“In my marketplace … we are surrounded by so many condos, and a lot of our clients trying to purchase with bad credit are having a tough time,” Phil Edwards, a Toronto-based broker with MorCan Direct told CREW. “They put their deposit down four or five years ago and then they’re ready to register the unit and get a mortgage and they’re walking into tough times because over those four or five years something may have happened with their credit and they can’t now get approved for a CMHC insured mortgage.”
It’s an issue homebuyers – who may have been pre-approved in a less strict environment a few years ago – are having as they try to get their finances in order to officially move in upon completion.
According to Edwards, the problem can be avoided if clients approach a broker early on in the buying process, as opposed to merely getting pre-approved with the lender’s bank affiliate.
“If the client comes to us (beforehand) we let them know that obviously we can’t hold rates for that amount of time but if they can be pre-approved we usually tell them to keep their credit up because it’s obviously based on credit being in good standing,” he said. “Pay your bills on time; simple things like that will keep credit where it needs to be and for the most part they follow along with that.”
Issues arise, however, when clients are late in approaching brokers; though there are some creative workarounds Edwards has figured out to help clients secure financing. “The problem is when a client hasn’t met us and their building comes up for registration,” Edwards said. “There are some lenders that will do a boost credit score with the insurer just because they have a little more relaxed guidelines, like a Bridgewater, for example. But it’s still pretty stringent on how bad the credit is.
“(In) most cases you’re still looking at first and second mortgages, trying to help them repair their credit and then afterwards trying to refinance them out of that mortgage because the property has appreciated in value so we may be able to finance at 80 per cent loan-to-value and get them out of that product.”
Though he admits it can be difficult and it requires a number of puzzle pieces to fall perfectly in place.
“It’s kind of tricky because they have to have certain things like other properties or equity in the property, appreciation in value on the existing property,” Edwards said. “So things have to kind of align in order for that to happen.”
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