How To Increase Your Chances of Getting a Canadian Mortgage
posted in Mortgage News
As a significant financial investment, purchasing a home is difficult for many people without a mortgage, and while there are no solid guarantees that you’ll be approved for the mortgage of your choice, you can take the following steps to give yourself the best chance of making it happen:
Keep a close eye on your credit report
Lenders will always look at your credit report before determining whether you qualify for a loan, and at what rate. If you obtain your credit report every four months, you can keep a close eye on it to help improve your chances of success.
Make corrections to errors
There’s always a chance that your credit rating has errors that might have a negative impact on your application, so be sure to take a close look at it and if you spot any, take steps to correct them.
Give your credit rating a boost
Summarizing your history of paying debts, your credit rating or score is the one figure that all lenders use to determine your level of risk, and likelihood of making timely payments on the loan. Simply put, the better your credit score is, the lower your mortgage rate is likely to be.
Lower your debt-to-income ratio
A debt-to-income ratio enables you to compare your total debt to your total income, and it’s calculated by multiplying your monthly gross income by the total amount of recurrent debt you owe on a monthly basis. A healthy balance between debt and income is when your debt-to-income ratio is low, and 43% is typically the most you can have and still be able to qualify for a mortgage. High monthly expenses are likely to see you being turned down by lenders for a loan.
How do you lower your debt-to-income ratio? Simply put: buy less. Look at what you’re spending your money on each month, and see if you can spend less anywhere.
Make your down payment as big as possible
The bigger your down payment, the more confidence a lender will have in your ability to save well. With a large down payment and lower loan-to-value ratio, you don’t just improve your chances of securing a mortgage loan, but you’ll receive lower rates of interest and have to make fewer payments over the loan’s lifespan.
Making a down payment of at least 20% also means that you won’t have to pay mortgage insurance. No mortgage is guaranteed, but by following the above steps and where appropriate, seeking advice from an expert mortgage broker, you can greatly improve your chances of getting a mortgage and securing your dream home.