5 Lessons You Can Learn From Bianca Andreescu—Canada’s Tennis Star, About Getting The Mortgage You Want
Self-employed Canadians are finding it increasingly difficult to qualify for their ideal mortgage
as stress tests (which qualify you for a mortgage loan) and financing tighten up. But that doesn’t stop entrepreneurs like you who are competitive and persistent. Instead of giving up or taking no for an answer, you find inspiration and seek answers by looking to other people's wins and how they got ahead.
Take a look at 19-year-old Bianca Andreescu, the latest female to win the women’s tennis champion of the world. Although tennis and mortgages seem to have nothing in common, there are many lessons we can all learn from Bianca’s success— especially about overcoming adversity and getting the end result you want.
1. Work With a Coach: Talk to a Mortgage Broker Before You Feel Ready
Bianca Andreescu surrounded herself with the best coaches Canada had to offer long before she did any damage to the world rankings. Even after her recent championship win, her current coach Sylvain Bruneau said she’s just getting started— and needs to train even harder to be number one in the world.
As an entrepreneur, you likely have the same talent and ambition as Andreescu. However, you understand that getting the best rate on your mortgage is hard to time and will need guidance from experts such as your investors, co-founders, or specialized consultants.
The bottom line: if you want to fast track yourself to the best result, don’t go at it alone. Have an expert on your side to guide and support you. An essential step you can take right now is to make contact with a mortgage broker who’s helped self-employed people in the past and can guide you through various options for obtaining an excellent mortgage rate in the future.
2. Plan for the Future: Anticipate What Lenders Will Need from You and Get Serious About This from Day One
Andreescu planned ahead. Knowing that she wanted to make something out of her tennis game, she hired a coach at just seven years old— the same year she started playing tennis in her hometown of Pitești, Romania.
Similarly, you can do the same no matter what level your earnings are at. Whether you’re just starting out or further into your entrepreneurial career, you can start thinking about the future by taking inventory of what you need to get approved for a mortgage.
Personal tax Notices of Assessment from the past 3 years
Financial statements for your business
Proof that your HST and/or GST is paid in full
Contracts showing expected revenue for the coming years
Proof that you are a principal owner in the business
A copy of your borrower’s business or GST license or Article of Incorporation showing you are licensed
Proof that your down payment has not been gifted (Gifted from family is fine if it’s a primary residence)
Your personal and business credit scores
3. Stay Consistent Even When You Have Setbacks: Personal Finance and Credit Score are King
By the age of 10, Andreescu joined Tennis Canada’s Regional Training Centre in Toronto. She trained three times a week, before or after school. But she wasn’t without her setbacks. She missed various key tournaments in 2018 and 2019 due to an injured shoulder, back, and groin. However, she still put in the work early and stayed consistent as she “leveled up” to be a tennis pro.
What non-negotiable habits can you implement right now to avoid setbacks, so that you can get the best possible mortgage rate? Let’s start by taking a look at how you choose to save money and maintain a good credit score.
Saving
Saving is the fundamental part of becoming a homeowner because you need a minimum of 5% of the purchase price for a down payment on a mortgage (plus 10% down for any additional amount over 500K). The more savings you have to you put down, the less your mortgage and mortgage insurance will be.
Source: CMHC
With the average home price in Canada being $480,000, it now takes Torontonians three decades to afford their first house. With some simple math, you can see that you need at least $24,000.00 saved to make your homeowner dreams a reality.
So, how can you implement good saving habits today? There are some fantastic personal finance apps to help you tighten and stay on track with your budget so that your savings stay up to par.
Maintaining a Good Credit Score
It’s key to understand how a credit score works as a self-employed person. Credit bureaus use the following factors in credit score calculation and here is how to have it work for you instead of against you:
Payment history (35%) – How good you are at paying your bills on time? Set and forget! Automation is your best friend when it comes to building up your credit, consider right now where you can set up pre-authorized payments with payees and take action.
Credit utilization (30%) – How much available credit are you using? You should be under 40%. For example, if you have a combined credit limit of $20,000 between credit cards, you should not be carrying a combined balance of more than $8000.
Age of credit history (15%) – The age of your oldest account matters because lenders like to see that you’re responsible and consistent over time. It’s beneficial to have a long history of paying your bills on time.
Credit inquiries (10%) – When a bank or lender makes an inquiry about your credit to determine your creditworthiness, you will get points against your credit score. However, checking your credit on the mortgage side by a broker has a minimal impact on your credit score. If your credit does get checked more than once in a 60-day window by mortgage companies, Equifax only counts it as one check.
The total number of accounts (10%) – Too few or too many bank accounts open and active credit cards can influence your credit score.
The bottom line: Aim to have a minimum of 650 as your credit score to qualify for A lending (which offers the best and lowest mortgage rates). If you’re below 650, you will likely need to resort to B or Private lending, which offer higher interest rates
4. Explore Your Sponsors: Alternative Funding with B and Private Lending
Andreescu’s sponsors in the early days were her parents. They were supportive of her but didn’t pay her millions of dollars, which she’s earning now with Nike, BMW, Head, and Rogers. Almost everyone comes from humble beginnings, whether champion athletes, celebrities, or entrepreneurs.
If you are self-employed and don’t have the credit score or debt to income ratio needed to qualify for A Lending (with rates usually between 2.39%-4%), B Lending and Private Lending allow for greater flexibility on stress tests and the aforementioned criteria that A Lenders need.
With B Lenders, you will pay between 4%-6% interest. With private lenders, the interest rate will range from 7%-18% with interest-only loans. Despite higher rates, both options can be a great way to access homeownership early and buy time to build up your credit. As you do this, shortly after you may qualify to move your debts over to an A Lending loan.
5. Don’t Get Too Comfortable. Always Keep Up With the Ever-Changing Mortgage Rules and Options
“I was always struck by how she was not afraid of opponents, or not intimidated by situations that I felt, at first, when she was 15, 16, could be intimidating. And she wasn’t." - Andreescu’s coach Sylvain Bruneau.
Bianca is fearless during her training and knows how to keep her mind strong. She has been practicing visualization and meditation techniques since she was 12-years-old. Even off the court, she doesn’t rest on her laurels and expects sponsorship money to magically flow in. To keep the best sponsors interested in her and attract opportunities, she must stay current with building her personal brand, being clear on her messaging, and increasing her following on her social media platforms.
You can follow suit when it comes to having lenders become interested in giving you an opportunity. Last October, The Canada Mortgage and Housing Corporation (CMHC) introduced changes that suggest additional factors lenders can consider for borrowers operating their business for less than two years. This will create more homeownership opportunities for self-employed Canadians.
The additional factors include having sufficient cash reserves, predictable earnings, acquisition of an established business, and previous training and education. All of these variables can help strengthen your “personal brand” (aka your reputation) with A-Lenders so that you can receive better offers.
FINAL THOUGHTS:
As a self-employed Canadian dealing with the daily stresses of doing business for yourself, let a mortgage broker coach you through mortgage stress tests and a myriad of lender products that will help you come out on top.
As you do in your business, plan ahead and stay current with the ever-changing mortgage options for self-employed Canadians. Prioritize being responsible for financing and credit. Most importantly, always make sure to be persistent about getting the best mortgage rate possible and keep an open mind as you explore new lenders and different strategies to finance your home.
Bianca Andreescu started from humble beginnings but knew from the start that working with the right coach, working through setbacks, and following a consistent training program was the key to becoming a world champion. You can apply the same techniques and adopt a similar mindset for your future mortgages and growing business.