5 Tips For Getting Approved on Your Mortgage Application

If you want to become a homeowner, you must be prepared at every stage of the way. Aside from following interest rates and looking for the ideal property, the most crucial step in the process is applying for a mortgage. While it may appear complicated, it may be made a lot simpler if you organize your financial matters ahead of time. Here are five strategies for getting your mortgage application approved.

1. Review Your Credit Score

Canada’s credit scores range from 300 to 900 and are divided into five categories: poor, fair, good, very good, and excellent. The specific categories differ depending on which credit agency is utilized, but the method is fundamentally the same. Your credit score is a snapshot of your overall financial health, so knowing what it is is critical.

Mortgage lenders will look at your credit score to determine your financial reliability and capacity to repay your loans. The higher your credit score, the more likely you will be offered the best mortgage rates in Canada. It would be best if you aimed for a score of at least 660, but more significant is always preferable. 

Your credit report will include information regarding late payments, the number of accounts you have open, your total debt levels, and the duration of your credit history, in addition to your overall numerical score. Making on-time loan and bill payments and not using too much of your available credit will generally result in a higher credit score.

Several online services will allow you to check your credit score for free. When you perform an online credit check, your credit score will be obtained from one of Canada’s two credit agencies, Equifax or TransUnion. It’s a good idea to check your credit score every quarter and do everything you can to improve it.

2. Save a larger down payment

If you’re looking to make your mortgage payments more affordable, a larger down payment is the easiest way to do that. In Canada, the minimum down payment is 5%, and it has to be made up of actual cash. Money saved up over time or gifted to you by family or friends can be used towards your down payment.

Once you have your down payment ready, you can either pay it in full when you apply for your mortgage, or you can use it towards your monthly mortgage payments. Either way, the larger your down payment, the less you’ll have to borrow from the bank, meaning you’ll also have smaller monthly payments.

3. Strive For a Stable Income

Credit scores are based in part on your history of employment. Lenders like to see that you’ve had several steady positions in recent years, and they don’t like surprises. In fact, they’re more likely to approve your mortgage application if you’re making at least double your mortgage payments in income. If your income is volatile and unpredictable or has significant money problems, your lender might be less inclined to approve you.

4. Avoid Carrying Heavy Debt

Your credit reports will also show lenders how much debt you carry. When you apply for a mortgage, your lender will use this number to indicate how likely you are to pay back your debts. The lower the amount of debt you carry on your credit cards, bank loans, and lines of credit, the better.

5. Partner With a Co-Signer

If you don’t have enough income to support your mortgage payments on your own, consider adding a co-signer to your application. Having another person willing to guarantee your mortgage payments should you default is a great way to get approved for a mortgage. The downside is that your co-signer is on the hook for your mortgage payments if anything goes wrong.

Conclusion

Even though getting a mortgage is a big financial commitment, it’s essential to have a solid understanding of how loans and mortgages work. Whether you’re thinking about buying your first home or you’ve already found your dream home, knowing what factors will work in your favour and which ones might weaken your application can help to ease the process.

If you’re in the market for loans to build a house in Ottawa, Mills Financial Group is the one to turn to! Our team’s combined financial expertise ensures you end up with a financial solution that meets your budget. Schedule a free consultation with our team today!