It is the Lender’s responsibility to ensure documentation is on file supporting details of a property’s description, such as, but not limited to: municipal address, legal description, square footage, lot size, property type, property tenure, occupancy, number of units, construction type, and age. Through the course of reviewing this documentation, if any negative characteristics of the property become evident that may influence the property’s marketability, it is the Lender’s responsibility to disclose this information to Sagen prior to funding. The lending value of the real estate that will be used to calculate the LTV is the lesser of either the market value as determined by an appraisal or the purchase price.
The Lender should also ensure the subject property meets all requirements as outlined in its own internal policy prior to submitting the application to Sagen. The following are examples of documents the Lender can review to gain more insight on the real estate and whether it is acceptable to their own guidelines prior to submitting the application for mortgage insurance.
| Document | Description |
|---|---|
|
Property Listing |
|
|
Purchase and Sale Agreement |
|
| All Schedules and Amendments to the Purchase and Sale Agreement |
|
|
Property Title |
|
In the absence of any Sagen policy related to evaluating real estate, the Lender is expected to defer to their own internal policy to ensure they support the quality of real estate.
Property Requirements
To be eligible for Sagen mortgage insurance, all properties must be:
- Located in Canada;
- Zoned to allow for residential use, and;
- Comply with all municipal zoning and by-laws*
*Properties containing unauthorized suite may be reviewed on a case-by-case basis
In addition, properties must meet the following criteria:
| Number of Units |
|
|
Property Type |
|
|
Property Tenure |
|
|
Acreage Properties |
|
|
Outbuildings |
|
| Properties with Existing or Previous Environmental Concerns
(i.e., Soil or Groundwater contamination) |
|
|
Properties Previously Used for Illicit Purposes |
|
| Water Potability and Source |
|
If water is received from a well located outside the property boundaries (i.e., shared well), evidence must be registered on title stating that the well:
|
|
| Age-Restricted Condominiums |
|
| Leasehold Properties |
|
| Mobile / Park Model homes |
|
| Manufactured / Pre-Fabricated / Modular homes |
|
|
Properties Ineligible for Mortgage Insurance |
|
*Environmental Site Assessments (ESA) – When required, at a minimum a Phase 1 ESA should be ordered. As a result of Sagen’s review of the Phase 1, additional environmental assessments may also be required. The assessments must be completed by a qualified professional who is insured in line with existing Canadian Standards Association (CSA) requirements.
Private Sales
A private sale is an unadvertised sale of a property which is not open to the general public. Typically, the transaction is negotiated between a buyer and seller directly without the assistance of real estate agents or public notices. Private sales are further characterized as either an arm’s length or non-arm’s length transaction. Each are permitted by Sagen subject to the following definitions:
Arm’s Length Transactions
An arm’s length transaction is one in which both the buyer and seller of a property are acting in their own self-interest and are not subject to any influence from the other party. These applications are not required to be referred to a Sagen underwriter for additional review.
Non-Arm’s Length Transactions
A non-arm’s length transaction occurs when the buyer and seller of a property have an existing relationship with each other. An example of a non-arm’s length transaction would be parents selling their home to their child. These applications should be referred to a Sagen underwriter for further review and the value of the property will be confirmed via a full appraisal.
Equity Buy-Out
In the event where the borrower(s) wish to buy out another borrower(s) interest in the property, the following requirements will apply:
- Available on purchase transactions up to 95% LTV
- Both parties must be currently on title to the property
- Documentation validating the remaining borrower is purchasing the departing borrower’s interest in the property and the sale price of the transaction must be retained on file. Acceptable documentation confirming this information can include any of the following items:
- An agreement of purchase and sale
- A finalized separation agreement
- A court order
- A full interior appraisal is required and will be completed by Sagen
Power of Sale Properties
A power of sale allows the Lender, and not the homeowner, to sell the property and use the sale proceeds to pay the remainder of the mortgage and any costs associated with the default. Additional due diligence is required when a property sold under power of sale is being purchased given there may be elevated marketability and/or quality related issues.
New Construction Properties
New construction must conform to the National Building Code and the latest edition of Residential Standards Canada or the applicable municipal or provincial building codes.
New homes are defined as:
- Any properties sold within one year from the date of the final occupancy permit being issued.
- Any properties that the developers/builders have as inventory even when the final occupancy permit has been issued for more than 1 year.
New Home Warranty Coverage
All new construction that is not “owner built” must be enrolled in a Lender approved New Home Warranty program.
In the provinces of British Columbia and Alberta, all new home and condominium applications must be covered by a 3rd party warranty provider recognized by the Homeowner Protection Office (HPO).
For new construction properties in the territories (Yukon, Northwest and Nunavut Territories) where New Home Warranty is not an option, Lenders must obtain either the occupancy permit or a third-party report from a qualified professional such as: an inspector, architect or engineer. The qualified professional must carry the appropriate liability insurance and confirm construction is completed in compliance with applicable bylaws and regulations.
Harmonized Sales Tax (HST) / Goods and Services Tax (GST)
The borrower may assign the rebates to the builder, and in such instances, the purchase price on the offer will represent purchase price minus the HST/GST rebate portion and should be submitted as the purchase price on the application. Where the borrower has not assigned the rebate to the builder, the Lender may submit the total purchase price (exclusive of any rebates).
Vendor / Developer Cashback Program
Any cash given to the borrower(s) that comes either directly or indirectly from the builder/developer must be deducted from the purchase price.
In all instances, no portion of any cashback programs may be considered as part of the borrower’s equity. Borrowers must have sufficient funds for the down payment and closing costs, as outlined in Sagen’s Product Specific Underwriting Guidelines. Any funds deposited to the borrower’s account after closing must be in excess of the amount the borrower has on deposit for the down payment and closing costs.
Final Completion Inspections
Mortgage insurance becomes effective when the premium has been paid, the property has been completed, and the full proceeds of the mortgage have been advanced subject to minor and seasonal deficiencies (maximum 5% of the value of the improvements), not including land value.
It is the Lender’s responsibility to ensure the property has been completed in accordance with originally submitted plans and specifications provided at the time of the initial underwriting.
Prior to the loan closing, the Lender must notify Sagen of any changes, along with a re-certification of value for approval, if necessary. Mortgage insurance will be in force when the premium is tendered, signifying that all conditions have been satisfied.
Incentives
An incentive is an offer from the vendor or builder intended to encourage a homebuyer to proceed in completing a specific real estate transaction. Common household items (i.e. built in appliances) negotiated as inclusions between the vendor and purchaser are not considered purchase incentives. Sagen will permit incentives that do not exceed 0.5% of the purchase price. For incentives greater than this amount, the amount must be deducted from the purchase price, (including builder interest rate buy downs).
