As busy as our housing market is in the Red Deer area, the entire Canadian market as a whole has challenges brought on by government regulation and lender guideline tightening.
Every time the government implemented new regulations pertaining to mortgages, the side effect was that mass confusion entered the market. Underwriters (your mortgage application decision makers) both on the lenders and mortgage insurer end seemingly tightened the qualifications even further than what was described in the actual release by the feds.
This usually lasted a few weeks until the uneasiness of the new rules were fully in force.
Well, it’s been seven months since the last mortgage rule changes and the belt tightening is still presumably there, although some underwriters claim that only the rule changes have applied and nothing else.
Those most affected by these unknown rule changes are those with credit scores below 680 but especially those with 620 (minimum requirement for an insured mortgage) – 650, although the rules state that you can still qualify, you are going to be scrutinized even further and may require further validation of any of the conditions that are required or they may even request a co-signer or more down payment.
Not all lenders and underwriters are created equal by any means, and many will listen to the story that created your lower credit score; however transferring that story to the mortgage insurer sometimes falls on deaf ears as mortgage insurer underwriters are seemingly more by the book type underwriters.
The past couple of months the popular rhetoric has been to send to a lender that you would likely qualify with then they send to their favorite mortgage insurer, and typically if the underwriter and lender believe in the deal, then an approval is sent back and all is orderly.
Lately though, it seems the underwriters – if they believe in a particular client – have had more struggles than usual getting mortgages approved.
For instance, and this has happened on quite a few deals in the very recent past, client ‘A’ has a pre-approval from the bank which I helped organize, then Mr. A puts in his offer which we then send to the lender, the lender then submits to the mortgage insurer for approval, and unexpectedly the insurer comes back with conditions that they require a co-signer or 10% down payment?
Even though one tries to renegotiate, they often don’t change their mind. Needless to say, with a quick conversation with the underwriter we try the competition, and they easily say yes.
The weird part has been that all three mortgage insurers have been doing the flip-flopping, whereas, if one conditions the heck out of a deal making it near impossible, the other will do it easily, and vice versa.
The difficulty is predicting who’s going to approve the mortgage, because seemingly these are qualified clients as per the ‘guidelines’ they provide us and the lenders with.
It has become more and more difficult to obtain mortgage financing as the global recession is still there, although we don’t feel it very much here, the credit world is still on its head. The lesson here is to keep your financial house in very tight order as even the slightest bump could mean the difference between an approval, a very stressful purchase or worse a decline!
Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres-Regional Mortgage Group.