Underwriting Guidelines

A

Adjustable Rate Mortgage (ARM)

Both the interest rate and payment vary concurrently during the term subject to two options:

• Option A) The mortgage payment is adjusted to cover both principal and interest to maintain the amortization schedule when the interest rate increases; or
• Option B) The mortgage payment is adjusted to ensure the interest is paid when the interest rate increases until the term renewal at which point the payment is adjusted to maintain the amortization schedule.

Alimony Child Support

When accepting child support or alimony, the applicant must meet the following criteria;

• Court ordered or an executed separation agreement (lender must obtain)
• No more than 50% should be used for qualification purposes
• 100% may be used provided income represents < 30% of gross income and borrower has demonstrated receipt - through T1General - for a minimum of 1 year.

B

Bankruptcy

An applicant with a prior bankruptcy will be considered for mortgage insurance, up to a maximum LTV ratio of 95%, provided that the bankruptcy has been discharged for at least 2 years and they have at least 2 years of re-established good credit. Applicants having had a foreclosure or power of sale are not eligible for mortgage insurance.

C

Car Allowance

Car allowance may be used to offset car loan/lease payments provided:

• Car allowance is a taxable benefit
• Applicant has been receiving car allowance for at least one year and it is likely to continue

Child Tax Credit/ Family Allowance

Child Tax Benefit/Family allowance income may be used for qualification purposes provided applicants meeting the following criteria:

• 100% may be used for the applicant's children who are 18 years old and under

The lender will be required to have verification of the child's age and income stream in the file. Age and income stream can be verified with the following documentation:

• Personal income tax returns
• Copy of birth certificate
• Allowance cheque slip
• Bank statement showing automatic deposit

Child Care Benefit (UCCB)

Genworth will accept the Universal Child Care Benefit (UCCB) as a form of income for qualification purposes. This benefit provides $100 per month per child for all children less than 6 years of age.No confirmation of the child's/children's age is required, but lenders must verify the UCCB income through one of the following:

• UCCB Statement
• Bank Statement showing automatic deposit of UCCB
• GRC62 Form (this is a statement provided by Revenue Canada)

F

Foster Care Income

Income will be considered subject to the following requirements:

• The caregivers must have at least 2 years experience as foster parents
• Income letter or contract from the ministry and pay stub are the only acceptable forms of proof of income
• Letter from Social Services confirming tenure and current status
• Maximum number of children should not exceed 6 (including any of their own children)
• The applicants must live on site
• If foster care income accounts for more than 50% of applicants' total income, we will require a minimum of 10% down payment
• Maximum LTV is 95%

G

Gifted Down Payments

Gifted down payments from immediate family members can be used provided they are properly verified, are non-repayable and all other characteristics of the borrower are acceptable. Gifted down payments are not required to be on deposit until time of closing.  Under the Cashback Equity/Borrowed Down Payment product, gifts are permitted from sources other than immediate family.

Guarantor income

If the guarantor occupies the property, the income will be considered for qualification purposes provided the guarantor is a direct family member (mother, father, brother, sister, grandparent, child or legal guardian). If the guarantor does not reside in the property, Genworth will consider income for the GDS/TDS calculation provided the guarantor is a direct family member and resides in the region where the property is located.

I

Immigrants to Canada

Qualified homebuyers who have immigrated to Canada, or have been transferred to Canada by an employer can qualify for a mortgage with as little as 5% down payment using Genworth's New To Canada program. Applicants must have immigrated and/or relocated to Canada in the past 36 months, be employed for a minimum of 3 months in Canada, have a valid work visa or obtained landed immigrant status as minimum qualifications for the program. Please refer to the New To Canada Program Overview at www.genworth.ca for complete details.

Investment Income

100% can be used if the last two years T5's confirm receipt. If some or all of the funds are liquidated for down payment, the income must be reduced accordingly.

O

Overtime

100% may be used provided income represents less than 25% of total income and borrower has demonstrated receipt for a 2 year period.

P

Parental Leave

Full return to work salary is acceptable for qualification purposes.  A letter from the employer is required indicating the position the person is returning to, the return date, and the salary/income upon return. 

Part-time

100% of permanent part-time income will be considered based on guaranteed number of hours.

Up to 100% of income from a second job will be considered if borrower can demonstrate a minimum 2-year history supported by income tax assessments or T4's.

Q

Qualifying rates

The qualifying interest rate used to calculate the gross debt service ratio (GDSR) and total debt service ratio (TDSR) will be determined as follows:

• For loans with a fixed rate term of five years or more, the qualifying interest rate will be:
  - the contract rate 
• For loans with a fixed rate term of less than five years and for all variable rate mortgages, the qualifying interest rate is the greater of:
  - the contract rate, or
  - the benchmark rate*
   
• For multi-component mortgages, each component must be qualified using the applicable criteria above.

R

Rental income - Owner occupied duplex, triplex and fourplex

For owner-occupied 2-4 unit properties, 50%* of the gross rental income from the subject property may be included in the borrower’s gross annual income.

TDSR:           Principal + Interest + Other Obligations     
               Gross Annual Income + 50% of Gross Rents*

* For 2-unit properties in Victoria and Vancouver CMA's, 100% of the gross annual income may be included in the borrower's gross annual income

Rental income - Other rental properties

For borrowers with other rental properties, the rental income needs to be confirmed with recent T-1 Generals.

• If there is a rental surplus – The surplus amount can be added to the
  borrower’s gross annual income.
• If there is a shortfall – The shortfall amount must be added to "Other Monthly Obligations".
• Where rental income cannot be validated with T-1 Generals, the full Principal and Interest must be included in "Other Monthly Obligations", and 50% of gross rental income may be added to the borrower’s gross annual income.

S

Seasonal Workers

100% of Employment Insurance income for seasonal workers will be considered provided the lender has verified that the applicant has been employed for at least 2 years, the income is regular, recurring and continuous and 70% of the income comes from the salary paid by the company and no more than 30% comes from the employment insurance. Income is calculated based on the lesser of the 2 year average income or the last year's income. The income must be validated with income tax returns or notice of assessments.

Self-employment

Any individual who has ownership interest in a company and is paid based on company performance, or whose ownership interest is 25% or greater is considered to be self-employed. Commissioned borrowers and other owner/operator situations, such as taxi drivers and truck drivers are also considered self-employed.

• Self-Employed Provable Income
  Income must be verified by 2-year's financial statements or tax assessments. Genworth permits lenders to gross-up the total income (line 150 Revenue Canada Notice of Assessment) by up to 15%. Income gross-up is subject to lender guidelines. The lower of the average net income for the previous 2 years or the most recent year are to be used for qualification purposes.
• Self-Employed Stated Income
  Self employed borrowers that cannot provide traditional income verification may qualify for a low down payment mortgage for purchase or refinance through Genworth's Business For Self (Alt A.) Program. This program recommends a minimum documented self-employed tenure of 2 continuous years and minimum credit requirements apply. Please refer to our Genworth Business For Self (Alt A) Program Overview for complete guidelines.

T

Treatment of Pension and disability non-taxable Income/Gross Income

For borrowers whose income is not taxed at the source, income may now be grossed-up on a two- tiered approach:

• Applicants with non-taxable income less than $30,000, are eligible to have their income grossed -up by 25%
• Applicants with non-taxable income greater than $30,000, are eligible to have their income grossed-up by 35%

In situations where there is disability income, the income may be temporary or permanent.

Treatment of US Income

U.S. income will be considered at the current conversion rate. This applies to borrowers living in Canada and paid in U.S. funds.

Trust Income

Trust agreement must be irrevocable and the statement must confirm the amount and frequency of payments.

V

Variable Rate Mortgages (VRM)

Variable interest rates are generally tied to the bank's prime lending rate and typically will fluctuate with prime. Genworth allows the following variable rate products with no additional premium surcharge:

Standard Variable Rate Mortgage (standard VRM)

Capped Variable Rate Mortgage (capped VRM)

• Fluctuating interest rate with a constant payment during the term
• Standard VRM's may not be available on all Genworth Programs. Please refer to specific Genworth Product Overviews for eligibility
• For applicable standard VRM trigger points click here

 

A constant payment during the term that is set at the capped rate, with an interest rate that fluctuates, but only up to the capped rate.

Trigger points

• For a non-capped VRM, the designated amount (trigger point) is 105% of the original gross principal amount. If the loan amount exceeds the designated amount as described above, we offer the mortgagor the following options:
• Increase the amount of each regular payment under the mortgage in order to amortize the mortgage over the remaining amortization period
• Reduce the total amount of the loan amount then owing by making a lump sum payment to reduce the total amount to a point below the designated amount
• Convert the mortgage to a fixed rate mortgage with equal monthly payments 
• For a capped VRM, the principal and interest payments are either calculated at the capped rate or at the contract rate (with the principal and interest payments being recalculated whenever the interest rate changes). This ensures the loan will amortize over the agreed term.
• If the event of default, the mortgage must be converted to a fixed rate mortgage. Once remedied, the VRM status can be re-instated.

Conversion

• Genworth allows conversion from a fixed rate mortgage to a variable rate mortgage at time of renewal, without an additional application fee or premium surcharge, provided that:
• the loan is in good standing and presently insured by Genworth
• the application is not a new application from a different lender 
• the lender has confirmed that the LTV of the original lending value does not exceed the maximum LTV ratio of their variable rate product arrangements
• the lender has retained all underwriting documentation in their files