Progress Advance Program

This program lets residential home builders and individual homebuyers to take advantage of insured progress advances while the property is being built. Mortgage insurance is based on the lesser of the market value of the work in place or the cost to complete.

Three Program Options

• Residential Home Builder Program: For people who are buying a home through a residential home builder.
• Contractor Program: For people who either own their own land or buy the land from a general contractor, and then build their home through that one general contractor (more than 50% of the cost to complete is done by one contractor).
• Self-Built Program: For people who either own their own land or purchase the land, and act as their own general contractor and hire qualified, licensed trade persons to build their home.

Acceptable Loan Purpose and Applicable Loan-to-Value Limits

Purchase Transactions

• 1 and 2 units: 95% LTV with multiple advances during construction.
• Property value ≤ $500,000 – 5% down payment required.
• Property value > $500,000 and < $1,000,000 – 5% down payment required up to $500,000, with an additional 10% down payment on the portion of the home value above $500,000.
• 3 and 4 units: 90% LTV with multiple advances during construction

Loan Security

• First mortgages

Eligible Properties

• Maximum 4 units where 1 unit must be owner occupied.
• Single-family detached and semi-detached homes.
• Condominium properties are not eligible.
• New construction must conform to the National Building Code and the latest edition of Residential Standards Canada or the applicable municipal and provincial building codes.
• Pre-fabricated homes are eligible for full coverage. Sagen Approved pre-fabricated manufacturers are admissible for specific disbursement methods (as outlined in Appendix A), are eligible to receive a full advance with no holdbacks and may receive payment on delivery of the module(s).
• In addition, for 3 and 4 units, the property must meet the following criteria:
  • Municipal zoning
  • Fully self-contained units

Maximum Property Value

• Property value must be less than $1,000,000.

Qualifying Terms and Interest Rates

• Fixed, standard variable, capped variable and adjustable rate mortgages are permitted.
• Maximum interest rate term of 25 years.
• The qualifying interest rate is the greater of the contract rate plus 2 % or 5.25 %

Amortization Options

• Up to 30-year amortization
• For greater than 25-year amortization, refer to 30-year amortization eligibility criteria.

Premium Rate

The premium payable will be the lesser of the premium as a % of the total new loan amount or the premium as a % of the top -up portion on the additional loan amount (if existing insured) based on the rates below:

The mortgage insurance premium is payable in full at the time of the first advance, in installments at the time of each advance, or at the end of construction.

Residential Home Builder Program and Contractor Program Qualification

• Builders / contractors must meet general profitability and credit worthiness as per Lender’s guidelines.
• Builders / contractors must be members of a Lender approved New Home Warranty Program (NHWP)*.
• Incentive programs, if any, must meet Sagen guidelines.
• Builders / contractors must be approved by Sagen to benefit from full coverage on all insured progress advances.

_{*For new construction properties in the territories (Yukon, Northwest and Nunavut Territories) where New Home Warranty is not an option, Lenders must obtain either the occupancy permit or a third-party report from a qualified professional such as: an inspector, architect or engineer. The qualified professional must carry the appropriate liability insurance and confirm construction is completed in compliance with applicable bylaws and regulations.}

Borrower Qualification

Income and Employment

• Standard income and employment verification requirements apply.

Credit

• 80% LTV: At least one borrower is required to have a minimum credit bureau score of 600.
• ≤ 80% LTV: At least one applicant should have a minimum recommended credit bureau score of score of 680.

Down Payment

• Qualified home buyers may use traditional down payment sources including personal savings, RRSP withdrawal, a non-repayable gift from an individual related to the borrower through a familial or legal relationship, sweat equity, existing home equity, proceeds from sale of property.
• Government grants may be considered if pre-approved by Sagen.

GDS / TDS Guidelines

Documentation Requirements

• Standard documentation requirements apply.
• Sagen may request that the Lender provide a copy of the required documentation on a case-by-case basis.
• For 3 and 4 unit properties Sagen requires that the Lender obtains a general assignment of rents and leases or include this requirement in the Standard Charge Terms.

Borrower documentation requirements to be retained in Lender’s file (both Full Service and Standard Service)

• Residential Home Builder program: all schedules and plans.
• Contractor program: all plans and specifications approved by the municipality and a copy of the contract with contractor(s).
• Self-built program: all plans and specifications approved by the municipality, estimates and / or contracts for all aspects of the construction.

Borrower documentation requirements (Full Service only)

With loan submission:

• A signed Offer to Purchase detailing land cost and construction costs
• Self-Built Program: a completed Sagen Construction Worksheet located at sagen.ca – Tools & Resources – Lender Forms & Worksheets – Construction Worksheet – Self Built Homes

During Construction:

• Inspections are to be ordered using Sagen’s Inspection Request Worksheet located at sagen.ca – Tools & Resources – Lender Forms & Worksheets – Inspection Request Worksheet

Inspection Requirements

Standard Service (inspection and disbursement management under the Lender’s control): Standard Service (inspection and disbursement management under the Lender’s control):

• Lender is fully authorized to make interim and final advances in accordance with their institution’s internal practices on progress draw Advances must not be made for land only.
• Sagen authorization is not required for any advances or calculations
• Lender is responsible for confirming the market value of the home

Full Service:

• Sagen will pay for up to 4 progress advance inspections. If more than 4 advances are required, the customer is responsible for the cost of the additional inspections.
• Lender must submit the Sagen Inspection Request Worksheet directly to the assigned Sagen appraiser or to the National Underwriting Centre.
• The assigned appraiser will inspect the property, determine the percentage complete and inform Sagen.
• Sagen will calculate the authorized amount and advise lender
• Minimum amount for first draw is when the property is 15% complete (excavation, backfill, and foundation) and will include 100% of the land cost less the amount of the borrower down payment.
• Advances must not be made for land only.

Portability

• Sagen mortgage insurance is portable, so home buyers can take advantage of a Lender’s portability plan. For further details, refer to the Portability Feature product overview.

Assumptions / Assignments

• Mortgage is assumable subject to meeting Lender guidelines.

Eligible Products*

• Business for Self (Alt. A) Program
• Borrowed Down Payment Program
• Homebuyer 95 Program
• New to Canada Program
• Vacation / Secondary Homes Program (Type A Properties)

*For specific underwriting guidelines related to the above eligible products, please refer to the applicable product overview.

Ineligible Products

• Family Plan Program
• Investment Property Program
• Purchase Plus Improvements Program
• Second Mortgage Program
• Vacation / Secondary Homes Program (Type B Properties)

Appendix A: Pre-fabricated Inspection Process: