Mortgage Tips for Nurses and Teachers!
Hey, all you nurses and teachers out there!
If you find yourself looking to buy a home, but don’t think you are ready yet, this is a good article for you to find out for sure.
As a health care professional or educator you have a union and/or a large organizational structure that controls your salary, type of contract, location, etc. Many clients of mine think they are unable to qualify for a mortgage simply because of their current contract with their school district or Alberta Health Services.
You are in luck! Banks love you teachers and nurses and have ways around some of those “temporary” or “casual” contracts. Here are some of the key ways we can use your income:
- 2 year average
- T4 and YTD paystub
- 1 year T4 and next years contract
- New permanent fulltime contract
- New permanent part time contract
- Maternity leave
- Pro-rated income for the year (new)
What does this mean Graham!?! (see below)
Scenario 1 (2 year average):
If you having been working on a casual contract, or no contract at all (subbing, casual hours, etc)for a couple years you can still buy a home. Banks allow us to average your last 2 years of Notice of Assessments or T4’s. It does not matter if it is a full 2 years or not. If you worked only 2 months last year, but worked a full year this year, we can average those two years of T4’s.
Example: 2 years old T4: $20,000 + Last year’s T4: $40,000. The bank will use $30,000 for income qualification.
Scenario 2 (T4 and YTD Paystub):
If you have only been on the job for less than 2 tax years, that is ok! Banks and lenders will allow us to take your most recent T4 income and average that with your most recent YTD (year to date) paystub. Or take the paystub year to date if it is less than last years T4.
For example: Last year t4: $45,000 and YTD paystub for this year is $50,000. We can average the two: $47,500 and use that for qualification.
Example 2: Last year T4: $45,000 and YTD paystub for this year is $26,000. We can use $26,000 for qualification because it is less than last year.
Scenario 3 (T4 and next years contract):
Remember that banks will take a 2 year average? Even though your new temporary, probationary or permanent contract has not even started yet we can use the average of the two! And potentially use the full contract… but lets pretend we can only use the average. We will take your last year’s T4 from last year and average it with your new contract that you just were offered. Even if it’s a temporary position!
Example: Last years T4: $40,000 and new contract is $70,000. We can average the two together because we know that the contract is promised for at least the year. Therefore $55,000 is what we can use for qualification.
In some cases we can use the new temporary contract at $70,000!
Scenario 4 (new permanent contract):
This one is straightforward and the easiest for everyone. We will use your new permanent contract to qualify you for the mortgage. It doesn’t matter if its your first day on the job or 10th year, we will use what your new permanent position offers. If it says $80,000, that is the number we will use.
Scenario 5 (new permanent contract – part time or 0.5 FTE):
If you are guaranteed a specific set of hours per week, but it is guaranteed and permanent we can use it! Even if its only 3 days a week and it’s a brand new position with the District or AHS, we can use that guaranteed base. We can not use extra shifts that you take over and above until you have 2 years of that extra income being consistent. But the your base salary is useable from day one, even though it is not full time.
Scenario 6 (Maternity leave):
If you are pregnant currently and are on maternity leave receiving income from EI we do not need to use the reduced amount. As long as you have a contract/position to return to, we can use your full salary on your contract. Even if you have 5 months left on your mat leave, we can use your returning to work salary as of right now. It is pretty slick. You will obviously need to verify this for the bank, by providing a letter of employment confirming that your position is waiting for you.
As you can see, the banks want to help get you into a home. We brokers and banks love you educators and health care professionals. You do lots for others, so let us bend over backwards trying to figure out ways to make your real estate goals happen! If you find yourself in a situation exactly like the above, or something similar please feel free to call or email me. I would be happy to answer any questions that would be specific to your situation. If for some reason, your situation is more unique than the above, all hope is NOT lost. We may be able to problem solve around it!
Scenario 7 (pro-rated income):
This one is a bit rare becuase hardly any banks do this. BUT, it does exist. Lets say you have been working at your new job for only 4 months. It is a casual position with no guaranteed hours at all. We can take your last 3-4 months of paystubs, add up the total income for those 3 months, divide it by 3 to get the average, and then times it by 12 to pro rate that income over the entire year. That will project what you are on pace to earn this year. That pro-rated amount would allow you to purchase a home on income that has not been earned yet. It is a very cool product, and therefore is a bit rare!
I hope the above helps you plan and inspires you towards some of your home buying goals.
All the best!!!
Graham Reimer and the Mortgage Crusher Team