Mortgage Loan Approval Tips

Mortgage Loan Approval Tips 

The mortgage process can be quite complex as it is. 2021 has seen low mortgage rates, however, low inventory and stricter stress test rules have made it a challenge. When you apply for a mortgage loan, you want your finances to be in the best shape possible to help improve your chances of getting approved. Our Kitchener mortgage broker team is here to help with tips that will better your chances of getting approval.


Tip 1: Check your credit score  

Your credit score gives lenders a snapshot of how healthy your finances are. Credit scores in Canada go from 300 to 900 and are separated into five categories:

  • Excellent credit – 760 to 900
  • Very Good credit – 725 to 759
  • Good/Average credit – 660 to 724
  • Fair credit – 560 to 659
  • Poor credit – 300 to 559

Depending on which credit bureau you are looking at, the criteria for these five categories can slightly differ.

The higher your credit rating is, the better your chances of being approved for a mortgage loan. Ideally, lenders like to see credit scores that are at least 660 or higher. You also have your credit history, which will show lenders information about debts, late payments, and your overall level of debt. By making your monthly debt payments on time and not using all of your available credit lines, you can keep your credit score in better shape.

You should take the time to go over your credit report though, to make sure there are no errors that need to be fixed. It also gives you a better idea of what your weak areas are with your finances. For example, having a lot of high-interest credit cards can bring your score down a bit.

For all our current mortgage clients at the Mortgage Centre Kitchener Waterloo, we recommend using Equifax Canada as your trusted credit reporting Agency. They offer a free Credit Score and Report.   Equifax is accepted by all Mortgage Lenders and will hopefully be closer to your true Credit Score. However, Lenders Credit score may vary widely.    


Tip 2: Save for a larger down payment

When you buy a home, you will need to pay some money upfront, like the down payment. The larger your down payment is the better because it means you will need to borrow less money from the lender. It will also lower how much interest you will end up paying. A down payment that is too low can cause you to not get approved at all. Canada has a minimum down payment requirement depending on the price of the home you are purchasing:

  • Under $500,000 – minimum is 5% of the purchase price
  • $500,000 to $999,999 – 5% of the first $500,000, and 10% for the amount that is over $500,000
  • $1 million and up – 20% of the total purchase price

Also keep in mind that, when you put down less than 20% for a down payment, you are required to buy mortgage insurance, which will raise your monthly mortgage repayments.

Tips 3: Have a stable income 

Part of qualifying for a mortgage loan is proving your income and that income needs to be stable. When lenders see that you have a full-time job that you have been in for a while, it acts as a guarantee that you are more likely to be able to make your monthly repayments. With the effects of the Covid pandemic, job stability has become an even more important factor. If you have a casual work situation, it may be a good idea to get into something more stable to better your chances of being approved.

It can be a bit trickier if you are self-employed because you will need to provide several years of proof of income along with your business details. Lenders want to be sure that you can remain profitable for the long term.


Tip 4: Pay down your existing debt

Having a mortgage means having a long-term debt. This is why it makes sense to get your existing debt paid off or at least minimized. It’s easier to pay off your mortgage if you don’t have a bunch of high-interest credit cards or unsecured loans that you are also paying off. Also, too much existing debt can mean not being approved for a mortgage. The more existing debt you have, the less you will be able to borrow for your mortgage.


Tip 5: Get a pre-approval

Having a mortgage pre-approval will not only let you know what your price range is for a home, but it can also give you an advantage when putting a bid on a home. When you get a pre-approval, the lender will evaluate your financial situation to determine a set interest rate, mortgage amount, and loan term. A pre-approval is valid for 90 to 120 days. This also lets you submit offers on a home faster, something that sellers look for.


Tip 6: Know what your budget is

Creating a budget gives you a better understanding of how much you can reasonably afford. You need to make sure you calculate things like general upkeep and maintenance of a home, utilities, taxes, and even the cost of moving. The last thing that you want to do is buy a home and then be house-poor.


There are a lot of factors that need to be looked at when applying for a mortgage. This is why you should see one of our Kitchener mortgage brokers. We know the mortgage rules and we have access to mortgage options that you won’t find directly from lenders. If you are getting ready to apply for a mortgage, give our team a call today!

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