Our House

36 >> OUR HOUSE Spring 2017 Dominion LenDing CentreS A s an independent mortgage specialist, i receive calls every month from people who want to know how to qualify for a mortgage because they were declined by their bank. in many cases, i can help them right away. in other circumstances they have to wait, but we identify what they need to do to get in a better situation to qualify. Here are the top five reasons why people don't qualify for a mortgage. Lack of a down payment or equity With the end of cash-back mortgages offered by the banks, borrowers now have to come up with the down payment on their own. they can receive it as a gift from a family member, but no more cash-back from the lender can be used for down payments. the minimum down payment is five per cent for the purchase of an owner-occupied home or 20 per cent for a rental property. there must be a minimum of 20 per cent equity in the home if it is a refinance. this will help you qualify for a mortgage. Insufficient income With the high price of homes in markets such as Vancouver and toronto, sometimes people simply don't earn enough money to manage all their expenses—and still have a life. When you add up the mortgage payment, property taxes and strata fees, along with existing consumer debt, people are simply stretched too thin. For some home buyers, there are a few other other options to help qualify for a mortgage: accessing more money for a down payment (gifted); purchasing a home with an income suite; and looking at alternative lenders who accept room and board and other sources of income. in some instances, home buyers will look for someone else to go on title to add income to the application. New mortgage rules For those with less than 20 per cent down payment, the new mortgage rules are adjusted to the debt-to-income ratios and amortization for borrowers. the new rules for debt servicing apply to those with good credit scores and allow for a max of 39 per cent gross debt servicing (gDS). gDS is the gross monthly income required to cover the mortgage payments, property taxes and 50 per cent of the strata fee. in addition, a max of 44 per cent total debt servicing (tDS) of gross monthly income is allowed to cover the same and other consumer debts such as loans, credit cards and lines of credit. the maximum amortization was also reduced from 30 years to 25 years, effectively tightening qualification for borrowers equivalent to a one per cent interest rate hike. Credit issues Some people don't realize if they are late making credit card, mortgage or loan payments, the lender will update the credit bureau agencies and those late payments will reflect on their credit report, lowering their credit Five reasons people don't qualify for a mortgage By Pauline Tonkin mortgage score. other things can also affect credit scores such as a collection. For instance, that unpaid fitness membership fee or parking ticket can be sent to a collection agency. those marks on your credit report make your score drop like a rock. other things that will lower your credit score? going over your credit card limit and applying for credit often, requiring your credit report to be pulled by the bank, auto dealership and credit card companies. Finally, a consumer proposal and bankruptcy will greatly impact your score, which can stay on your report for up to seven years if real estate is involved, as is the case with bankruptcy. (to learn how to keep your credit in check read "three ways to rebuild your credit," p. 43.) TOOLBOX MISSTEpS

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