Credit rating and savings are not always a mortgage slam dunk

Anytime someone wants to borrow money – for whatever reason, from whomever, lenders always ask themselves one simple question –“will they pay this back?” This is true even if it is your best friend hitting you up for a personal loan, or if you are sitting in your local bank branch filling out an application for a mortgage.

Two years ago, a young lady I had worked with for several years decided to dip her toe into the condo market in downtown Toronto. Her credit report had always been spectacular, and she was a prodigious saver. She was by nature risk-averse, and I know there was no chance at all she would ever renege on a mortgage – no matter what. (She also had the deep pockets of parental support behind her should she run into difficulties.)

Sounds like a slam dunk? Well no, this was a high ratio CMHC insured mortgage – and her present level of income meant there was no chance she would legitimately qualify for a mortgage (the debt service ratios were WAY out of whack). And although her parents were in her corner if need be, they did not want to formally co-sign or guarantee her mortgage.

What can you do if you need a mortgage co-signer but don’t want one?

With regret, I told her I could not do the deal as presented – a couple of parental signatures and she would be on her way. But she and they were adamant that would not be necessary – and it turned out they were right.

She paid a visit to her personal banker and told her she needed a mortgage. She was told the best way to ensure approval was to declare a second (concurrent) full time job. Once that was done, the mortgage was approved effortlessly.

The lender knew her customer – she knew this mortgage would never be in jeopardy, and she decided it was worth “crossing the line” in this instance.

Lenders and their agents often face such decisions – it’s not a subject often discussed in the media, and I am sure you can understand why.

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