Mortgage decline? lets discuss some options together:

Within the Canadian mortgage industry there are legitimate reasons for a client’s mortgage decline and then there are “bank policy” and “political”  reasons for your mortgage to be declined.  Your mortgage will be declined for one of three reasons:

• Credit
• Income
• Down payment

Lets further expand on these reasons for your mortgage decline along with providing honest answers and some solutions for you.  The good news is, depending upon your reason for decline we might have some very good mortgage options for you.

Mortgage decline reason # 1 – Credit:

• This is an interesting topic and largely hinges directly to your down payment.  The larger your down payment, the less your credit score matters in some cases.  Within Canada  your credit is primarily scored by Equifax and is calculated into what is called a beacon score – this is a number out of 900, with most clients that we see fitting between the mid – 600s and the low 700s.  As a side note if you order your personal score through Equifax they will send you a graph showing most Canadians have scores in the mid 700s to mid 800s, in over a decade in the mortgage industry and in working with thousands of clients I have found this to be a misrepresentation of the normal Canadian public so don’t worry if you are in the 600s – you are doing just fine. 
• With a down payment of less than 20% we have to work with CMHC for almost all purchases.  The government has set a minimum credit score for CMHC mortgages of 600, however a 600 credit score does not guarantee approval.  They will also look at the amount of time you have had credit, your credit limits, and your repayment history.
• If you have a credit score of under 600 and a down payment of 5% or 10% unfortunately your only other approval option is for us to add a strong cosigner.
• If you have a credit score of over 600 but have been declined by CMHC, definitely contact me and we can review your credit together as we have the option of dealing with all three mortgage insurers in Canada: CMHC, Genworth, and Canada Guaranty.  Some lenders only deal with one insurer so we can work toward approaching the other insurers for your approval.
• If you have a down payment of 20% or more and have been bank declined due to credit we have several good lenders who specialize in clients who have had past credit challenges.

 Mortgage decline reason # 2 – Income:

• There are two typical reasons for your mortgage decline based upon income, (assuming you make enough income to qualify) either you have two part time jobs and the lender will only accept the income from one, or you are self employed.
• If you are purchasing a home with less than 20% down payment the government imposed guidelines are for you to have a two year history of both of your part time incomes in order to use them both.  There is not much bending in this policy, the only exception we are regularly able to make is if you are in the same industry for several years with one position and then decide to split it into to permanent full time positions.  In this case we are often able to look at an income history for your previous position along with confirming your two new positions are permanent and in the same industry.  If you have more than 20% down payment we are often able to use both of your incomes with a one month history of both positions.
• The second common income decline is due to you being self employed.  Many self employed clients do very well in the overall income category but when it comes time for tax reporting they are able to structure their income in a more favorable way that allows them to show quite a bit less personally.  This is a great strategy until it comes time to approve a mortgage with the bank.  Fortunately we have many creative and excellent solutions for you.  I have written an extensive article on your self employed options here – long and short contact me and we will work out your options with you to ensure a great outcome for your mortgage.

Mortgage decline reason # 3 – Down payment:

• Assuming our credit and income is strong, clients will be declined by some banks for not having the government required 5% down payment.  We do have a solution for this challenge as well, for clients with strong income and credit we are often able to work with a couple of the remaining lenders in Canada who participate in the CMHC flex down program.  This program allows us to offer you best rates and terms while at the same time approving you for a mortgage with a borrowed down payment.  
• The flex down is a two step process, first off we will refer you to a bank branch partner of ours for the approval of an unsecured line of credit for your 5% down payment, secondly we will submit you to one of our lending partners and CMHC for their approval.  If you would like to discuss this solution for your new home purchase please contact me.

If you have received a mortgage decline and you think you might fit one of the solutions we discussed above please feel free to contact me directly.  I would be happy to work through your mortgage options with you and ensure we have the best creative solutions, rates, and terms for your new home mortgage.

Rylan Hahn 403-802-7201 for solutions for your mortgage decline