OVERCOMING THE CHALLENGES OF INCOME QUALIFYING
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Transcript of OVERCOMING THE CHALLENGES OF INCOME QUALIFYING
presents
OVERCOMING THE CHALLENGES
OF INCOME QUALIFYING
HOW DOES A “MESSY” FINANCIAL PROFILE QUALIFY FOR A
MORTGAGE? – WITH CASE STUDIES…
A little about Geoff Lee…
√ Co founder and Director of the Imani Orphan Care Foundation
● www.imaniorphancare.com
√ Over 22 years of real estate experience and investment
√ Member of…
● Better Business Bureau
● Chamber of Commerce
● Mortgage Brokers Association of British Columbia
● Canadian Association of Accredited Mortgage Professionals
√ Mortgage educator/key note speaker for…
● Wealthy Investment Network
● Business Network International
√ Regularly sourced for mortgage insights by the …
● Vancouver Sun
● Mortgage Broker News
√ Ranked amongst the top 3% mortgage brokers in Canada by CMP magazine
√ Finalist in 2014 CMP Canadian Mortgage Awards for Best Customer Service from
an independent office
√ Recipient of Dominion Lending Centres Silver award for 2012 and 2013
I’M READY TO INVEST!!...,
But the bank says I have to income qualify!
HOW???
WHAT ARE YOU?
Are you employed? Do you work for a company?
• Receive a consistent paycheck and get a T4 in the spring for tax filing purposes?
Or self-employed? Are you one of the following?
• Sole Proprietor – one person performs all functions. You pay personal taxes on net income (business expenses deducted)
• Incorporation – business is a separate entity. You pay personal taxes on wages/salary given to you from the incorporation.
• Limited Company – same as an incorporation.
COUNTING YOUR CHICKENS!!!... In other
words, what documents do you need to
show income qualification?
A. Are you employed? You may need the following:
1. T4’s for the previous year
2. 2 most current Notices of Assessment
3. Most recent paystub
4. Letter of employment
5. Up to 90 days of bank history to show you have the down payment and closing cost (usually 1.5%)
COUNTING YOUR CHICKENS!!!... In other
words, what documents do you need to
show income qualification?
A. Do you work for yourself? PROPRIETORSHIP MAY NEED:
1. T1 Generals for the most recent last 2 years
2. 2 most current Notices of Assessment
• Proof that no personal taxes are owing
3. Up to 90 days of bank history to show you have the down payment and
closing costs (usually 1.5%)
COUNTING YOUR CHICKENS!!!... In other
words, what documents do you need to
show income qualification?
A. Do you work for yourself? CORPORATION MAY NEED:
1. 2 most current Notices of Assessment - You need to show an income!
• Proof that no personal taxes are owing
2. Up to 90 days of bank history to show you have the down payment and closing costs (usually 1.5%)
3. Verification of Business For Self
a) Last 2 years of Business Licenses
b) Articles of Incorporation
c) Last 2 years of GST/HST remittance forms
d) Last 2 years of Financial Statements
e) Business Registration Form
Make sure you are
working with a good
accountant who is
aware of your future
goals and sets your
business up so that
you show at least an
average income on
your NOA.
But what if you don’t
income qualify, even
with using a great
accountant? Is
there another way?
YES!!
You can use “Stated
Income” which simply
means “stating” your
income to be
REASONABLE and to
reflect the time you
have been working
within that industry.
For what type of mortgages can I use
“STATED INCOME”?
• REFINANCE
• PURCHASE
• PRIMARY RESIDENCE
• PURCHASE PLUS IMPROVEMENTS OFF PRIMARY RESIDENCE
• SECOND HOMES
• INVESTMENT PROPERTIES
What do Insurer’s guidelines say about
“STATED INCOME”?
GENWORTH AND CANADA GUARANTY
• To be a permanent resident of CANADA
• MAXIMUM of 2 units in the property
• BUSINESS FOR SELF (BFS) for more than 2 years (Exceptions may apply)
• Must be the same industry for the last 2 years
• Cannot be COMMISSIONED SALES if HIGH RATIO
• Can be COMMISSIONED SALES if CONVENTIONAL
• Established CANADIAN credit
What do Insurer’s guidelines say about
“STATED INCOME”?
GENWORTH AND CANADA GUARANTY
• GDS and TDS ratios (GDS/TDS)
• Credit score of >680 and GDS/TDS ratios of 39/44
• Credit score of <680 and GDS/TDS ratios of 35/42
• 2 – 2 – 2 RULE
• Up to 2 years with NO late payments
• Minimum of 2 “trade lines” such as a credit card
• Minimum of $2,000 dollar credit limit
• Low utilization of debt
What do Insurer’s guidelines say about
“STATED INCOME”?
GENWORTH AND CANADA GUARANTY
• ABSOLUTELY NO PERSONAL TAXES OWING
• DP needs to be 10% of purchase price… but
• 5% needs to be from own resources
• 5% can be gifted from an immediate family member
Insurer’s premiums
Mortgage Default Insurance is required, generally, when you are contributing between 5%
and 20% of the value of the property as a down payment. Other factors such as investment
properties and Self Employed can affect whether or not you pay insurance premiums.
In Canada, we have 3 companies that provide that insurance; Genworth, CMHC, and
Canada Guaranty.
We pay for this insurance through premiums that are usually added to our mortgage. The
following charts show premiums charged by mortgage insurers.
What premiums do you pay with “STATED
INCOME” (of BFS)?
INSURERS GIVES THE FOLLOWING RATE PREMIUMS FOR BFS:
DOWN PAYMENT LOAN TO VALUE PERCENTAGE OF LOAN AMOUNT
15% - 10% of Purchase Price 85.01% - 90% 5.45%
20% - 15% of Purchase Price 80.01% - 85% 3.35%
25% - 20% of Purchase Price 75.01% - 80% 1.90%
30% - 25% of Purchase Price 65.01% - 75% 1.15%
>35% of Purchase Price Up to 65.00% 0.90%
What premiums do you pay for “INVESTMENT
PROPERTIES”?
INSURERS CHARGES THE FOLLOWING PREMIUMS FOR PROPERTIES BOUGHT FOR INVESTMENT:
DOWN PAYMENT LOAN TO VALUE PERCENTAGE OF LOAN AMOUNT
25% - 20% of Purchase Price 75.01% - 80% 2.90%
30% - 25% of Purchase Price 65.01% - 75% 2.00%
>35% of Purchase Price Up to 65.00% 1.45%
What premiums do you pay for “STANDARD
PREMIUMS” (or up to 4 residential properties)?
INSURERS CHARGES THE FOLLOWING PREMIUMS FOR RESIDENTIAL PROPERTIES:
DOWN PAYMENT LOAN TO VALUE PERCENTAGE OF LOAN AMOUNT
10% - 5% of Purchase Price 90.1% - 95% 3.15%
15% - 10% of Purchase Price 85.01% - 90% 2.40%
20% - 15% of Purchase Price 80.01% - 85% 1.80%
25% - 20% of Purchase Price 75.01% - 80% 1.25%
30% - 25% of Purchase Price 65.01% - 75% 0.75%
>35% of Purchase Price Up to 65.00% 0.60%
“An investment in knowledge
pays the best interest”Benjamin Franklin
“Lasting Quote….”
Get in touch with us….
www.geoffleemortgage.com
Twitter: @geoffleeca
Linked In: http://ca.linkedin.com/in/geoffleemortgage/
Email: [email protected]
Phone: 1.778.552.3489
Thanks so much for attending the GLM Mortgage Group
workshop – OVERCOMING CHALLENGES OF INCOME
QUALIFYING 101.
If you have any questions please call me at 778.552.3489
or email me at [email protected].
“We specialize in getting you the fastest “YES” at the
SHARPEST RATE… GUARANTEED!”
- Geoff Lee