Business For Self Alt-A
This program is designed for self-employed borrowers who are unable to provide traditional income verification but have a proven 2-year history of managing their credit and finances responsibly. Eligible borrowers typically own a small size business for a minimum of two years, which can be confirmed via a third-party arms length document. In addition, the borrower is required to declare their annual income, which should be reasonable based on the industry, length of operation and type of business.
Acceptable loan purpose:
Purchase, Purchase Plus Improvements
Progress Advance
Refinance for repayment of existing mortgage debt, home renovations, debt consolidation, or asset enhancement
Equity takeout limited to $200,000
Where the loan purpose is to consolidate existing first and second mortgages, the maximum LTV will apply
Loan-to-value ratio limits:
Eligible properties:
Maximum 2 units where at least 1 unit must be occupied as the principal residence
Existing and new construction
Readily marketable residential dwellings, located in markets with demonstrated ongoing re-sale demand
Older homes (pre 1950) must have been substantially modernized and the estimated remaining property (economic) life must be at least 25 years
New construction must be covered by a lender -approved New Home Warranty Program
Maximum Loan Amounts:
Note: Exceptions to these maximums will be considered on a case-by-case basis
Terms/qualifying interest rates:
Fixed, standard variable, capped variable, or adjustable rate mortgages are permitted
For terms less than 3 years, the qualifying interest rate is the greater of three-year posted rate or contract rate; for terms of three years or more, the contract rate is used
Amortization options:
Premium rates:
Premiums must be paid in full at closing, and may be capitalized into the mortgage balance.
Where the first and second mortgages are insured concurrently, the total premium will be equal to the amount that would be required if insured as a single first mortgage
Premium matrix:
LTV Ratio |
Recommended Credit Scores |
Purchase |
Refinance |
Top-Up Premium |
85.01% - 90% |
650 |
4.75% |
N/A |
7.00% |
80.01% - 85% |
620 |
2.90% |
2.90% |
5.50% |
75.01% - 80% |
620 |
1.64% |
1.64% |
3.85% |
65.01% - 75% |
620 |
1.00% |
1.00% |
2.60% |
< 65% |
620 |
0.80% |
0.80% |
1.50% |
|
* A .20% premium surcharge will be applied for every 5 years of amortization beyond the traditional 25 - year mortgage amortization period
|
Borrower qualification:
The income reported by the borrower must be reasonable based on the industry, length of operation and type of business
Strong credit and credit score with minimum 2 trade lines with at least two (2) years history (for recommended bureau score requirements see the premium matrix below)
Genworth will average the scores pulled from both credit bureaus for each borrower, and the minimum score requirement will apply to all borrowers on the application
No mortgage, installment or revolving credit delinquencies appearing on the credit bureau in the past 12 months
No reported defaults on residential mortgages for the past 7 years
No previous bankruptcy
Minimum 5% down payment from the borrowers own savings. The remainder may be gifted from an immediate family member. Borrowed down payments are not permitted (Reminder that purchases require a 10% down payment under ALT A).
Borrowers with commission income are ineligible
Lender to ensure borrower(s) have no tax arrears
Maximum one (1) Genworth-insured Alt. A mortgage
Self employed borrowers:
One (1) form of written third party documentation confirming self-employment tenure for at least two (2) years must be on file
Lender is required to capture the borrower's "Stated" income and submit to Genworth as part of the application.
The "Stated" income should be reasonable based on the type and size of the business, and should be able to service the required mortgage as per the GDS/TDS Guidelines above
Reasonableness of the borrower receiving this income is a critical factor in the approval of the loan as is the borrower's ability to service the loan and all other obligations
Documentation/information requirements:
Sole Proprietorship
A one-owner operation where the owner directs all the activities of the business, assumes all authorities and obligations, and is liable for its business debts. The sole proprietor income is reported to revenue Canada on the standard tax return (T1 General) together with Revenue Canada's required statement of business or professional activities.
Documentation requirements - Any one of the following must confirm at least two (2) years business-for-self tenure:
Business License
GST/HST Return Summary
T1 Generals with statement of business activities attached for a minimum 2 years prepared by an arm's length third-party
Audited Financial Statements for the last 2 years, prepared and signed by a CA
Plus a recent Notice of Assessment or a signed affidavit by the borrower(s) to confirm no income tax arrears (Note: in the province of Quebec, both federal and provincial NOA's will be required)
Partnerships
Partnerships are businesses owned by two or more individuals who share the profits or losses of the business operation. The partnership income is reported to Revenue Canada on the standard tax report (T1 General) together with Revenue Canada's required statement of business or professional activities, which reflects the percentage of the NET income or loss for each partner of the enterprise.
Documentation requirements - Any one of the following must confirm at least two (2) years business-for-self tenure:
Business License
GST/HST Return Summary
T1 Generals with statement of business activities attached for a minimum 2 years prepared by an arm's length third-party
Audited Financial Statements for the last 2 years, prepared and signed by a CA
Plus a recent Notice of Assessment or a signed affidavit by the borrower(s) to confirm no income tax arrears (Note: in the province of Quebec, both federal and provincial NOA's will be required)
Corporations
A limited company or corporation is a legal entity, separate from the persons (all shareholders) who own it. The business can own assets, enter into contracts and conduct business transactions in its own capacity. The company is called limited because the liability of the shareholders is limited to their investment. All provincial Corporations must obtain articles of incorporation from the province in which they are registered or may be federally incorporated. The applicant's personal income will be reported by T4 from the corporation.
Documentation requirements - Any one of the following must confirm at least two (2) years business-for-self tenure:
Articles of incorporation
Audited Financial Statements for the last 2 years, prepared and signed by a CA
Plus a recent Notice of Assessment or a signed affidavit by the borrower(s) to confirm no income tax arrears (Note: in the province of Quebec, both federal and provincial NOA's will be required)
Portability:
Example for Scenario #3:
Outstanding mortgage balance = $100,000; Top-up mortgage amount = $80,000; New Loan Amount = $180,000 (90% LTV)
($100,000 x 1.5%) + ($80,000 x 7.0%) = $7,100
($180,000 x 4.75%) = $8,550
Premium Payable is $7,100
When porting with a top-up mortgage amount, the blended amortization option is available
Assumptions/assignments:
Eligible Products:
Ineligible Products:
-
New to Canada
-
Family Plan
-
Cashback Equity
Vacation Homes (Type B)
