- 120 days of your bank history for savings
- your investment accounts
- your RRSP accounts
- Gift letters signed and filled out by Giftor
- (sometimes) a giftor account bank statement
Of course CREDIT still reigns supreme. And more today than ever. I’m seeing lenders have much better rates for applicants with 800+ beacon scores than 680. And for 680 than 600. etc. Finally we are seeing a rational pricing market!
I know things are incredibly tough right now and maybe the last thing on your mind is your mortgage. I get that. I don’t want to be insensitive to this. However you might make a mistake if you don’t plan this well. This could be for your purchase, or your renewal, or your refinance. So – with the above steps AND a phone call (416-910-4448), we should map this out and see how things are going to end up for you.
Hope this helps!
Thanks for reading and of course, stay the f*ck home.