Some find it embarrassing to call to inquire on potential mortgage financing.  Although they are good people, circumstances lead some to believe that they are not destined to become homeowners, simply because they have been rejected in the past, or they feel their situation is hopeless.  I have had several people call me up recently to discuss mortgage financing, on the off chance that someone would approve their mortgage.  To their surprise, in most cases, the answer was positive.  Let me give you some guidelines so you don't have to feel negative when you call.

If you have entered into a bankruptcy situation, within the last seven years, some lending institutions won't look at you at all.  Other lenders will insist that you be discharged (released from bankruptcy) for a certain amount of time.  Among the major lending institutions, the figure varies from two to four years.  Depending on down payment, other (fringe) lenders will entertain your application as soon as the ink is dry on the discharge.  These lenders are more expensive but approachable.

If you have had less than a stellar credit history in the past seven years, most of the major lending institutions may still have a problem advancing mortgage funds.  Depending on the amount of your down payment, fringe lenders may approve you as long as they are satisfied that whatever caused your credit problems in the past has been rectified.  If the credit problems are recent, a satisfactory reason must accompany your request.  For those seeking mortgage financing with the minimum down payment (ie. 5%), very few lending institutions will represent you to Canada Mortgage & Housing Corp (CMHC) to insure the loan against default.  Without this insurance, Canadian lending institutions are forbidden to advance beyond 75% financing.

If you have the type of job that allows you to write-off expenses,  your taxable income may be  too low to qualify you for a mortgage through the major lending institutions.  Most of these lenders will qualify you on your net taxable income, instead of gross income before tax.   If you are a commissioned employee, the commission part of your income may not be considered at all. The system is indeed flawed.  You should know, however, that some lending institutions really don't care how much money you make (equity lenders). Other lenders do care but their debt service ratios are much higher than the norm (up to 50% GDS).  Still other lenders understand that you may make more money than you report to Revenue Canada, therefore, they will allow you to disclose an amount that they will consider as adequate for income purposes.

Should you happen to work for yourself, proving income is tenuous at best.  Most lending institutions will insist on averaging your last three years worth of "net" taxable income reported to Revenue Canada.  If you happen to have had a lousy year, three years ago, but business is booming today, the system could prevent you from buying to your capacity.  In some cases, you may not have been working for yourself for three years.  Some lenders will not consider you a viable risk.  Other lenders, however, will justify lending you mortgage money by assuming that you would not have quit your regular job to become self-employed, unless you were certain of making more money.

Supposing you found a house for sale, and the Vendor of the house was motivated enough to lend you the down payment, most mainstream lenders will deny you your mortgage because the purchase represents 100% financing.  As in the eighties, some lending institutions today will put more credibility in your credit rating, rather than in your provable down payment.  As long as your agreement with the Vendor is disclosed, fringe lenders can advance up to 85% financing without the required CMHC coverage.  In this case, your credit must be excellent. If the Vendor has agreed to lend you the 15% required down payment, the deal will still advance.

If you earn your income by having multiple part-time incomes, rather than one full time job, as long as continuity has been there for your income over the last three years, fringe lenders will indeed accept your verification of jobs by way of income tax returns, rather than job letters.

Most alternative financing cases can be summed up this way:
a) if your credit is poor, your down payment will be 25% of the purchase price of the property;
b) if your credit is good, but provable income is weak, 85% financing is available;
c) most cases will dictate a fee to the lender (because the lender realizes you can't get this done at a bank);
d) most cases will be at a higher rate than the traditional banks;
e) most cases will dictate a Mortgage Broker fee.