Thursday, January 22, 2015

How to Qualify for a Mortgage

Getting approved for a mortgage depends on a few factors. Qualifying for a mortgage in Canada depends on four main factors, stable income, a good credit history, making a sound choice on the property you are purchasing, and how much of a down payment you have. All four of these factors work together to determine which mortgage options will suit your situation best, and the rate you will receive by the mortgage lender.



Are you an employee or are you self-employed?
  • If you are an employee you will need to have a letter from your employer stating your name, job title, start date, salary, and that you are a full time and permanent employee and a recent pay stub.
  • If you are an employee but you are PART-TIME you will need to have been at that job for 2 years and will need to provide your last two years Notice of Assessments from CRA. If you do not have the originals mailed to you, call CRA to order reprints. 
  • If you are an employee but you are FULL-TIME and are paid HOURLY you will also need to provide 2 years Notice of Assessments to prove consistent income. 
  • If you are self-employed I will need a copy of your last 2 years Notice of Assessments from CRA. A Notice of Assessment is sent to you personally after your taxes are filed.
  • The lenders want to confirm that you have a stable source of income.
Do you have good credit?
  • If you have good credit you will get the best rate.
  • Don’t worry if your credit isn't perfect there are programs available to you while you rebuild your credit. I can still get you approved for a mortgage but remember your rate may be a little higher for the short term. 
  • A credit history is always pulled by your mortgage broker when you apply for credit or seek pre-approval so that we can determine which programs will suit your situation.
  • A score of 680+ is most desirable by lenders.
  • Lenders also require you to have credit history, so if you have paid off a credit card or line of credit please DO NOT CLOSE the account, otherwise this will show as not active. Lenders require 2 trade lines (credit card, loan, line of credit, etc) with at least 2 years active credit history in good standing. 
Property
  • The property choice also impacts the mortgage qualifying process as the real estate is the lender's security, if for some reason you were unable to repay the mortgage. The mortgage lender will want to be sure that the property is in good condition and that if they needed to market the property it would sell quickly.
  • A property appraisal is almost always ordered and involves a physical inspection of the property for the lender by a certified appraiser who assesses the condition and market value of the property to be mortgaged.
How much will you qualify for?
  • This depends on your assets, equity, debt and total household income. It is best to speak with a Mortgage Broker in advance to discuss your options. If you are planning to buy in the next few years speak to a Mortgage Broker today to plan ahead and ensure you have everything needed to qualify for a mortgage at the best possible rate.
Down Payment
  • A minimum of 5% down payment of the purchase price is required.
  • If you have less than 20% down the mortgage lender will insure your mortgage against default and the premiums will be included in your total mortgage amount.
  • If you have a down payment of 20% or more of the purchase price this is known as a "conventional" mortgage and the mortgage lender will not require default insurance.
For specific advice on how much you will qualify for please call me anytime at 778.388.4240 or apply online for pre-approval at www.cleverlending.com.