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Looking for a Mortgage Loan in Victoria, BC
If you are like most people purchasing a house in Victoria, you can’t cover the entire cost of the house yourself. Instead, you have likely saved up some of the purchase price to put down, or you have inherited some money or received a gift that will cover the amount. To avoid having to pay the additional insurance premiums that come with a high-ratio loan, this down payment needs to be at least 20 percent of the purchase price. Approval is still possible, though, as long as you have at least 5 percent to put down.
Real Estate Loans in Victoria, BC
A down payment is only one of three elements in a successful mortgage application, though. The second is your credit score. If it’s high enough to make the bank happy, you get the loan that you want. If it isn’t, then you don’t, and there’s precious little wiggle room in this area, particularly in the aftermath of the housing collapse of 2008 and 2009. Before that time, it was pretty easy for people to get approvals for loans they couldn’t afford, because banks were focused on getting as much revenue in the door as possible. Although the wave of foreclosures was significantly larger in the United States than it was north of the border, the seismic effect of defaults on Canadian banks — and the Canadian economy — meant that stricter regulations had to follow.
The strict regulations not only had to do with credit score but also with the third element of a mortgage application, which is a verifiable income history. This can be particularly problematic for people who have gone through a layoff in the past couple of years, as they do not have a steady stream of verifiable income. It can also be a problem for people who are self-employed. Even if they have been successful in starting their business, it is not likely that their income comes in at a consistent level, Income verification was an area with which the banks played a little fast and loose during the early 2000s, and so now this is something that the banks check rigorously.
Victoria Mortgage Lenders
If you are applying with a Victoria mortgage lender and you have a pristine credit report and have worked with the same company for the past several years, earning a consistent income, then you are likely to qualify with one of the banks and get what is known as an “A” loan. You have access to the lowest interest rates, no matter whether you choose an open or closed mortgage, and whether you choose a term of two years or ten.
But what if you’re not quite where the banks want you to be? Not everyone has perfect credit, and not everyone can verify their income history. If you’re a successful optometrist, for example, and you started your practice two years ago, but it took you three months or even six months to start turning a meaningful profit, then your income history is compromised, and the “A” loans may not be what you qualify for.
What if you got laid off and couldn’t find work for nine months? Or if you went through a divorce and had to pay the lawyers instead of making timely car payments? The effects on your credit score can be severe. Even if you’ve spent the last couple of years making your payment records perfect, those negative items can stay on your credit report for seven years.
So if the “A” loans aren’t working for you, how can you get approval? Amansad Financial has connections with two other tiers of lenders. The first is known as “Alt-A” or “B” lenders. These have a slightly higher interest rate than the “A” lenders, but you can still start building home equity instead of having to spend more time renting.
Even if you can’t qualify with these lenders, there are also private lenders, also known as “C” lenders. With these types of loans, lenders look at the property in question rather than the credit profile of the borrower. The down payment on this type of loan generally has to be at least 15 percent of the value of the home, to ensure that in the case of default, the sale of the home would cover the loan. Also, the interest rate here is going to be higher than the “A” or “B” loans.
If you’re wondering which type of loan would be best for you, talk to one of our credit specialists at Amansad Financial. We will review the numbers and make a recommendation best suited to your needs.