PURCHASE

A Pre-Qualification, or Pre-Approval, is an important first step in the home buying process. Before you start house-hunting, it is important to confirm that you will qualify for a mortgage. At Maple, we do a comprehensive review of a client’s income, credit history, and source of down payment. Our pre-qualification review is as rigorous as a live mortgage application, so that there are no surprises once you have made an offer on a property. Most Pre-Approvals done at Banks are virtually worthless. The Maple advantage is in a fully qualified application at the beginning of the process.

There are several benefits to being fully Pre-Qualified:

• Save Time: Determine what purchase price you will qualify for so that you are seeing properties in that range
• Qualify: Review your financial picture to fit a purchase within your financial plan
• Hedge: Protect against rising interest rates with a rate hold up to 120 days
• Education: Learn about the process and collect helpful house-hunting tips

The market is competitive and we arm our clients with the confidence and information they need to make a successful offer on a property.

If it is your first time buying a home, the most important consideration is to ensure that buying is affordable and within your financial plan. Homeownership is a value that many Canadians share, and our job at Maple is to clarify a complex process.

The first step in buying a home is to determine that you will be approved for a mortgage. Mortgage qualification has tightened in the past few years, but there are several programs available to first-time buyers. We are experts in obtaining financing for first-time buyers and we have access to many different mortgage lenders with preferred rates.

There are 3 factors we will review with you to determine your affordability:

1. Down Payment
First-time homebuyers are eligible to purchase with as little as 5% down and are entitled to several specialty programs like the Home Buyer’s Plan. However, the amount you have saved may limit your maximum purchase price (ex: savings of $20k limits you to $400k purchase price – 5% of $400k is $20k). If you are putting less than 20% down, you will be required to pay for mortgage default insurance through CMHC, Canada Guaranty, or Genworth. Premiums are added to the total mortgage, and are calculated based on Loan-to-Value and mortgage amount.

2. Employment Income
We will review all eligible types of income (salary, part-time, bonus, commission, self-employed, investment, etc.) to determine what can be used to qualify – this is critical because this is what a mortgage lender will review on an application

3. Monthly Obligations
A review of your current financial position and outstanding debts. Many Canadians have a variety of monthly debt obligations that mortgage lenders factor into affordability calculations. Your repayment history of this debt is also very important.

We understand that the process can often feel overwhelming for a first-time buyer. We make this process clear and less stressful.

You have gone through this process before and you are familiar with the steps. Hopefully your previous experience was positive, although we have heard many horror stories, especially for customers who previously dealt with bank branches. We are specialists at improving the poor customer experience many people have endured at other institutions. As you know, this is one of the largest financial decisions you will make in your life and arranging the mortgage should be done by an expert who is representing you, not the bank.

This process will be similar to your last purchase, however the qualification criteria may have tightened since the last time you applied for a mortgage. We will review your credit, current employment and income to determine what mortgage amount you will qualify for. We will also review your monthly debt obligations and current outstanding debts to make an affordability assessment. What may be different for repeat buyers is the source of equity for the down payment on the new purchase. Here are a few example questions:

• What institution is your mortgage currently registered with, and what is remaining on your current mortgage term?
• How much equity have you built up in your current property or will you be making this purchase with other savings?
• Are you refinancing your existing property to purchase a secondary home?
• Has your Realtor discussed a strategy for aligning the sale of your current property with the new purchase to minimize the cost of bridge financing?

We deal with scenarios like this all the time. It is never too early to get organized if you are considering purchasing a new home in the near future.

The rules for Self-Employed mortgage applicants have changed several times over the past few years as it has become increasingly difficult for these applicants to get a mortgage. We have three options for Self-Employed applicants, however the first two are reserved for applicants who have strong credit histories and have no back-taxes owing to the CRA:

1. Fully confirmed and reported income. This is a scenario where you are claiming enough income on a 2 year average to qualify for the mortgage amount you would like. You pay yourself consistently on a year to year basis through salary or disbursements (i.e. dividends). In this scenario, a self-employed applicant is being qualified like a traditional salaried applicant, and therefore all standard qualification guidelines apply.

2. “Stated” Income gross up. When line 150 of your tax return (total income before deductions) is not enough to qualify for a mortgage, but you have reduced this number from a true “gross income” by applying eligible deductions. In this case, many lenders will allow their underwriters to arrive at a grossed-up income higher than the line 150. This gross-up is a reasonability assessment based on an analysis of the company’s gross revenues and expenses. One caveat is that this reasonability assessment is a sliding scale that will at very best consider a grossed-up income at 1.75x what is showing on Line 150. This will often entail a review of the company’s financial statements.

3. Alternative Stated Income. This is when a stated income applicant cannot qualify based on a gross-up or when the applicant has a weaker credit history. These alternative lenders have slightly higher interest rates, however they have much more flexible underwriting requirements. These alternative lenders will review tax documents in conjunction with bank statements to corroborate income. The rates are higher, but historically speaking, they are reasonable.

If you are Self-Employed, it is vital that you engage an experienced mortgage expert.

Whether you are a new or experienced Real Estate Investor, we can assist with mortgage financing of both residential and commercial rental properties. If you are building a portfolio of Income Properties, it is critical that you engage an experienced mortgage expert who will “begin with the end in mind”. Making early mistakes can limit your future options, and it is essential to have both a financing strategy and access to capital.

Rental income is eligible when qualifying an application, however different institutions have distinctive qualification measures for a rental mortgages. Investment properties can range from one to multiple units, and there is a methodical strategy for arranging financing. Most property types are generally acceptable; however, it is important to ensure all rental units are legal. Interest rates are slightly higher for rental properties, and unless you are planning to occupy one of the units, the minimum down payment is 20%.

Real Estate Investors need access to a range of funding sources, which is something that cannot be facilitated by a single bank. We have access to Banks, Mortgage Finance Companies, Credit Unions, Alternative (B) Lenders, and Private capital. When we are approached by an investor, we formulate an investment plan:

1. Portfolio Review of Current Holdings and Financial Review
2. Real Estate Investment Goals
3. Timeline
4. Tax Strategy (personal holdings vs incorporated holdings)
5. Tips for Landlords

Various property types are eligible for mortgage financing, provided that they are zoned for residential use.

• Urban Housing
  • Single Family Homes, Townhomes and Condominiums
• Multi-Unit Properties
  • Primary Residence with a Rental Suite
  • Duplex
  • Triplex
  • Apartment
• Vacation and Cottage Properties
• Second Homes
• Rural Homes and Acreages
• Vacant Land
• Builder Loans
• Assignment Sales
• Modular Homes

Most residential properties are eligible, and we pride ourselves in helping our clients acquire their dream homes.

The mortgage process truly begins before you start shopping for a new home, as you actively save for that purchase. Down payment is important to understand because it may impact your mortgage rate and the total cost of the mortgage.

In Canada, the minimum down payment is 5%. However, there are two main categories of mortgages:

1. High Ratio (less than 20% down)

• Any down payment less than 20% requires mortgage default insurance. The insurance premium is calculated at different rates depending on the Loan-to-Value and the mortgage amount. For purchase prices under $500,000, the minimum down payment is 5%. For purchase prices between $500,000 and $1,000,000, the minimum down payment is between 5-7.5% (5% on first $500k, and 10% on every dollar above $500k).

2. Conventional (20%+ down)

• Any purchase of a property of $1,000,000 or greater requires a minimum 20% down payment
• Rental properties require a minimum 20% down payment

You must prove the source of your down payment and a 90-day history, however various sources of down payment are permissible, including:

• Savings (cash and investments are eligible)
• Registered Accounts (RRSP or TFSA)
• Gift (often from a family member, must include a gift letter indicating it is not a loan)
• Sale of a property
• Borrowed (not always applicable)
• Inheritance or Settlement

Depending on the circumstance, there are many specialty programs designed for Canadians to assist with mortgage qualification. These programs are available to homebuyers, some eligible for as low as 5% down on a purchase. Here are some examples of programs we offer:

• Self-Employed or Business For Self
• New to Canada
• Resident and New Doctors, Dentists and Veterinarians
• Purchase Plus Improvements (Purchase and Renovation)
• Vacation Properties and Second Homes (Homes for immediate family members or children)
• Rental Properties
• New Construction
• Bruised Credit
• Alternative Lending (B)
• Private Lending
• Non-Resident Lending & Foreign Income
• Net Worth
• Equity Lending

These programs are designed to assist in qualifying borrowers who fit these categories. The flexibility of specialty programs from our lending partners allows us to navigate our clients through a successful application and realizing their dreams of homeownership.

Closing costs are often overlooked when you are purchasing a home. In addition to the down payment, lenders require that an applicant prove the source of closing costs before they will approve a mortgage application. Closing costs can vary, however a rule of thumb is to budget for closing costs using 1.5% of the value of the property.