Working with a mortgage broker is a different experience than working with a bank specialist. It’s also a different part of the home buying process compared to working with your Realtor. Some people may have never worked with a mortgage broker before and don’t know what to expect. Because of that, there are some questions…Read Article
Income Exceptions When Being Approved for a Mortgage
There are many things to consider when in the approval process for a mortgage. Whether you’re self employed or employed, income is always the largest factor and question when it comes to getting approved.
I’ve written many articles about getting approved for a mortgage, what income you need for self-employed clients and employed clients, plus all of the documents I’ll need for the approval process.
In this article, I go through the different income exceptions that can be made to help you get approved for the mortgage loan you’re after.
Increased debt to income ratio.
The normal income-to-debt ratio is 39% of your income and 44% total if including other debt. But, with clients that have good credit, some lenders are willing to alter those numbers.
For clients with good credit and 20% or more down payment some lenders will allow increased debt to income ratios up to 48% +/-.
The 48% would be for both GDS (Gross Debt Service) and TDS (Total Debt Service) and depends on the positives of the client. Everything from income, credit, assets outside of down payment, etc will be considered for this exception.
Increased income if you’re incorporated.
If you are a self-employed individual who has incorporated, there may be an income exception for you.
One of my lenders will consider using more income for self employed borrowers who pay themselves from a Corp under the following circumstances:
o Credit score of 650 to 730 or higher (Preferably 730 or higher)
- Less than 35% down payment, credit will need to be 730 or higher. Down to 650 is for if you have 35% or more down payment.
o Positive net income in the Corporation
o Positive retained earnings in the Corporation
o Funds left in the Corporation account that can be shown could have been withdrawn or can fund extra earnings for ongoing years
Using your child tax benefit.
Did you know that if you receive the child tax benefit in Canada, you can utilize that as part of your income to get approved for a mortgage?
Simply let me know that you have a child or how many children you have and how much tax benefit you are receiving every month. Then, we’ll be able to include that in your income section of the application.
Depending on the lender, the children will need to be 12 to 15 or under for the full calendar year you are buying.
And don’t worry if you forget. It’s a question that I ask all clients to help them out along the application!
EI plus seasonal work.
If you are a school teacher, landscaper or other seasonal worker, you can utilize your EI along with your seasonal work income to help qualify yourself for a mortgage. To make this work, you will have to be returning to the same position within the same company for a lender to accept the income.
When we go through the process together, I will need your EI information as well as a job letter stating that you’re returning to the same position and company. You will need to have been doing this type of work for two or more years for this to apply.
Using your spousal support.
If you receive spousal support, you are able to include that in your income section for a mortgage application as well. This support will be accepted in combination with your income, up to a certain percentage.
Each lender has different percentage rules, so the best bet is to go through the process and I will let you know what the percentage is and we can go from there.
Using disability income.
Many people don’t know that it’s possible to use disability income as your income for a mortgage application. I will need your disability information to put into the application and can let you know if other documents may be needed as well.
Using your pension, retirement income, etc.
Lenders are not allowed to age discriminate, which means that they accept all pension, retirement income and government funding as income. This can be your Canada Pension Plan, your Old Age Security or other forms of retirement income that you have.
Just because you do not have a full-time job, doesn’t mean you can’t qualify for a mortgage! This also goes for co-signing for a mortgage. You can be a co-signer even if you don’t have a job.
Reach out to get started.
Now that you know some of the income exceptions that are allowed, reach out to me to get your application started today. We can go through your situation and see if there are any other income exceptions that can be used and included.
I look forward to hearing from you and seeing what help I can be to you.