There 4 main areas that lenders evaluate, while also considering the 5 C’s of credit. These are income, down payment, active and historical credit, and the property itself.
5 Steps to Get a Mortgage
- Income and Employment. You monthly income is what will be paying the mortgage. There is a maximum percentage of your taxable income that a lender can use to service the qualifying mortgage payment, property taxes, condo fees, heating for the property and any other monthly debt responsibilities you have.If you want to get a mortgage you will need to provide confirmation of the amount of money that you currently earn and the guarantee in its consistence. A salary or full time position with guaranteed hours provides more security and consistency compared to employment and income that is fluctuating such as casual, commission or self employed income.
- Down payment. The minimum down payment requirement for a property you will live in is 5% for a home under $500,000, an additional 10% for the amounts above $500,000 and at least 20% down for a property over 1 million. For an investment property such as a rental, a minimum 20% down payment is required.The strongest sources comes from self saved funds, but it can also be gifted from an immediate family member, or come from the equity in the sale of another property. There are also mortgage down payment options called “Flex Down” which is money that you borrow from yourself from a line of credit, or loan. With a flex down the amount borrowed must fit within the debt ratio’s for qualifying.If you are looking for a mortgage, you should be setting aside savings in a high interest savings account, that you can withdraw without fees . If you are considered a first time home buyer consider the RRSP Home Buying Plan.
- A marketable property. As the mortgage lender is going to be providing the funds upfront for the purchase. They will want to ensure that the property is easily marketable. Which means, its easy to sell.Unless you have a larger down payment, plenty of assets and low qualifying ratio’s- you will want to choose a property that would be easy to sell. This would be a property that would appeal to many buyers.
- Credit. Your credit does matter and the history of your relationship with your creditors will help a lender decide if you are a good candidate to lend money too. The minimum requirement is two trade lines, opened for at least two years that are currently active.Tip: start your credit as early as possible and aim to have two ACTIVE trade lines with minimal debt balances. Credit cards are the strongest from of credit especially ones with major banks, ideally with a minimum limit of $2500. Vehicle payments are a trade line, but they will also add a monthly debt which may lower your home buying purchasing power.
- Work with a mortgage broker to get Pre Approved! Mortgage brokers save you time and money!A mortgage broker does not get paid a salary like a bank employee. They are only compensated by the lender once your mortgage funds, so its in their best interest to make sure your mortgage approval goes as smoothly as possible from start to finish. They design their business to be service oriented and look to their clients to refer them to their friends, family and co-workers. Not only can they shop the market from many lenders rates and products to save you money, but they can set you up on a mortgage plan to maximize your purchasing power. Mortgage brokers have the ability to work much quicker than the banks to complete your mortgage pre approval, help you win your offer on your home and get your mortgage approved.
At Mortgage Sisters West we would love to work with you to make your home ownership dreams become a reality. We have a simple 4 step process to get you on your path! Book a call with one of our Mortgage Sisters today!
We serve all of Alberta, with a focus on Edmonton, Sherwood Park, St. Albert, Fort Saskatchewan, Spruce Grove, Stony Plain, Beaumont, Leduc and surrounding areas!
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