6 Tips to Getting Approved for a Mortgage
Often consumers think getting a mortgage is as simple as getting a car loan, however it is very different.
Educating yourself is the key, and there are a number of ways to avoid the heartache and disappointment when applying for a mortgage.
Getting Your Mortgage Approved
Purchasing a home is already stressful so taking the time to educate yourself on the best ways to get approved is so important.
1. Know Your Credit Score
It takes only a moment to pull your credit score, yet many home buyers do not. It’s important to know whether your credit score is high enough before submitting a mortgage approval. Often consumers may have had past slow repayment history or even bills that weren’t paid and sent to collections. These situations need to be immediately addressed, paid and updated to the credit reporting agency. Fixing errors on your credit report are key to keeping up a good credit score.
2. Save your cash
In Canada, it is required to have a minimum of 5% down payment. This down payment can come from your own savings, gift from an immediate family member and can also be borrowed from a line of credit or loan however borrowing the down payment has significant criteria in order to be approved.
If you are putting less than 20% down payment you will also have to pay a CMHC premium. This premium is based on the loan to value payment, how much money you are putting as your down payment compared to the purchase price. If you have more than 20% as your down payment, you omit paying the CMHC premium.
3. Stay at your job
When buying a home, employment is key. Staying at your current employer is so important. Even if you have an offer in place, have had all your financing conditions completed and you’re just waiting to take possession. If you happen to lose your job, change employers or quit to become self-employed throws a wrench in the plans, and lenders must re-evaluate your finances to see if you still qualify.
4. Pay down debt
You do not need a zero balance on your credit cards to be approved for a mortgage. However, the less you owe your creditors, the better. Your debts impact how much of a mortgage you can qualify for. Lenders evaluate your debt-to-income ratio before approving a mortgage. This number can also be a little higher if your credit score is higher as well. Carrying lots of credit card debt definitely impacts a lenders decision.
Even if you have a mortgage approval in place, do not go out and increase your debt load or make any changes to it. That means not changing vehicles, buying furniture on credit or applying for more credit. Please avoid any purchases on credit until your mortgage has closed
5. Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage before you go out looking at houses is just being both emotionally and financially responsible. You will know exactly what you can spend before you go out and fall in love with a house you cannot afford.
The pre-approval process is fairly simple, and we have multiple ways to complete it. You will need to submit your financial information including employment information, verification of your employment income and down payment. If there are any surprises, we can help correct them so that everything lines up to get a mortgage approval.
6. Final Word
If you currently don’t meet the qualification criteria for a mortgage approval, don’t get discouraged. Instead, let it be the motivation you need to improve your credit, pay down your debt and increase your savings. Many people have risen above credit problems, bankruptcy in order to purchase their first home. Just be sure to implement a realistic plan and stick to it.
Mortgage Tailors, Edmonton’s top 3 mortgage brokers is focused on making home ownership happen for you.