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The Bank’s Not Always Right

We heard from a reader last week who was declined for a mortgage by a Big 5 bank. The problem was not with him, however. The problem was his banker’s ineptitude.

Fortunately for Ralph (his name), he was particularly well-versed in the bank’s guidelines, having researched rental financing in the past. When the banker told him he was declined, Ralph knew something was wrong. He did the math (i.e., calculated his debt-service ratios) and was certain he should have qualified.

“I told the…branch manager that there had to be an error in the numbers sent to underwriting for [my] refinance to get declined,” he said.

“After a bit of gentle but firm persuasion on my part, [the banker] looked through the [application], and noticed a potential problem with their ‘existing housing cost’ numbers.”

“[The banker] sent me an excerpt from a screenshot showing [that] the monthly costs for one [of my properties] were over $1,000 too high.” That was boosting the total debt service ratio above the bank’s limit.

Ralph then had the branch manager resubmit his application to underwriting with correct data and, sure enough, it was approved.

Don’t Take Declines at Face Value

This is a tale that likely plays out every week in every big bank in the country. All too often, bank mortgage applications are processed by people who either:

(A) Wear too many hats

  • Some banks give them generic titles like “client advisors”
  • They’re turned loose to sell a variety of financial products, wherein they’re masters of none


(B) They have limited, if any, experience underwriting complex applications, like those that rely on multi-unit rental income.

  • This includes newer “Mortgage Specialists,” who you’d think from the title know their own mortgage policies.

Or sometimes, the person pre-underwriting your mortgage application is just plain sloppy.

“Many of them don’t understand the bank’s own [rental income] formulas, and some of them are too interested in an easy commission to put the necessary work in on a deal involving multiple rentals,” Ralph adds. Bank staff, and even brokers for that matter, cannot be blindly trusted.

So, if you feel you’re sufficiently qualified but the bank doesn’t, request they send you the calculations they used to decline you. Then check their math against their stated policies.

That exercise is especially worthwhile if you have provable income (including rental income), a 700+ credit score, a comfortable debt load, etc.

And don’t stop at one lender. Engage an experienced broker to give you a second opinion. They can match your qualifications up to a host of other lenders and potentially get you approved, even if your bank shoots you down.

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  • Ken says:

    The bank or any lender doesn’t have to approve a deal even if it’s qualified, for any reason. Rental properties are high risk lending with usually the weakest applicants.

    And many lenders don’t favour rate shoppers and especially those with weak or minimal savings/fallback. The referral source could be enough to get a deal declined.

  • Huh? says:


    Rentals are not high risk. They may be slightly higher risk than owner occupied purchases but defaults are still well under 1% on prime rental deals.

    And what do rate shoppers have to do with this story?

  • JP says:

    I’d be willing to bet half of all mortgage brokers and branch staff don’t know how to use a rental income worksheet.

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