Is it getting more difficult to get a mortgage ?

Don’t expect rubber stamped approvals anymore….. Whether you are planning to move from an existing home or are stepping into the property market for the first time, and unless you have a substantial supply of cash, you will likely require a mortgage. Interest rates may be at historic lows but with uncertain and changing market conditions, lenders want to be doubly sure that borrowers can repay a mortgage. This has led to lenders placing more stringent conditions upon borrowers and demanding more detailed and verifiable proof of income and ability to pay. A borrower’s income, expenses, credit history and down payment are all considered when assessing whether they qualify for a mortgage. Prior to eight months ago, for a standard salary individual, you could do the mortgage on a job letter, Now you need a job letter … then they want a pay stub … and a lot of times they’ll ask for two paystubs, then they’re going to want either a T-4 or a notice of assessment. The bank wants to make sure that you can afford the mortgage. It’s tough love; they want to make sure that you’re going to be able to afford to stay in your house. If you work overtime it is essential to check with the lender if this income can be counted towards your mortgage qualification. Because of increased default rates in some communities, some lenders will now only consider a base salary when evaluating a mortgage application. If you have a stable job, a decent-sized deposit and a good credit score, putting in the hard work at the application stage can secure you a good deal. With prices having softened due to the recession, housing has never been more affordable. It is a little more difficult to qualify when it comes to showing your income and proving different parts of it, but it’s also much easier to qualify on the numbers because house prices are down and mortgage rates are still low. However, mortgage qualification has become rather more testing for those with lower credit scores, smaller deposits or irregular income. Lower credit scores have become more difficult to get traditional financing for. You can still quite often get a mortgage but it’s just going to cost more. Those with very poor credit probably have much more difficulty today. If you’ve got bad credit and haven’t been proven to be able to manage it, maybe you need to get things fixed up before you get a mortgage. It has also become a lot tougher for self-employed individuals to get mortgage financing. Lenders are still allowing self-employed applicants to state their own income levels but the income stated must be deemed reasonable based on the size and type of business. Many lenders, are demanding extensive documentary evidence from self-employed applicants and even then, lenders can refuse to provide a mortgage if they believe that disparities between taxable and real income are not reasonable. It is not just borrowers buying their own homes who are facing tougher lending criteria. For buyers of rental properties, lenders have become less generous when calculating how much rental income can be used to qualify a mortgage. Conventional lenders used to include up to 80{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} of the rental income when calculating how much homebuyers could borrow. However, due to a higher risk of default, now he says some lenders are including only 50{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} to 70{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} of the rental income. The best advise is to not have to worry about this…. Take the steps needed to maintain a HIGH beacon score….. We’ll help 🙂

Michael Mullis