Over the many years of brokering mortgages, lenders have proven to me that it is not just about the math and the debt ratio calculations on a residential mortgage application. Money lending is a risk-based decision. Your file is evaluated in its entire context.
Often that is a good thing, lenders are able to make exceptions as they are confident with other aspects of your file. One sticky item doesn’t necessarily mean a deal breaker. However, a combination of weak points can add up to a lender unwilling to take the total risk on your file. In this case, you would move on to another lender until your options are exhausted.
This is why it is important how your application is packaged and presented. You want it done in a way the lender can understand with explanations that are reasonable and plausible. Everyone’s file varies and can be unique. That is ok, as long as there are explanations for irregular or unusual items. In the absence of information, it is human nature to say no. This is no different for a lender. Without knowing or understanding the explanation and details, lenders will assume the worse case scenario and may not feel comfortable approving your application.
I tell clients my job is to be a gift wrapper. I take your application and story and package it into a pretty present with a bow on it. The lender should be happy to open it as the file is easy to follow, has all their questions answered and gives them confidence to say yes.
During the mortgage application process, it is implied that all information in the application is truthful and disclosure of any material information is not omitted. A mortgage broker can advise if the information is or will be relevant to a lender. The financing industry is highly regulated and very fraud-alert oriented. There are multiple layers of auditing processes behind the scenes.
That is why now, more than ever, there are increased documentation requests. It is just a symptom of the regulations. Understand that you are just helping the lender conform to the regulations so that they can continue to loan out money to borrowers like you.
So, to win the game, put yourself in the lender’s shoes. They want to lend you money but need to follow some rules. if you were lending out your money, wouldn’t you look at risk as well?