Mortgage Services

1. Figure out how to get a mortgage pre-approval.

Because obtaining a mortgage pre-approval is the first step in making your real estate idea a reality, you should be aware that there are two methods for obtaining one. The first step is to shop around for mortgage rates with different banks and then apply to each one.

Because Canadian law forces banks to report every denial, this is a risky alternative for your credit report. There will be no impact if all of the banks you contact agree to sign this pre-approval. However, if you receive one or more rejections, your credit record will inevitably be tarnished.

However, if you utilize a mortgage broker to compare rates from several financial institutions, you won’t have this concern because your broker will only provide them your banking information, never your identity. This implies that even if you are turned down, your credit file will be unaffected.

Because your mortgage broker is well-versed in each bank’s selection criteria, it is also his job to persuade or dissuade you from submitting your application to a particular institution. As a result, it’s critical not to spend any time in getting your mortgage loan at the best rate and in the shortest amount of time possible.

2. Pre-approval for a mortgage: Filling out the Application Form

Filling out the mortgage pre-approval application form is the next step. You will be able to complete it with your broker or with a financial institution directly. To do so, you’ll need to provide a number of documents that prove:

Your personal information;

Your credit score: a number between 300 and 900 that lenders use to assess the risk of lending you money;

Your financial state, including employment, financial situation, debts, and so on;

Your down payment is the amount of money you’ll be able to put down on a house when you secure a loan. You will save more money in interest if you make a greater down payment. In Canada, a down payment of at least 5% of the home’s buying price is required. As a result, if you want to buy a $600,000 home, you’ll need to put down at least $30,000. However, to avoid paying insurance, a 20% down payment will be required, equating to $120,000 for this same project.

3. Determine your debt-to-income ratio.

In order to get a mortgage loan, you must first calculate your debt ratio. Then it’s a matter of determining your ability to repay based on your:

Monthly rent or mortgage payment, including heating, electricity, home insurance, condo fees, and all related taxes; Monthly car loan or lease payment; Any other monthly expense connected to any other kind of financing (student loan, credit for furniture or appliances, child support, etc.).

Please keep in mind that non-debt generating items like meals, phone plans, and transportation will not be factored into your debt ratio computation. However, it is definitely advised that you evaluate them in order to understand all of your budget’s expenses.

Your broker is the best person to tell you about all of the costs you’ll have to pay before and after you sign the deed of sale (building inspection fees, notary fees, welcome tax, etc.).

Let’s use the example of a couple with a gross monthly salary of $6000, $1200 in rent, $300 in monthly car rental, and $300 in student loan repayments per month to calculate their debt ratio. The debt-to-income ratio will be approximately 30%, which is a reasonable number. Your real estate purchase project will be jeopardized if this percentage, also known as the total debt service ratio (TDS), is more than 40%.

4. Verify your borrowing capacity before submitting your application.

This is a comprehensive analysis of your financial circumstances (wage, rent, credit score, debts, down payment, and so on) that will determine the size of your mortgage loan. Your broker will be able to lead you to the institutions where your file has the best possibility of being kept based on the results received.

Mortgage lenders will examine your entire housing expenditures as well as any existing debt as part of the borrowing capacity assessment procedure. From property taxes and insurance to heating, electricity, and maintenance, not to mention the down payment, housing costs may rapidly mount up. Lenders are obligated to use debt-to-income ratio computations to decide how much they will lend you:

Ratio of Total Debt Service (TDS)

This is the percentage of your gross yearly household income that you’ll need to purchase your home after paying off all of your other obligations and loans. The formula takes your GDS % and adds any other monthly obligations you may have, such as loans or credit card debt (s). to fill up an application

Ratio of Gross Debt Service (GDS)

This is the amount of your gross annual family income that you’ll need to buy a house. Annual mortgage payments (principal and interest), property taxes, heating expenses, and a portion of condominium fees, if applicable, are all estimated by lenders.

5. Getting a pre-approval for a mortgage… or not

Then comes the long-awaited time when you’ll learn which banks are most likely to offer you a mortgage and how much money you’ll be able to borrow. It’s crucial to understand that each lender has its own set of mortgage guidelines and policies. As a result, there is no need for a bank to lend you money.

Your mortgage pre-approval could be declined due to a poor credit history, a low debt-to-income ratio, or other factors. Your broker will be able to lead you to alternative possible solutions in this scenario.

For example, you might opt to lower the amount you expected to spend on a home, make a larger down payment, ask for a co-signer, or be sent to other lenders who might accept your credit file in the future, but at a higher mortgage rate due to the risks involved.

Be cautious: a pre-approval does not guarantee that your submission will be accepted in its whole. In truth, a variety of circumstances, such as the loss of a job, a divorce, or poor investments, could invalidate a favorable mortgage pre-approval.