![\"\"](\"https:\/\/rankmyagent.com\/agent-resources\/wp-content\/uploads\/2019\/07\/homebuyers-with-a-20-down-payment-had-to-also-theoretically-afford-certain-principal-and-interest-payment-in-case-interest-rates-go-up-1024x1024.png\")
<\/figure>\n\n\n\nReasons\nwhy you may not qualify for a mortgage<\/h2>\n\n\n\n
A year and a half ago (January 2018), the Canadian government tightened the qualifications required for a mortgage. They implemented a \u201cstress test\u201d where homebuyers with a 20% down payment had to also theoretically afford certain principal and interest payment in case interest rates go up. Ever since, more homebuyers \u2014 unable to satisfy this stress test \u2014 have flocked to B and C lenders to have their mortgages approved. <\/p>\n\n\n\n
As the government\ncreates new regulations and the economy and interest rates change, it will\nheavily influence who gets and doesn\u2019t get approved for a mortgage. But this\nisn\u2019t the only reason for a major bank to decline a mortgage applicant. <\/p>\n\n\n\n
On a more\ncase-by-case scenario, a common factor to mortgage rejection is poor or no\ncredit history. A credit score is a number on the scale of 350-900, where 350\nis bad and 900 is stellar, which explains a person\u2019s spending habits. The score\ndepends on history of debt payments, how long you\u2019ve had a credit account for,\nnew inquiries for credit, and other factors. <\/p>\n\n\n\n
Quite frequently,\nfirst-time homebuyers are plagued with the poor spending habits of their\nyounger self. This could have been a mismanaged credit card or high student\nloan debts, which would have resulted in a terrible credit score. Another issue\nis if the person has never had credit. This would result in no credit history\nthat the lender could rely on. <\/p>\n\n\n\n
There is hope,\nhowever. Even with a bad or missing credit history, individuals can still get\napproved if they have a guarantor or co-signer. This is someone legally liable\nfor your loan payments if you default. <\/p>\n\n\n\n
Self-employment\nis another common way that people find themselves unable to get their mortgage\napplication approved. Due to the instability of their income, A lenders find\nself-employed people a greater risk. Thus, the bank may require a higher\ntaxable income or a larger down payment to approve of someone who is\nself-employed. <\/p>\n\n\n\n
Lastly, many\npeople make financial mistakes, and this can result in bankruptcy. People who\nhave declared bankruptcy in the past few years likely won\u2019t get approved by any\nmajor bank and will have to seek help from a B or private lender. <\/p>\n\n\n\n While A lenders\nconsist of the major banks, like RBC, TD, CIBC, etc\u2026, and the major credit\nunions, there are many more organizations willing to lend money. Just because\nyou\u2019ve been declined at an A lender, doesn\u2019t mean you\u2019ll have to head to a\nsketchy alleyway and find a loan shark that charges a 30% interest rate.\nAlternative lenders have a lower barrier to entry in exchange for a higher\ninterest rate. They also commonly charge a processing fee that\u2019s 1-2% of the\nmortgage and a brokerage fee, usually 0.5% of the mortgage. <\/p>\n\n\n\n Often, using an\nalternative lender is not a permanent fix. Many borrowers use an alternative\nlender as a way to rebuild their credit and then apply for an A lender later\non. <\/p>\n\n\n\n Contrary to what\none might think, there are dozens of banks in Canada. Many of these smaller\nbanks, such as Equitable Banks or B2B Bank, allow clients to miss one or more\nof the components that the big banks look for in a client. For example, they\nmay approve someone even though they have a bad credit history if the applicant\nhas a stable job and no recent bankruptcies. B lenders also more heavily\nconsider the property being purchased in offsetting default risk. <\/p>\n\n\n\n![\"\"](\"https:\/\/rankmyagent.com\/agent-resources\/wp-content\/uploads\/2019\/07\/BC2-1024x1024.png\")
<\/figure>\n\n\n\nThe\nalternatives<\/h2>\n\n\n\n
B\nLenders<\/h3>\n\n\n\n
![\"\"](\"https:\/\/rankmyagent.com\/agent-resources\/wp-content\/uploads\/2019\/07\/BC3-1024x1024.png\")
<\/figure>\n\n\n\n