There have been a lot of changes in the world of financing over the past year, particularly in property financing. From appraisals to documentation, there are many recent changes you must be aware of when you are looking to finance a property in Whistler.
We spoke to the finance experts at the Sea to Sky Mortgage Team about what has changed when it comes to preparing for finance and how property buyers can prepare to make the process much smoother.
What has Changed:
Getting Pre-Approved or Approved
While borrowers may have been pre-approved or approved for a mortgage in the past, now they must qualify at the bank’s benchmark rate of 5.34% or 2.00% above the contract rate (fixed rate). This means borrowers need a significantly higher income to qualify for their mortgage. Even though borrowers may be aware that the qualifying rules have changed they are often surprised how much these changes affect them.
Pre-approval does not mean the client’s documents have been reviewed and accepted. It often means that the underwriters have not even reviewed documents so often pre approvals are rate holds only. Once the client has picked their property, the lender still has to accept that property. As we know, ALR, nightly rental, small square footage, B & B or Leaseholds affect certain lending approvals. The property being accepted is just as crucial as the income used to service that mortgage.
Private lenders are an option for individuals that don’t fit the conventional guidelines. Brokerages are using them more and more for borrowers that don’t fit into the tighter mortgage guidelines.
Documentation Has Changed.
Mortgage brokerages can no longer rely on a job letter and a recent paystub. Lenders will generally require a one to two year history of employment depending on the job to confirm that the job letter and paystub match up to the income stated on their file.
“We get our clients to provide their supporting documents up front, so we know ahead of time what they really qualify for.” – Eileen Craig of Sea to Sky Mortgages
By providing documents up front your mortgage broker can better manage expectations. While an individual may have a high net worth with many rental properties. It can come as a surprise that they still need more income to qualify and that their high net worth is not enough to approve the mortgage. There are some ‘high net worth’ programs, but a lot of them still won’t lend past 65% financing and have pretty tight guidelines on what classifies a borrower to qualify as a HNW client.
Appraisals Have Changed.
All lenders now require that appraisals be ordered through several central appraisal companies. Your brokerage can’t order the appraisal until they know which lender is approving the file. If an appraisal is ordered for one lender and the lending parameters change the brokerage must go through another lender. Often the first appraisal can’t be used without it costing additional money, and in some cases a second appraisal may have to be carried out.
Perhaps the biggest change is to non-resident borrowers. While in the past lender documents could be signed in any country now all documents must be signed in Canada. No lender will allow a power of attorney or other forms of out of country signing (ie Embassy or Consulate signing).
If you are from a non-English speaking country documents will need to be translated to English and stamped by the Canadian consulate as certified true copies. Some non-residents may be surprised by the amount of documentation needed and the time it takes lenders to review these documents.
Helpful Tips to Make the Process Smoother for you:
- When sending the offer to your broker, send the printable MLS/WLS sheet, and Property Disclosure Statement (PDS) at the same time. Make sure that the PDS is completed fully. If there are ‘yes’ and ‘no’ answers where they typically wouldn’t be, please go to page 4 and indicate why. We have to ask agents all the time to get the PDS fixed.
- Make sure that the offer is not closing on a holiday or weekend. That the offer is signed and dated on all pages required and completed properly.
- If the offer includes furniture, we have to indicate that the furniture holds ‘x’ value, usually minimal as we are not allowed to finance furniture. We often ask our agents to do an addendum where the buyer and seller deem the property to hold ‘x’ (often zero) value but is being left for convenience purposes only.
- Make sure all buyers are listed on the offer, otherwise the brokerage is requested to get an addendum adding the other buyer and this is needed before the file is instructed to the lawyer.