Categories: General
Date: May 19, 2010
Title: Answers to Commonly Asked Underwriting Questions
This article answers commonly asked underwritting questions about such things as: Alimony & Child Support; Bankruptcy; Car Allowance; Child Tax Benefit/Family Allowance; Foster Care Income; Gifted Down Payments; Guarantor Income; Immigrants to Canada; Parental Leave; Part Time, Overtime and many more!
100% may be used provided income represents less than 30% of total income and borrower has demonstrated receipt, through a T1 General, for a minimum of 1 year. Otherwise a maximum of 50% will be used.
An applicant with a prior bankruptcy will be considered for mortgage insurance, up to a maximum LTV ratio of 95%, provided that the bankruptcy has been discharged for at least 2 years and they have at least 2 years of satisfactory re-established credit. Employment and income should be stable and debt ratios must be in line. Previous bankrupt borrowers are ineligible for the following products; Cashback, Alt A, Vacation property and Refinance applications. Borrowers who have had a bankruptcy in the last 7 years that resulted in a loss on debts secured by real estate are ineligible for mortgage insurance.
100% may be used to offset a car loan or lease payment provided that:
Income may be used for qualification purposes provided applicants meet the following criteria:
The lender will be required to have verification of the child’s age and income stream in the file. Age and income stream can be verified with the following documentation:
Income will be considered subject to the following requirements:
Gifted down payments from immediate family members can be used provided they are properly verified, are non-repayable and all other characteristics of the borrower are acceptable. Gifted down payments are not required to be on deposit until time of closing.
If the guarantor occupies the property, the income will be considered for qualification purposes provided the guarantor is a direct family member. If the guarantor does not reside in the property, Genworth will consider income for the GDS/TDS calculation provided the guarantor is a direct family member and resides in the region where the property is located.
Qualified homebuyers who have immigrated to Canada, or have been transferred to Canada by an employer can qualify for a mortgage with as little as 5% down payment using Genworth’s New To Canada program. Applicants must have immigrated and/or relocated to Canada in the past 36 months, be employed for a minimum of 3 months in Canada, have a valid work visa or obtained landed immigrant status as minimum qualifications for the program. Please refer to the New To Canada Program Overview at www.genworth.ca for complete details.
Full salary is acceptable for qualification purposes. A letter from the employer is required indicating the position the person is returning to, the return date, and the salary/income upon return.
100% of permanent part-time income will be considered. Up to 100% of a second job income will be considered if borrower can demonstrate a minimum 2-year history supported by income tax assessments or T4’s.
100% may be used provided income represents less than 25% of total income and borrower has demonstrated receipt for a 2-year period.
The qualifying interest rate used to calculate the gross debt service ratio (GDSR) and total debt service ratio (TDSR) will be determined as follows:
* The benchmark rate (5-yr conventional mortgage rate) is published weekly by the Bank of Canada in series V121764 and can be found via the following link: http://www.bank-banque-canada.ca/en/rates/interest-look.html
For owner-occupied 2-4 unit properties, 50%* of the gross rental income from the subject property may be included in the borrower’s gross annual income.
* For 2-unit properties in Victoria and Vancouver CMA’s, 100% of the gross rental income may be included in the borrower’s gross annual income.
100% of Employment Insurance income for seasonal workers will be considered provided the lender has verified that the applicant has been employed for at least 3 years, the income is regular, recurring and continuous and 70% of the income comes from the salary paid by the company and no more than 30% comes from the employment insurance. Income is calculated based on the lesser of the 3-year average income or the last year’s income. The income must be validated with income tax returns or notice of assessments.
Any individual who has ownership interest in a company and is paid based on company performance, or whose ownership interest is 25% or greater, is considered to be self-employed. Commissioned borrowers and other owner/operator situations, such as taxi drivers and truck drivers are also considered self-employed.
Income must be verified by 2-year’s financial statements or tax assessments. Genworth permits lenders to gross-up the total income (line 150 Revenue Canada Notice of Assessment) by up to 15%. Income gross-up is subject to lender guidelines. The lower of the average net income for the previous 2 years or the most recent year are to be used for qualification purposes.
Self-employed borrowers and commissioned sales people who cannot provide traditional income verification may qualify for a low down payment mortgage for purchase or refinance through Genworth’s Business For Self (Alt A.) Program. This program recommends a minimum documented self-employed tenure of 2 continuous years and minimum credit requirements apply. Please refer to our Genworth Business For Self (Alt A) Program Overview for complete guidelines at www.genworth.ca
For borrowers whose income is not taxed at the source, income may be grossed-up on a two-tiered approach:
U.S. income will be considered at the current conversion rate. This applies to borrowers living in Canada and paid in U.S. funds.