The challenge
While Sahil and Ananya have strong credit scores of 750 and 800 respectively, they found it difficult to secure mortgage financing for their new rental purchase. The main challenge was with servicing since they currently hold a mortgage on their primary home and on an existing rental, along with small outside debt that would factor into any debt-servicing calculations.
Their backstory
To invest in their future, these clients purchased a second rental property – a duplex – in their hometown of Kitchener with a significant down payment. Both have good, steady employment; he’s been a full-time, commission realtor for more than five years while she is full-time salaried.
Our view
Sahil and Ananya have good equity in both their primary home and the existing rental property. With clean credit and having saved 35% for a down payment for this new purchase, we saw solid applicants.
Our approach when reviewing servicing is to consider up to 100% rental offset for the non-subject rental, and to assist with income review of the commission applicant, we used a two-year average of his earned (gross) income.
We also recognized that the current market rent for this area provides coverage.
Approval details
- Purchase: 65% LTV
- Income verification: Two-year average income, supported by T4As, and YTD commission for the main applicant (Sahil) and a pay stub and employment letter for the co-applicant (Ananya)
- Rent verification: Lease agreement on existing revenue
- Lease agreement for existing rental
- Proof of down payment
- Full appraisal: Completed and supporting market rent on the new purchase, as stated.
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TIPS
Before submitting to us for review, it’s always best to comment on market rent and, whenever possible, verify the income for any non-salaried applicant to ensure all meets our lending guidelines.
DID YOU KNOW?
We can consider up to 100% rental offset for a non-subject rental in servicing and we will also review the income of commission applicants by way of T4As for the last two years.
