05/20/2020
COVID-19 Mortgages – They exist, here’s how to get one.
Despite all the changes that have occurred as a result of the novel coronavirus, one thing is still true. You can still buy a house and you can still get a mortgage.
As a mortgage agent, I wondered if the global pandemic would result in me having nothing to do. For a brief moment, I worried that the phone calls and applications would stop coming in and I would have a lot of idle time. I didn’t need to worry long, as the phones kept ringing and emails kept coming. Even more interesting was the fact that the approvals kept rolling in. A large part of the economy may have shut down, but the mortgage industry was not one of those parts.
If you have found the house of your dreams and want to get a mortgage, here are a few things to keep in mind to ensure you are successful.
1. Have your income documents ready to go! Right now, many lenders are requiring income documents up front and are asking for more of them.
a. If you are employed with a company, current letters of employment (LOE) have become a necessity. Lenders want to know if you are still employed and/or still being paid. When asking your employer for a letter of employment, be sure to ask that it include your job title, guaranteed hours of work, hourly wage or annual salary, how long you have been working, and that you are expected to continue working. Lenders will also want the most recent month of pay stubs or direct deposit slips and 2 years T4s.
b. If you are in business for yourself, you can still get a mortgage. You will require your most recent 2 years T1 Generals and company financial statements. You will also need to provide a description of the business, when it was established, number of employees, and its current status (e.g. operating, shut down). Be prepared to explain how you are still generating business and attracting clients.
2. Manage your expectations. If you are currently collecting EI or CERB due to COVID-19, there are still lenders out there that will do your mortgage, it just might not be the ones you were hoping for. While most “A” lenders, like Scotiabank or TD, will not accept these forms of income to qualify for a mortgage, there are monoline and “B” lenders that will. To get the house you want, you may need to accept a slightly higher interest rate and a lender fee for the short term. You can refinance the house a year from now, when you are back to work, to secure a lower interest rate with an “A” lender.
3. Have the source of your down payment squared away. If you have saved up your down payment, be prepared to show a 3 months account history of where it’s coming from. If you are being gifted funds from a parent, know they will have to complete a gift letter and speak to the lender to confirm the gift. Have this all confirmed and ready to go.
4. Give yourself lots of time. Everything moves at a slower pace right now. Lenders are experiencing the same disruptions to normal operating procedures as the rest of us. Make sure you give yourself time to move through the mortgage approval process. This may mean getting pre-approved so you are in a good position to know what you can afford, or giving yourself time to close on the property. Quick closes are harder to come by.
5. Speak to a mortgage agent. Every lender makes their own exceptions and allowances. Some lenders will accept 100% of CCB as income to support a mortgage, some won’t. Some will allow you to borrow a percentage of your down payment, and some have more flexible qualification ratios. Speak with someone who can find the right mortgage for your unique borrowing situation.
The current pandemic does not mean your dreams of owning or upgrading your home have to come to a halt. Lenders are still lending. Being prepared is the best way to ensure your desired outcome!
