Stated Income - What is it?

A lot of news surrounding speculation about upcoming changes in Canadian Mortgage Rules has been surfacing in the last couple of weeks. Throughout the news there have been lenders changing and pulling programs and the governments touting of "Lenders using Sub-Prime type" guidelines.

I wanted to discuss one of the most recent changes and major developments that many people may not know about - Stated Income Programs. What the heck is that? Well here in the Peace Country, this may affect a lot of consumers. These programs cater to Self-Employed individuals and how they qualify for the purchase or refinance of a home. It is a common issue when Self-Employed individuals try to purchase a home that they encounter difficulties. With programs like these the lenders offset risks of Self-employed individuals by asking for more down payment and the insurer (CMHC, Genworth or Canada Guaranty) charges a higher insurance premium. They also ask the borrower to have a higher credit rating. To ensure they are making good decisions they also confirm that the client has been in business for a minimum of 2 years and has no personal taxes owing to Revenue Canada.

So here's the skinny for "Stated Income" Programs - Also called Business for Self or Alta A.

 - Borrowers need to have 10% down payment for purchase
 - 680 beacon (650 if they are putting 15% down or more)
 - confirmation that they have been in business 2 years+
     *Usually confirmed by Certificate of Incorporation, Business License or Business Accounts
 - Premium charged is higher.

Firstline and Street Capital have already pulled this program as well as a few of their other "riskier" programs. They will likely not be the last lenders to do this.  It is a strong possibility that the government will change rules so that programs like these will be removed entirely from the lender landscape.

Bottom line is... If this is you, you have 2 options. Talk to your Mortgage Associate now and see if you fall within the guidelines of lender programs that are still available OR do some tax planning to qualify under traditional guidelines.

I have included links to the insurer programs for more detailed information as well.
CMHC Self-Employed
Genworth - Business for Self Alt A Program
Canada Guarnty Low Doc Advantage


Additionally here is a great article by some economists and speculation about coming changes to Mortgage lending rules in Canada and other articles detailing lenders pulling Business for self and immigrant programs.

http://www.canadianrealestatemagazine.ca/news/item/1019-property-investor-definitely-keep-your-day-jobs

http://www.mortgagebrokernews.ca/news/breaking-news/economists-bet-on-more-mortgage-rule-changes/123481/

http://www.moneyville.ca/article/1124551--mortgage-lending-tightens-for-self-employed-immigrants

Enjoy the video... Share it with your friends, and please feel free to comment, ask questions or tell me what else you would like to know more about.