Think Your 'Mortgage Pre-approval’ Worthy?
Assess Your Finance Fitness in Fifteen Minutes
Finding the right location, a home that you love, and the right mortgage terms and rate will require most people to invest a lot of time and energy, so it's prudent to consider whether you have a hope of being approved prior to jumping into the process. Whether you have had some financial challenges in the past or you simply want to establish reasonable expectations ahead of time, here are some great ways to determine if you have a shot at being pre-approved for a mortgage.
Have A Down Payment?
Many people recommend that the ideal down payment amount is 20% of the purchase price of a home, however, this does not mean you have to have this full amount. Yes, it is important that you have a good chunk of money put away to help show potential lenders that you are financially stable and have considered where you will be drawing funds for your down payment. A 5% down payment is completely acceptable in most cases and is in fact the minimum you can move forward with in Canada. Having a larger down payment over 10% or 20% will save you money in the long run as it will minimize the amount of money, you will need to pay the lender each month. So, make sure whatever the amount, you have saved a down payment suitable for the type of home you will be shopping for. Doing so helps show that you know how to save and can be trusted with a significant financial investment.
Understand the Strength of Your Credit History
Many potential homebuyers have financial setbacks or missteps in their history. Lenders understand life has its challenges and people make mistakes. Having some blemishes on your credit report does not have to be debilitating. It’s how these past challenges are dealt with that determines the potential of your financial future. You will have considerable issues getting a mortgage approved if you are negligent toward making minimum payments on time and have a high debt usage ratio. However, if you take steps to reduce some debt and develop a good habit of making payments promptly and on-time you can have a positive impact on your credit history in a matter of months. It is a good idea to get a copy of your credit report in advance to ensure if there are errors you plan some time to get things back on track.
Do You Have Good Employment History?
When planning to apply for a mortgage, it is particularly important to have a solid work history, as this will show potential lenders that you have a stable cashflow from which to draw and make your monthly mortgage payments. Be aware that it is good to have at least two years of continual employment in the same or similar field, and you will need to provide proof of this in the form of paystubs, employment letter and/or T4’s. If you are self-employed or your recent jobs have been sporadic and unsynchronized, it can cause issues with getting approved for a mortgage.
It can take time to find the right location and home, but if you have solid employment history, a sizeable down payment and give your credit rating the attention it deserves, you will be well on your way to pre-approval. If you are preparing for purchasing a home, it is likely you have a few unanswered questions. Don’t hesitate to connect with me for zero cost advice and guidance.
Mortgage Agent in Ontario, Canada.
Dominion Lending Centres
416.432.8836 | www.dougpaterson.ca