Getting a Mortgage During a Pandemic
Home buyers getting into the market and home owners looking to refinance wonder whether a new mortgage is possible right now.
It is, but with some caveats.
A recent first-time home buyer decided honesty was the best policy when he lost his job during the current COVID-19 crisis.
With just two weeks before the deal closed on his new home, he told his bank what happened. His parents co-signed on the mortgage and the deal moved forward, but the home buyer could have landed in serious financial trouble without that safety net.
He was at risk of losing his deposit and being sued by the sellers for money they would have lost had the deal fallen through.
Can I get a mortgage right now?
All this to say Canada’s large banks are still financing home purchases, even with an economy that’s all but halted. But they are being more conservative with their lending, says James Harrison, president and mortgage broker with.
For starters, they’re no longer making exceptions on debt-service ratios and they’re eliminating discounts on prime and variable mortgages. Self-employed applicants will also have a harder time getting a mortgage with banks more thoroughly scrutinizing the industries in which they work.
Updated letters of employment are now essential for approval. Banks have started asking mortgage applicants for pay stubs up to two weeks before deals close, too, and they’re calling employers to confirm clients still have a job.
“Get your files in order,” Harrison advises. “Get your conditions met as soon as possible so there are no problems later and deals can close.”
Be prepared to wait.
Still, it will take longer for deals to be funded because banks are swamped right now. Mortgage applications were up 400 per cent when the pandemic started taking its toll economically, Harrison says.
Home buyers were taking advantage of low fixed rates at the time. Homeowners looking to refinance also jumped at lower interest offered after the Bank of Canada dropped rates.
Approval on financing can now take up to 10 days with clients waiting up to four weeks to get that cash in hand.
The key is to work with an experienced mortgage broker who can help navigate financing during these unprecedented times and get the best rates for homebuyers and homeowners in the process.
“It’s not the time to drag your feet and rate shop,” Harrison says. “Have the conversation with an experienced mortgage broker, know what’s out there and get your approval in place. Don’t be left in the dark because everything is changing so fast.”