“Self-employed colleague pre-approved for a mortgage 6x his gross declared income. Same guy couldn’t get a mortgage more than 3.3x his income back in 2003, when he had a stable job.”

gse36 at RE Talks 11 mar 2011 10:35am“Just got off phone with a colleague of mine. Pre approved for a mortgage 6x his GROSS income — from one of the big 4 banks. All it took was a single notice of assessment (haha I guess it could be faked — and could be a stated income mortgage). The guy is self employed. Some of the income is not stable (stock gains, side income, etc), but the NOA does not differentiate. You could easily fabricate income through realizing stock gains one year to bump up the income. He was never asked how long he’s been self employed, etc. Basically told to provide 1 year of NOI and how much he wants to put down (this isn’t a CMHC mortgage either — you would think the banks would actually care). His Net income is much smaller due to RRSP contribution. If you take Net income, its 7.2x net income! Looks like the party will roll on. Nothing has been done to ease the credit lending practices in Canada. Same guy couldn’t get a mortgage more than 3.3x his income (he had a regular stable government job back then) back in 2003.”

5 responses to ““Self-employed colleague pre-approved for a mortgage 6x his gross declared income. Same guy couldn’t get a mortgage more than 3.3x his income back in 2003, when he had a stable job.”

  1. That’s it. I’m shorting Ca banks. I’ve been toying with this idea for a month and now I can’t bear (heh) to resist it.

  2. I’m self-employed and have had a bad 18 months and was still pre-approved for a $900,000 mortgage in a couple of days. I didn’t use it, but it does worry me that the banks are still shoveling out money.

  3. Banks were willing to give me 6x income in 2004, more if I had supplementary rental income. Rates were low then too; it’s all related to DSRs. I haven’t bothered looking recently so who knows what I could get.

    What was astounding for me in 2004 was that, 5 years previous to that, loans at 6x income were unheard of. Now, in 2011, it’s almost as if it’s par for the course.

  4. It seems to me to be more the exception rather than the rule. I could see the banks not giving a dam if CHMC insurance was involved, but I doubt the banks will give non-insured morgages easly without doing due diligence.

  5. pricedoutfornow

    It IS strange. When I moved to Vancouver in 2001, people told me that they could never buy a house here because it was too “expensive” (I think the average SFH was around $300k). But now, prices are REALLY expensive and people are jumping all over it. Every time I call my credit union, they give me a spiel about “Are you tired of renting? Get our 3.85% mortgage!” I don’t doubt that this guy’s bank gave him a massive mortgage. I know people who have never earned more than $50k in gross income in their entire working lives, and are now sitting on mortgages of $700k, or more. Seriously. And this is not just one person I know, either.
    Frankly, it’s disgusting how much debt people have.

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