Private mortgage lenders use a risk based model to determine if you qualify for the loan or not. This is actually a lot simpler than the bank’s system. Here is how it works.
Qualifying At The Bank
When you apply for a mortgage at your bank you first need to know who you are dealing with. Visions of an old dragon guarding it’s gold come to mind.
The bank’s system is designed to keep you out. Like a scaly gatekeeper who guards his heap of ill gotten treasure day and night, so is your enemy to the approval of your mortgage.
Here are some common bank tactics that end up with you hearing NO:
- Minimum credit scores – This magic number is an arbitrary, internal moving target that the banks use to disqualify your mortgage.
- Being able to prove your income – This used to be a straightforward process of an employment letter and a paystub. The bank has turned this into a fiasco of ‘guaranteed hours’, using the lowest possible number of any multi-year averaging, and not being able to use any non traditional income source.
- Having your taxes in perfect order – If CRA is not up to date and on time (even if you are disputing a charge) the bank will slam the gate down in your face. I wonder who’s interests this dragon is really protecting?
Qualifying With A Private Lender
The most important aspect in qualifying for a private mortgage is if you have the equity in your home in order to borrow it and still have enough remaining for the lender’s comfort.
Example: Your home in Ontario is worth 750K and you have a 1st mortgage of 500K with your bank (67% of the value). You need to borrow 100K for a major home renovation. You will now owe 600K (80% of the value).
Because you still have 20% of your equity remaining the lender is comfortable to proceed with the mortgage.
This is why evaluating your property and determining the accurate value today is the first step in qualifying.
Here are some of the methods to accomplish this:
- Purview Property Report – A provider of the most comprehensive publicly available data in order to determine your estimated property value and provide recent sales in the neighborhood.
- Appraisal Report – A third party appraisal is completed and the report is used to give a comprehensive value of the property complete with superior and inferior marks compared to the most recent sales.
- MPAC municipal property assessment – Your local municipality completes regular assessments of your property’s value in order to gauge the amount of property taxes you should pay. This report is sufficient for some private lenders and can save you the cost of an appraisal.
Private Mortgage Approval
Now that it has been confirmed that you have the equity to proceed you begin to feel confidence return and that your cause is not lost.
It is time to draw your sword once more and make another run at that slimy gatekeeper that has prevented you from getting the gold you deserve. The private mortgage approval is just the weapon for the occasion.
To complete your approval, there is a secondary risk assessment based on your credit, income, and debts that typically determines the cost of the loan. To clarify, in most cases this will not cause you to fail to get the mortgage; just at what interest rate and terms of the contract you will be agreeing to.
Important note…not all private mortgage advisors have access to the best sources of private capital. If you have been declined it doesn’t mean that there are no private mortgage options in Ontario for you.
Find out more about all of the things you need to know about your Private Mortgage Made Easy
Qualified To Win At Life
I know, I know…it can be intimidating to look the dragon in the eye. But what is the alternative?
Spending your golden years in servitude to minimum interest payments? Seeing your loved ones living as slaves to the landlord for another 5-10 years? No, that is NOT how your story ends.
If you have read this far…getting qualified for a private mortgage loan is your destiny and I will be there to guide you to victory in securing the gold and slaying the force that opposes you in the pursuit of your goal. Reach out to me below. Your family’s gratitude will be worth it!