Question:

My girlfriend and I are looking to purchase our first home. Up until May 2003 she was attending Algonquin College enrolled in the Hotel and Restaurant Management program. When she completed school in May, she began to look for a position relating to her course of study and was finally able to secure full-time employment at a major hotel in the area on November 25, 2003.

We would like to purchase a home but we're curious as to how the length of time she has been with her current employer will affect our pre-approval for a mortgage. She has completed her probationary period but we still have concerns. We have been in contact with one of the major banks in the area concerning our mortgage application and have been told that we will need to provide her income for a 1 year period. We don't see how this is relevant since she only worked part-time (in some cases only 8 hours a week) at other locations until securing full-time employment with her current employer.

Could you tell me if asking for her income for the past year is a standard practice or is the bank going looking for too much unnecessary information? We fail to see how previous part-time income with other companies is applicable. Any information you could provide would be appreciated.

Thanks in advance,

Cory Lusk

Answer:

If you plan to have no down payment whatsoever, there are a specific set of guidelines that most lenders follow to approve you for a mortgage. If you have 5 to 10% down, there is a more lax set of guidelines they follow. If you have 10 to 25% down, still another even more lenient set of guidelines and with 25% or more down, there are still fewer guidelines to follow.
The guidelines are comprised of a series of definite and indefinite requirements to obtain a mortgage. For the purpose of my answer, I will assume that you have 5 to 10% scheduled as your down payment. The guidelines are that you need to show an additional 1.5% of the purchase price of the home as additional unborrowed funds available to cover closing costs. So, 6.5% cash is required on your part. You also must have a proven track record credit wise and have a solid employment history, this may be circumvented somewhat with a strong guarantor. If you would like to pursue this further, call me at the office to go over the specifics.
John Lozinski

Answered By: John Lozinski

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