Important Factors to Consider When Applying for a Mortgage
Unless you’re paying for your new house in cash, you will likely need to apply for a mortgage. There are many important factors to consider when you make an application with mortgage providers.
Your Earnings
To qualify for a mortgage, you need to have a reliable source of income. Your income can come from several sources, including your salary, child support, or stock dividends. If you are self-employed, it’s usually a more complex process as this line of work is generally labelled as unreliable and inconsistent. However, if you can provide consistent payslips showing earnings from the past three or more years of being self-employed, you are more likely to be accepted for a mortgage.
Proof of Income
Mortgage lenders will require proof of earnings. They need to know that you are reliable and that you can afford the monthly mortgage repayments. For this reason, you will be asked to present proof of income via a number of documents, including
● T4
● CRA Notice of Assessment
● Employment letter
● Pay stubs
Failure to provide the above documents might lead to your application being rejected.
Credit Scores
Credit scores
play a major role in whether or not you will get approved for a mortgage.
Generally, a credit score of 660 or above is ideal. Anything below this is
labelled as subpar. A lower credit score makes it more difficult for you to
succeed in getting a loan, and if you do, your interest rates will be higher.
Deposit Payment
If you successfully get approved for a mortgage, you will be required to make a down payment. Deposits are usually anywhere between 5 to 20% of the total cost of the property. The higher your deposit, the more equity you will initially have within your new home.
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Existing Debt
Mortgage lenders will consider the amount of debt you are currently in and compare it to your income. They use a 38/42 ratio. The former represents the amount of your income allowed for monthly housing expenses before tax. The latter represents the amount of your pre-tax income that can go toward recurring bills like direct debits and credit card debt.
Interest Rates
Interest rates vary depending on the current housing market and your unique credit profile. Choosing a fixed-rate mortgage means your interest rate will also stay at a fixed price. If you opt for an adjustable-rate mortgage, expect your interest rates to change over time.
Closing Costs
Many mortgage lenders will charge a one-off closing cost. The cost covers administrative fees and expenses to obtain your credit report or references. On average, closing costs will be anywhere between 2-5%. Be sure to ask your lender about their specific closing fees, so no unexpected payments pop up towards the end of the process.
When you choose a new house to buy, always consider your income, savings, and the likelihood of getting a mortgage.
It's vital to shop around for the lowest affordable mortgage rates when making a home purchase. The lowest mortgage rates now on the market represent a substantial financial hardship for ordinary people. Unless they give up now, they'll lose all they've worked so hard for because they're fatigued from the ongoing struggle. Low-interest mortgage rates for your first house may be found through Mortgage Intelligence. Mortgage agents with whom we work have a wealth of experience and are dedicated to finding the best possible interest rate from many financial institutions. Get in touch with us if you need additional details.
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