experts: real estate column Wednesday, December 11, 2002

New mortgages aimed at self-employed

People who cannot prove how much they earned will find it easier to buy a home

By Ozzie Jurock

This article appeared in The Vancouver Sun on December 7, 2002

We all hear more and more people accepting cash for services.

We also have a world where 300,000 new jobs were created by small business in the last 3 years. A new world, where 90% of people are employed in companies under 20 employees and where half (half!) of our revenues are now generated by small business ... while the big by companies are laying off in the thousands daily.

At the same time, more small businesses are forced to become tax collectors for GST and PST and perhaps well, perhaps - There are now more and more $100 bills in use than ever before ... Ahem!

Perhaps not too surprising, since life for individual businesses is becoming more and more complicated. Apart from being tax collectors (with huge penalties when you don’t) for any business. Many industries have now onerous reporting requirements that have nothing to do with their business. For instance, developers are forced to become policemen against their own subtrades (Must report what GST subtrades have received). Realtors must act as policemen for ‘suspicious transactions’ against their own buyers. A cash down payment - in the eyes of our government is suspicious as is a deal written ‘ as nominee’ and a hundred other situations.

While lawyers have received a temporary reprieve of reporting against their own clients ... there are dozens of other professions, that also have new onerous reporting requirements. George Orwell 1984 society? Hah, even he did not envision that.

One of the new mortgage products aimed at a market where buyers can’t prove their income via T-4 (as in self-employed) is a new mortgage by General Motors ... or its finance arm GMAC.

This brand new product by giant GMAC (exclusively marketed through Mortgage Intelligence in BC - starting December 15, 2002) has some interesting twists, which will really help you if you have good credit, are a contractor, self employed OR do not want to have the hassle of providing income verification. (Yep!)

This product requires no income verification.

Here is what is needed:

  • Approvals are made on 'stated income' although ratios must be in line.
  • Lender reserves the right to call employer to confirm employment but not salary!
  • For self employed, confirmation of business via Articles of Incorporation, accountant's letter etc. is sufficient.
  • Your credit has to be ok.
  • Self-employed individuals have to confirm that there are no outstanding taxes.

That's it! You can say you made enough money for the mortgage, no one will question it! I earn $200,000 last year ... no one will check. You can be a ‘somebody’. You can get a mortgage on the house you can afford ... even if you can’t prove you have the income to support the payments.

This new product proves the extreme competitiveness of the mortgage market ... It also proves a perceived need? It clearly will help a growing segment of today’s society.

The down side? While 3 - 5 year terms and variable rates are offered, the new mortgage is available on the 'posted rate only'. So, you will pay about 1% more than the 'best rates' posted here below.

Says John Ribalkin of Mortgage Intelligence: "This is the biggest change I have seen in 25 years. Thousands of people that are self employed or for whatever reason can't prove their income are now able to get the larger home purchases approved." Indeed.

Ozzie Jurock is the publisher of Jurock's Real Estate Insider an independent real estate advisory service. You can reach him at 604-683-1111 or e-mail ozzie@jurock.com.




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