As a self-employed person myself, I was happy to hear that CMHC is willing to make some changes that will make it easier for us to qualify for a mortgage.
In an announcement on July 19, 2018, the CMHC has said “Self-employed Canadians represent a significant part of the Canadian workforce. These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation. These policy changes are to take effect Oct. 1, 2018.

Traditionally self-employed borrowers will write as many expenses as they can to minimize the income tax they pay each year. While this is a good tax-saving technique it means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.
Plain speak, we don’t look good on paper.

Normally CMHC wants to see two years established business history to be able to determine an average income. But the agency said it will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.
Take for example a borrower that has been an interior designer with a firm for the past eight years and in the same industry for the past 30 years, but just struck out on his own last year. His main work contract is with the firm he used to work for, but now he has the ability to pick up additional contracts from the industry in which he has vast connections.
Where previously he would have had to entertain a mortgage with an interest rate at least 1% higher than the best on the market and have to pay a fee, now he would be able to meet insurance requirements and get preferred rates.

The other change that CMHC has made is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write-offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.

It is refreshing after years of government claw-backs and conservative policy changes to finally see the swing back in the other direction. Self-employed Canadians have taken on the burden of an often fluctuating income and responsible income tax management all for the ability to work for themselves. These measures will help them with the reward of being able to own their own home as well.

Kristin Woolard

Dominion Lending Centres – Accredited Mortgage Professional
Kristin is part of DLC National based in Port Coquitlam, BC.

Mortgages are like vehicles. A bank is similar to the brand, Ford or Toyota for example. How long you have a mortgage before it’s time to renew is like the model, a Fusion or Camry. The rate is similar to the car’s paint color, and the mortgage benefits such as prepayment privileges and portability are like the car’s benefits; 4-wheel drive, hatchback, four doors instead of two, etc.

A bank is like a sales person at a Ford or Toyota dealership. He or she is an expert, they know everything about every car on their lot; engine size, warranty, all available colours, and their fuel ratings. He or she can match any car to your needs and lifestyle, as long as it’s sold at their lot.

But what if they don’t have the most fuel efficient car? What if you don’t like the design or you need four doors and a trunk and all they have is two doors and a hatchback? Are you still going to buy from that dealership just because you went there first? No, you’re going down the street to check out the Chevrolet, maybe even BMW, Mazda, or the new Chrysler dealership. That sales person doesn’t want you to go buy from another lot down the street, but you are buying to satisfy your needs, not the dealership’s needs of selling their own cars.

Now imagine a dealership that sold every single make and model of vehicle. Imagine you could choose one of their sales people, and have them work only for you. They know just as much or even more about every make and model, they do all the research for you and tell you what you need to look for, they ask you the important questions; they have your best interest. That is a mortgage broker, your own personal expert.

Now, you may not need a personal expert to buy a car. But what about mortgages? Is a 0.10% lower interest rate a lot? Or will a 20% prepayment privilege instead of 10% be more advantageous? Can you switch lenders and move your mortgage? $15,000 or $5,000 penalty? How is it calculated? Fixed or variable? Is a collateral charge good or bad? 2-year term or 5-year? Big bank or monoline lender? How about credit unions? The list goes on.

So, a bank or mortgage broker? Put it this way; would you buy from the first dealership you visit or hire an expert? If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

Ryan Oake

Dominion Lending Centres – Accredited Mortgage Professional
Ryan is part of DLC Producers West Financial based in Langley, BC.

So you just got a shiny new car, and now you want a shiny new home to go with it. Will that new car payment affect your mortgage pre- approval? The short answer… absolutely it will.
Recently, I have encountered many people looking to pre-approve for a home purchase that do not qualify. While it may be in part because of the mortgage “Stress Test” rules, a good portion is due to large debt obligations such as car loans. I have witnessed applicants that have brand new car loans/leases with huge payments and not one gave thought as to whether it would affect their ability to qualify for a mortgage.
Unless you have already done your home work with your mortgage broker by getting a mortgage pre-approval that factors the new car payment into it and your budget, you may be in for disappointment.
However, it doesn’t necessarily have to be one or the other. Here are some tips to get set for mortgage approval success.

1. Get pre-approved. Seek the guidance of your mortgage broker to know exactly what you qualify for before you start the house hunting process. Knowing what your maximum purchase price is, helps you and your realtor.
2. Be realistic with what you can afford. Start by looking at what you pay in rent now. That’s a good starting place to figure out what you can pay on a mortgage. However, you also must consider what you can get approved for.
3. Remember to save and budget for more than the mortgage payment. When you own a home, your monthly payment consists of more than just the mortgage payment. You will also pay property taxes, home owner insurance, and utilities on top of your other monthly debt obligations. Having emergency savings can help alleviate the stress of taking on the financial responsibility of a owning a home.
4. Clean up your credit. Paying off credit balances can not only help improve your credit score, it can also increase your buying power.
5. Avoid making big financial changes. This is the big one. Most lenders want to see that you’re a stable applicant. Doing things like buying a new car before you buy a new house does not establish you as stable. Similarly, opening new credit cards, or making a drastic change to your employment can also be detrimental to getting approved for a mortgage.

When in doubt always seek the advice of your Dominion Lending Centres mortgage professional.

Lynn Nequest

Dominion Lending Centres – Accredited Mortgage Professional
Lynn is part of DLC Forest City Funding based in Kitchener, ONT.