Welcome to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm gonna be talking to you about how to qualify your buyers that say they don't have any down payment, and you can qualify them today. And I'm gonna explain. But getting out there, prospecting, doing all those things, it's a lot of hard work.
Scott Dillingham:Right? So when you're speaking to people and they say that they don't have a down payment, ask them what their credit score is. If it's 7 100 or higher, then they can potentially tap into one of these two programs that I'm going to outline next. The first program is a program through CMHC called FlexDown. What it does, it's flexible down payment.
Scott Dillingham:That's what that that means, what that stands for. So if the borrower is strong, they can borrow their down payment, whether it's from a line of credit, a credit card, a family member, whoever, right, and we factor in that minimum payment against them, but they can buy now. So they can borrow that, we'll factor into the debt ratios, and we're good to go. One little layer that I usually do on this as well is depending on the borrower, there's some lenders that offer cash back anywhere from one to 5% cash back. So what I did when I first started lending was we would have the the client borrow the down payment, the 5% down, then we'd give them the 5% cash back so they could pay off the loan, and then they just had their mortgage.
Scott Dillingham:Now the cash back interest rate goes up. Right? It's usually 20 basis points per 1% cash back. So if you get the full, you know, 5% cash back, you're you're increasing the rate by 1%. However, for someone who's not able to buy, it's a great option because they can buy now, which is the goal.
Scott Dillingham:Right? The second thing that you can do, it's called an RSP loan. So the client goes to a bank, we can help advise, we know the ones that do this, but they apply for an RSP loan. Now RSPs, in the year that you deposit them, is a bit of a tax break. So they're gonna get a tax break from their RSPs, So, you know, that's that's a positive.
Scott Dillingham:Now, once those RSPs are in there for ninety days, you can then redeem them for the down payment. So it's another way to purchase, but it's a little bit longer. Right? It's a ninety day time period instead of the flex down where they could do it right away. However, it is a little easier to qualify for because if you're applying for just a regular line of credit for your down payment, it's completely unsecured.
Scott Dillingham:Or if you apply for an RRSP loan, that is tied to the RRSPs. Right? So the way that the lender sees it, they're giving you a loan, but the money never leaves the bank. Do you know what I mean? It's not like you're taking it and you're going out and spending it.
Scott Dillingham:They're just reinvesting it somewhere else. So it's it's less risky. It's easier to get approved for. The downside is that it takes longer. Right?
Scott Dillingham:It takes the ninety days. But then we can redeem the RRSPs for the down payment and move forward. So with this program, they can get best rates on the mortgage. Right? Because we're not doing the cash back.
Scott Dillingham:You could if you wanted to, but the RRSPs, they need to be paid back. I believe it's ten years. Ten years like equal installments. So you do have to pay it back, but it's at a much, you know, easier frequency than the the first loan program. And both of those programs are available for credit scores over 700.
Scott Dillingham:Now again, keep in mind, you have to have that strong income. You have to have all that stuff still behind you. So this is just someone that they got a good income, good credit score, but they just didn't have the ability to save yet. Maybe they just finished school. Right?
Scott Dillingham:And they just started their job. And you know what I mean? There's all these different variables, but those are the two things that we're looking for, income to qualify and the credit score. And if you've got that, you've got a deal. I hope this episode helped.
Scott Dillingham:Check the show notes below for full details, as well as additional resources. Looking forward to seeing you next time.