Some new financing alternatives which I felt would help maintain our vibrant real estate market. There are now some even more exciting break through products available in the marketplace.

The 100% financing program is a product which will enable many home buyers to enter the marketplace with absolutely no down payment.

The lender will add an administration fee of 4% and will charge an interest rate approximately 1% above the posted, non discounted rate. For qualification purposes, the mortgage company will use only the total debt service ratio (tdsr). The benchmark is 40% which means the total amount of monthly debt for the borrower (mortgage payment, property taxes, heating costs, plus any other outside monthly debt payments) cannot exceed 40% of the borrower's monthly gross income.

The other conditions necessary to obtain approval are two years of stable employment and two years of good credit history.

No past bankruptcy history is allowed for this new program.

The mortgage term must be either three or five years and the maximum allowable mortgage is 400,000. Funds can be advanced up to a maximum of $500,000 but anything above $400,000 will require a 20% down payment for the difference. The maximum loan amounts are also restricted to Larger Urban Centres. High-rise condominiums can be financed up to 85% of the loan to value ratios.

Other Products:
Furthermore, the same lender has come up with additional products that are also very valuable to the consumer. There are two classes of products - the Xecutive products and the Xtra products.

I will first summarize the Xecutive plan products.

If a borrower required 90% financing, he/she could choose either a mortgage with a 3% administration fee which would be built into the mortgage or a no fee product with an interest rate approximately 1.25% higher than that of a fee product. There are also 85%, 80% and 75% loan plans with corresponding administration fees of 2.5%, 2.0% and 1.5%. The last three plans do not allow for a no fee product option.

The maximum total debt service ratio for the above products is 45%. Discharged bankrupts are accepted with a minimum of 3 years discharge and re-established credit on loan to value ratios up to 90%. The property must be in a marketable location and rural residential properties will be considered on an exception basis. The maximum purchase price is $500,000.

If an applicant does not qualify for the Xecutive program, there is the Xtra product which is a little more flexible. It allows for a higher total debt service ratio up to a maximum of 50%. The lender will also consider, with a reasonable explanation, some isolated negative credit history beyond 12 months and providing that the debt has been paid in full. Some "tarnished" present credit history will be considered. Limited credit and/or employment history may also be entertained by the Lender. This will be assessed on a case by case basis. This program also allows for self-employed individuals who may not be reporting the necessary income to qualify. The administration fees in this program mirror those of the Xecutive program. However, the interest rates will be higher because of the more liberal qualification requirements.

Conclusion:
There is now a lender that will do up to 100% financing. Unlike CMHC and GE Capital Corp. (both of which are insurers of the financial institutions), they will consider isolated credit issues, accept verifiable credit history that is not reported by the credit bureau ( for example, rent expenses), and they will accept a total debt service ratio of up to 50%. There are administration fees associated with these mortgage plans and the interest rates will be higher to compensate for the higher levels of risk. Ultimately this new lending structure will open the doors to many new prospective home buyers who would not have qualified in the past.

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