Steps to Secure Your First Mortgage
Applying for your first mortgage can be scary, but an approachable mortgage broker makes it easier to take the first step. You can ask as many questions as you like, so you can start learning about mortgages. Mortgage approvals are based on perceived risk by the banks.
Tips for Securing Your First Mortgage
Before applying for your first mortgage, look at the 5 C’s of credit that lenders look for.
Lenders check your credit history to make sure that you pay back your debts. The information found in your credit history includes your credit accounts, amounts owed, bill payments, and recent credit inquiries.
Very simply capital is talking about your net worth. In addition to assets that you have, the minimum down payment in Canada is 5%. It is best if you have saved up the 5% for the down payment as this looks really strong when you apply for your first mortgage. We understand that 5% can add up, so ask us about other options such as the flex down program.
When you apply for your mortgage, your house is the collateral. The lender will want to know that the home is very marketable. For example if an older home only has an 60amp electrical box, then the majority of Canadian lenders would not lend on that property.
Capacity refers to debt servicing and your ability to make your payment. For example, the cost of your house should not exceed 30-32% of your gross income. All your debts should not exceed 40-42% of your gross income. With good credit these numbers could be 39% and 44% respectively, but then you would be considered “house broke”. It is important to do your own budget so that you are proactive on what you want your mortgage payment to be.
Your lender also wants to know your story. For example, if your income was low because you got injured at work in a previous year, lenders can often make an exception for the lower income if you are currently back to work full time.
Understand How Accurate Your Pre-approval Will Be
Not all mortgage pre-approvals are equal. If you’re approved in 5 minutes from an online portal, there may be many variables that have been overlooked. Take the time to meet with a professional to make sure…
- Your credit has been checked
- Your income has been verified
- You have confirmed the amount and origin of your down payment
Mortgages in Canada are Document Intensive
Examples of documents that you should be prepared to bring in are as follows:
- Letter of employment
- Most recent paystub
- 2 years income tax history
- 3 months statements showing source of down payment
Be Aware of Your Credit History
If you are just out of college or starting your independent life, you need to grow your credit history. Take out small loans and pay them on time or apply for a credit card with your little balance. You can also get an RRSP loan with the proceeds put into a retirement savings plan, and then the RRSP loan will show up on your credit report. Good credit history will also help you access small loans that you can use to increase your down payment in the flex down program.
Avoid Rush Changes and Lavish Purchases
Do not make expensive purchases on cars, jewelry, or clothes once you get your mortgage pre-approval. It will reduce the loan amount you qualify for. You should also avoid changing your job within six to eight months of planning to buy a house because the lender might view it negatively. However, if you are moving up the career ladder in your industry, it may work well for you. Any life changes like this should be communicated to and discussed with your mortgage broker.
Securing Your First Mortgage in Edmonton
If you are ready to apply for your first mortgage, don’t be afraid just do it. Even if you don’t qualify now, a professional mortgage broker will be able to give you a step by step plan so that you can qualify in the future. For more information on securing your first mortgage in Edmonton, contact Dominion Lending Centres today.Request Mortgage Info