Be careful before you break that mortgage





Okay…so not that Number 2.  But it’s still funny.

In our last instalment – we talked about CREDIT.

Today’s tidbit is about Employment/Income.

While Credit is the pinnacle to the Big 4 Criteria that does not mean that the other 3 are to be under estimated.

For instance…Employment/Income is an enormous component that may seem superficial on the surface…but as you will learn momentarily – we look at it from an entirely different perspective.

You have a job. Great! Are you Permanent Full Time? Permanent Part Time? Casual? On Contract? Self Employed? Retired? Are you paid a Salary? Are you paid Hourly Wage? Do you have Over Time Earnings? Do you get Annual Bonuses? Are you on Disability? Are you on Maternity/Paternity Leave? Do you have 3 years of Industry Experience? Are you on Work Probation? Are your earnings derived from a Pension plan? Do you claim Tips as Income?

Every one of the above items has it’s own unique set of rules for us Mortgage guys to follow. Some lenders want letter’s of employment and pay stubs…other’s will also want 2 years of Notices of Assessment, another may also want your T1 Generals…and on and on it goes.

Typically our clients are Permanent Full Time with either an Hourly Wage or Annual Salary. And it’s simple enough for us to prove their earnings. However, from time to time we get a client who earns a boatload of Over Time pay…and we may not be able to use it.

Things are getting complicated now…fret not.

When it comes down to it, most income a person makes is legitimate, but the requirement for Brokers to enforce “Prudent Underwriting” demands that we show Consistency in said earnings.

What is Consistency from our viewpoint? 2 Years Average.

“But I don’t have 2 years average and I really need a house.”…well, we empathize with your situation – don’t be surprised if we ask for a Co-Borrower.

If you are Self-Employed…the demands on proving your income is a bit more of a pain in the ass (Yes…I said it), especially if your business is Incorporated or a Limited Liability Company.

If this is you – be prepared! You will be asked to provide your Income Tax and Financial Statements for at least 2 complete tax years…and they of course have to be the 2 most recent tax years.

And if you owe any personal income tax…it has to be paid in full before we can provide a mortgage to you.   Each Self Employed professional is different – it’s best to speak to your broker directly about your situation…you may have a lot of expenses to write off against your income and it looks poor on paper at the end of the day…you are probably still okay under the CMHC Self Employed program.

Confused at all this?   Don’t sweat it. We’ll assess your situation properly and let you know EXACTLY what you need to provide in order to prove your income.

Our next installment will be about your Down Payment! It’s great you have one…but we want to know where it came from!

That’s all for today!

Happy Friday Everyone!