How do I qualify for a mortgage?
Qualifying for a mortgage is mainly comprised of four factors: stable income, good credit history, good purchase on a property, and how much of a down payment you have. These factors determine which mortgage options will suit you and your situation and what rate you will receive from the mortgage lender.
Ensure that you have a stable income and avoid changing jobs or quitting before submitting a mortgage application. Lenders look for steady sources of income and will request a letter of employment and pay stubs to confirm your position and salary. The less you make, the more your credit report and credit score will matter.
A credit report is always needed for mortgage lenders to review and determine which programs suit you best. Consider getting a credit report prior to applying for a mortgage so you can ensure that there is no outstanding balances or fraud on your report. Any incorrect information on your report can cause higher rates, or keep you from getting a mortgage altogether. As well, if your credit score is too low, consider rebuilding your credit before applying for a mortgage.
If your credit score is too low on your credit report, consider saving for a larger down payment. The more money you have upfront, the higher the chances are of you being approved for a mortgage. The rule of thumb is to have over 20 percent of the purchase price for the down payment. Not only is 20 percent better for you long term- with the smaller mortgage loan, but it will also reduce the monthly payments from not having to purchase mortgage default insurance.
If you have a home you’re interested in, ensure that the property can easily be resold. This can influence your mortgage application. If you are seen as a riskier borrower and could potentially default on mortgage payments, lenders will want to be sure that the property can easily resell if a foreclosure was to occur. A property appraiser might be requested by lenders to ensure that the property is in good condition and has a good market value.
Being responsible on your spending habits can greatly influence and affect your position in getting a good loan with the best interest rate. Every lending institution is different and can approve or disapprove any applications they see fit. Consider contacting a Realtor® who can help you by referring you to a mortgage broker who is aligned help you with your needs.
Use Mortgage Affordability calculator, to check if you qualify for a mortgage.