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(Nov 17, 2023)

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For most Canadians, securing a mortgage is often the gateway to homeownership, but it’s a journey filled with hurdles and challenges. Complicating matters further, a time restriction looms in the background- the dreaded financing conditions. In today’s complex mortgage environment, two critical factors seem to consistently rise to the forefront, ultimately shaping the path and intensity of your mortgage qualification journey; down payment verification and stability of your employment and creditworthiness.

Down Payment

Down payment verification emerges as the foremost source of frustration in the mortgage application process. However, its impact is not so much deal-breaking as it is labour-intensive. Applicants find themselves begrudgingly inundating the process with copious verification documents—bank statements, investment records, and any other documents that can verify your source of funds—while brokers and lenders, in turn, begrudge the meticulous analysis and review that follows. Speaking from personal experience, the verification of down payment documents induces a collective sense of exasperation for all involved parties—the applicant, the broker, and the lender. The origins of this cumbersome procedure trace back to the aftermath of the 9/11 terrorist attacks when Canada’s Department of Finance expanded upon the existing Anti-Money Laundering Act to also include an Anti-Terrorist Financing component. Consequently, the entire down payment verification process has morphed into an insane effort. Lenders, and by extension, mortgage brokers like me, are compelled to subject applicants to what feels like an intense interrogation. This is an inescapable reality; irrespective of an applicant’s wealth, credit score, or income scale, all applicants must adhere to the stringent down payment verification requirements…they are as follows:

(i) provide a 90-day history of the funds that will be used for down payment,

(ii) the documents must be presented in their entirety and have your name and account number displayed to verify your ownership of the account,

(iii) in addition, any random/unexplained deposits identified within the statements will also have to be backed up with its own 90-day history verification…that’s right, you could essentially be providing a chain of 90-day verifications if you have several random/unexplained deposits coming into your bank accoun that have not completed a 90-day hibernation period. Lenders will general require 90-days history on any unexplained deposits over $1,000.

How to prepare for this clerical assault?

-DO NOT use your cell phone online banking portal. The screen captures that you attempt will not be acceptable as they do not display account numbers and identities

-you will have to log in to your online banking portal through your computer and retrieve documents through this pathway as your bank generates more detailed documents and screen captures

-if it’s not too late, AVOID transferring sums of money between your various accounts, 90-day paper trails will be required on each transfer every time you do so

Ok, on to the second condition that is absolutely crucial when it comes to satisfying conditions within the financing conditions timeframe…

EMPLOYMENT: Sustain your employment at the same pace as when you initially qualified. Any alterations to your employment status before completing/closing your mortgage will be detected by the lender, necessitating re-adjudication. Consistency is paramount not only in maintaining employment but also in preserving your specific terms. Changing employers during your mortgage completion process without prior consultation with your mortgage broker can jeopardize your qualification. For example, transitioning from an employee with income taxes deducted at source to an independent self-employed contractor in the same role could put your mortgage qualification at risk. While some circumstances might be negotiable with the lender, assuming automatic approval is unwise. If you shift to self-employment or become a 100% commission earner, lenders typically require a two-year income average for qualification. Unfortunately, the previous two years of deducted-at-source income won’t be eligible, potentially leading to qualification with a subprime lender featuring relaxed ratios but higher interest rates.

And finally, the second most important stability pointer…

CREDIT: Uphold timely payments, refrain from increasing existing balances, and avoid acquiring additional credit. Just like with employment, maintaining your credit profile, at a minimum, matching your status when you first qualified for the mortgage is critical. Throughout the mortgage transaction, a lender may update your credit report, especially if the completion process extends beyond 30 days. In such cases, the lender will scrutinize any updated balances, credit cards, or derogatory ratings, impacting your mortgage qualification. This can be prevented if your mortgage broker provides a snapshot of your balances at the time of application. Increasing your credit balance during the mortgage completion is repairable by paying it down, but a more severe consequence is a credit score drop. Improving credit scores can take at least a full 30-day cycle and potentially longer, depending on the severity of the issue causing the drop. This could pose significant challenges to your mortgage qualification, particularly if adhering to a specific completion date is imperative. Again, complete disclosure of your credit report at the time of application by your mortgage broker can prevent such issues.

Time running out with your financing conditions? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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