When submitting a deal to a MIC lender, its important to remember that their underwriting for purchases may be different than for refinances. At first this may seem confusing, but the lender is applying their experience from previous files to minimize risk.
The first difference is LTV, and this is a function of confidence in the value of the property. In an arms length purchase, the purchase price is the best indicator of the value of that property. So in this case a lender may be willing to give a higher LTV. In a refinance, the lender is relying on an appraisal which is the appraiser’s best estimate of the fair market value. Because this in only an opinion of value, lenders may be more conservative in their LTV on a refinance.
Secondly, lenders history may indicate more defaults with refinances than purchases. If this is the case, they may be more conservative in their underwriting.
When a borrower asks how much they can borrow from a MIC, remember that the LTV may be different for a purchase than for a refinance.