Every Lender has Different Views
By Rami El-Beaino
When a young family, Jay (31) and Alisha (31), immigrated to Canada 3 years ago, they had set out plans to find work in their field, save money and buy a home. Like most plans, theirs did not unfold as expected.
As the novel Coronavirus spread through the country and caused a national crisis, it challenged the economy, a society and in some views, a constitutional right. Despite the global crisis, however, the positive multilateral response from lenders helped Canadians keep their homes by offering mortgage payment deferral plans. This limited bully predatory offers that could’ve destabilized the market on many levels.
Just as important as the cooperation which the novel Coronavirus mandated, lenders and insurers across the Great White North worked with consumers and brokers in an environment that required more caution and vigilance. The setting opened up a variety of programs and guidelines that also helped some buyers.
This simultaneously restructured the playing field. Mortgagors (borrowers) are being assessed differently by different lenders. Each lender is uniquely underwriting the mitigating risks.
As borrowers, Jay and Alisha are still learning about Canadian credit and the crucial benefits of establishing credit. Some “A” level lenders will accept a credit score as low as 600, while others will only entertain an application with credit scores starting at 640. To put things in perspective, a hospital bill sent to a previous address that end up in collections, can bring your credit below 600 very quickly, and push you out of the market. Although, with respect to the title of this article, it depends on the story. Some “A” lenders can make this exception if all other variables align. While others, simply won’t.
Jay and Alisha’s setback was their lack of credit. They simply did not have enough credit to prove their ability to manage and repay a revolving debt such as a mortgage. “We thought a credit card would hurt us. Why is my risk higher if I have no debt?” pleads Jay during one of our meetings. The requirement is establishing credit. No credit is nearly as bad as ill repayment history in the eyes of some lenders.
Other lenders can mitigate the risk by using the repayment history of utility, rent, and phone bills. Individuals such as young students, or those who are newer to Canada, likely have limited tradelines. This is where a story becomes the forefront of the application.
As lenders diffe on views, options are endless. When a borrower has something to offer, there’s a lender that has an appetite. Risk tolerance will differ as policies change on rentals, spousal buyouts, bridge loans, income confirmation, down payment and many other variables that require professional placement to ensure financing options are open. How can we explain your unique story?
Rami El-Beaino | Mortgage Agent | Team Leader l Mortgage Approvals Ottawa Team
Mortgage Alliance Company of Canada Inc.| Brokers License 10530
T 613-355-7269| Lic. M12000501 | ramimortgages.com | rami@ramimortgages.com