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(February 14, 2023)

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With over 20,000 condos expected to complete this year in Greater Vancouver, many buyers are holding their breath and hoping that their mortgage approval crosses the finish line. Since January 2022, interest rates have been on a steady upward ascent, and as a result, existing mortgage qualifications are suddenly echoing alarm bells across lower mainland Vancouver. With the most striking qualification pain point being the high-interest rate environment, when applied to the merciless mortgage qualification stress test, many are finding themselves either fully submerged or sliding into mortgage disqualification territory. If you or anyone you know is experiencing such a circumstance, read on!

Before we uncover some save-the-day solutions and tips, it is important to note the following:

Make sure you are affiliated with a mortgage broker as opposed to a single-solution-product provider (i.e. a bank). At this stage of the game, you need to have access to every single available option in the country and only a mortgage broker can offer this type of representation. Call or text Marko Gelo right now at 604-800-9593 or Click Here to schedule a call that is convenient for you
Prepare to adjust your mindset and expectations. Be ready to discuss plenty of what-if scenarios. There will be lots of questions and exploratory discussions from the onset. Be patient and understand that troubleshooting and brainstorming are part of the process and will ultimately lead to a solution.

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How did I get here…why did this happen to me?

• Quite often a buyer is left with an impression from their lender that they are “pre-approved”, but later discover that this wasn’t the case. And in many instances, not even close. It is critical to recognize that if you haven’t provided any income or credit verification to your mortgage provider, then you simply haven’t been pre-approved. On many occasions, applicants misinterpret rate holds for mortgage approvals – they are two different things. Rate holds do not require verification documents, but pre-approvals (absolutely) do! If you have not exchanged income and credit documents with your mortgage provider, you ARE NOT pre-approved. Call Marko Gelo right now to begin your pre-approval process, or Click Here to get started.

•Interest rates have skyrocketed since you secured the purchase. It is possible (and highly likely) that you qualified at a rate that was much lower than today’s qualifying rates. If you secured and qualified for your purchase prior to January 2022 and your completion date is approaching, you are in an entirely different (more challenging) qualification environment.

•Or perhaps a life event has altered your financial circumstances to the extent you no longer qualify.

Regardless of the reason, the only path forward is to evaluate your options and decide how to proceed accordingly.

The following strategies and methods are derived from a multitude of various lender guidelines and products, hence the need to align with a mortgage broker that represents multiple lenders.

Here are some qualification remedies to consider if your once-approved mortgage approval has slid into ineligible territory:

If you haven’t already done so, restructure the qualification amortization to the maximum allowable (up to 40 years with some lenders). This will expand your debt servicing ratio limits allowing you to qualify for larger mortgage amounts.
Access other qualification guidelines by exploring greater than or less than 20% down payment scenarios. For example, with a 20% down payment, you will access far more lender options and qualification allowances than you will with a down payment of less than 20%. And conversely, mortgages with less than 20% become insured which also brings with it qualification advantages.
Explore scenarios where down payment proceeds can be repurposed for other obligations. For example, reduce your down payment, and instead, use a portion of the proceeds to pay down some debt. This would reduce your debt servicing ratio and significantly increase the chances of getting re-approved
Get a co-signor. Remember, co-signers do not have to be forever. Depending on your employment and qualification circumstances, you may only require a co-signor for one or two years at which time you can set the co-signer free and re-approve the qualification based on your own merit.
Consider B-lenders. These are lenders with less restrictive qualification criteria. The interest rates are typically 1-1.5% higher than “A” lenders (Canada’s highest-grade lenders). Terms are under 2 years and amortizations can be extended to as high as 40 years. These band-aid type products are ideal for applicants who are a short period of time away from graduating to a stronger financial footing. For example, perhaps a job promotion is pending in the next few months which would in turn equip you with a higher qualifying income, or perhaps you require another year to repair a derogatory rating within your credit report. Whatever the case may be, the common thread is the requirement of time that is needed that ultimately propels the applicant into the top A-lender arena.
Be aware of and implement private mortgage funds as top-ups that may boost your qualification with a B-lender. For example, let’s say the lender can only approve you up to 65% loan-to-value mortgage, but you require 75%. In this case, the private lender would provide the small booster loan which would combine with the B-lenders approved amount, thereby allowing you to purchase the property with a 25% down payment. The outcome would be a bundled mortgage scenario consisting of a 1st and 2nd mortgage with a combined loan-to-value of 75%. The mortgages would have terms and rates independent of each other.

If all else fails, one could inquire with the builder about assignment options. Assignments allow the buyer to sell his/her purchase contract to a new party who essentially inherits the original purchase contract (for an agreed-upon price). Click Here to learn more about assignments.

Wondering how you can turn your decline back into an approval? Call Marko right now at 604-800-9593 to discuss your options.

Having trouble closing on your mortgage for your presale condo? Call or text Marko right now at 604-800-9593, or Click Here to schedule a call to find out if any of the senior-focused solutions above are a fit for you.

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