The thought of applying for your first home loan can be unpleasant when you think about what lenders are looking for, but you can make the whole approval process much easier by knowing how to get approved. Here are our some tips on how to qualify and get your mortgage approved.
Tips for applying for a mortgage
Did you know that Canadian lenders use the five C’s of credit when determining your ability to pay back a mortgage and whether you get approved or not? Never heard of the five C’s of credit, here’s some more information you may find extremely helpful.
-
Credit history – Your lender will look at your credit history to ensure you pay back when you borrow money
-
Capital – They will want to ensure you have accumulated assets
-
Collateral – When it comes to a mortgage, they want to know you have collateral to offer
-
Capacity – In short, capacity is debt servicing. For instance, your housing cost shouldn’t exceed 30 per cent to 32 per cent of your gross income and all of your debts shouldn’t exceed 40 per cent to 42 per cent of your gross income
-
Character – It’s an evaluation of all four previous C’s as well as subjective and objective things such as how long have you been in your job, what type of job you have and how long you have lived in your current residence
But what can you do to improve your chances of getting your first mortgage approval? These five tips will help you in getting a mortgage and to get that final tick of approval:
Get pre-approved, but understand what type of pre-approval your banker or broker is performing
Since, not all mortgage pre-approvals are created equal, it’s important to understand what kind of pre-qualification you’ve been provided. Whether or not the mortgage specialist has done credit checks and verified income and the source of your down payment could affect whether you’re approved in the final stages.
Bring in all verifiable information
Be sure to bring in a letter that states your income, pay stubs banking information that verifies the source of your down payment. Having that info all readily available will provide you with a pre-approval with less conditions (some say subject to satisfactory income or down payment verification). Getting all this stuff out of the way, is one less thing to worry about.
Ask to have your banker/broker check your credit history
Not all bankers/brokers will do this at the pre-approval stage. However, it could prevent you from getting final mortgage approval. So if you’re not sure, ask.
Build credit history, if you don’t have any
Applying for an RRSP (Registered Retirement Savings Plan) if you’re in the soft stages of buying a home will appear on a credit report. That loan is going to create the down payment for you.
Avoid lavish purchases and job changes
Don’t run out and buy cars or run up credit cards before you buy a home because it will impede the amount you can qualify for. In addition, don’t change your job within six to eight months of buying, because a lender will look at that, depending on the industry you work in, if it’s a natural progression, it will be looked at differently.
To learn more about how to get a mortgage and how to qualify for a mortgage and mortgage pre-approval, speak to a qualified mortgage broker today.
When we say Yes! We stand behind our promise.