Mortgage decisions are made in two steps. The first is a review of your credit report. The second is a comparison of your debt and mortgage payments to your gross income.
I have started changing my talk to say it’s a comparison to your eligible gross income. That is because of the lending policy universal across lenders as well as default insurers like CMHC and Genworth.
Lenders use your guaranteed income when you are a full time permanent employee. Different rules apply when you are working on contract.
Meaning, if you are Appendix A, hired through the PWU or Teamsters Hall, a supply teacher or a temporary operator effectively on contract – there are different rules that apply for mortgage applications.
How to Get a Mortgage with Contract Income
The short answer is – it depends how long you have been working on contract.
When you are self-employed, working on contract, hired out through a union hall or on some form of temporary employment eg: a maternity leave or a supply teacher – lenders require a minimum two tax year history to determine your income for use in that equation.
It doesn’t necessarily need to be with the same contract or employer. And there are some examples where we can squeeze time a little – specifically in November and December. When you started in May or earlier the year previously – sometimes we can get exceptions.
Generally – you need to have a two year track record as evidence that you can actually remain employed and stay paid through that time frame as proof/evidence that it will continue in the future so you can make your mortgage payments on landscape architecture.
What If I Move to Full Time Permanent Position?
As soon as you transition to a full time permanent position – not on probation – then the length of time on contract goes away. It is no longer a factor. Then we are back to using your base guaranteed income – and comparing that to your debt and mortgage payments – to determine how much you qualify for.
For one exception to the probation comment above – if you are at Bruce Power – read here.
I Want To Buy NOW. How Can I Speed Up Time?
The only way around this is to bring a cosignor to the table. They become a part owner to the property – and a party to the mortgage – along side you. Their income must be enough to carry their own debts and your house purchase and debts.
Once you have the two tax year history on contract – and/or – have moved to a permanent position – then you can apply to the lender to have the cosignor removed.
If you have questions – just contact Jim at 519-396-6800.