5 Quick Tips to Get a Swift Mortgage Approval!
1. Check your credit score
Your credit score is a snapshot of your overall financial health, so it’s important to keep track and maintain your score to be in great condition. In Canada, credit scores run from 300 to 900 across five main conditions such as, poor, fair, good, very good and excellent. You can check your credit score for free with several online companies, such as Equifax or TransUnion.
Mortgage lenders will use your credit score to check your financial trustworthiness. The higher your credit score, the more likely you’ll get the lowest mortgage rates. Ideally, you want your score to be at least 660, but higher is always better. To increase your score, try your best to make loan/bill repayments on time and not use too much of your available credit.
2. Save a larger down payment
You will always require some amount of cash up front when buying a home, also known as a down payment. A larger down payment is better simply because you’ll borrow less from lenders and pay less interest. A larger down payment also helps you get approved for certain home prices.
In Canada, there are minimum down payment requirements based on the home’s price:
Less than $500,000: The minimum down payment is 5% of the purchase price.
$500,000 to $999,999: You’ll need 5% of the first $500,000, and 10% for the portion of the purchase price above $500,000.
Over $1 million: 20% of the total purchase price at minimum.
It’s important to remember that a down payment of less than 20% of the home’s purchase price requires the buyer to buy mortgage loan insurance. Paying these insurance premiums will increase your monthly mortgage payment. Therefore, the more cash you put down at the beginning, the less you’ll pay in fees in the future and the more likely you’ll get approved by a lender.
3. Pay down existing debt
When you get a mortgage that means you are committed to some long-term debt, so it’s best to lower whatever debt you are holding right now. It will be easier to pay off your mortgage if you don’t have other debts to pay off; overall, it’s easier to focus on one debt as opposed to many. If you have a lot of unpaid debt, your debt-to-income ratio will be high and make it difficult for you to get approved. So, it's important to be aware of your debts and minimize whatever you can.
4. Keep your income stable
When applying for a mortgage, it’s important to have proof that you can afford your monthly payments. A stable, full-time job is the best way to prove that as it guarantees your long-term income. Having been with an employer for a long time will also help your application. If you’re employed on a casual basis, try searching for permanent positions for the duration of your mortgage application. If you’re self-employed, you’ll be required to provide details on your business and income for several years to prove that your business is profitable long-term.
5. Get a mortgage pre-approval
A mortgage pre-approval is when a lender evaluates your financial situation and pre-approves you for a set mortgage amount, interest rate and term. Depending on the lender, mortgage pre-approvals are valid for 90 to 120 days, which gives you time to find the perfect home while securing the best rates.
You can reach out to me for help to get your mortgage preapproval, so that you are more confident during the house-hunt process. A preapproval will allow you to quickly submit an offer when you find the perfect home. Check out the contact page to get in touch!
Wishing you the best of luck when securing your mortgage,
Roza Rodrigues
Rosehill Mortgages
Mortgage Agent #M22001354