There are many factors that go into getting a Canadian mortgage. Understanding the process will help to better plan your finances and prepare your documents. This guide will explain what banks and lenders look for in potential borrowers, and how much money you have to pay off a mortgage.
What is the eligibility criteria for the loan?
You must have stable income before you apply for a mortgage. In order to determine if a borrower can pay back the loan on a regular basis, banks will need to confirm income. Before applying, make sure to have bank statements and tax returns.
A down payment is required for all home loans and mortgages. A typical down payment for a traditional mortgage in Canada is 20% of the total house price. A smaller down payment is possible if you are a first time home buyers. First time home buyers have the exception to put 5% to 10% down payment on their property. Any down payment below 20% will require the borrower to obtain loan insurance from CMHC (Canadian Mortgage Housing Corporation). A down payment of less than 5% is allowed only for first time home buyers.
Bad credit can make it impossible to get approved, even if everything else is perfect. Credit scores over 680 are the best for mortgage applicants. Credit scores below 600 make borrowing more difficult as potential lenders will view you as a high risk candidate. A low credit score, or history of repaying loans, can have an impact on whether or not a bank or credit union approves your mortgage application. Before applying for a mortgage, make sure you check your credit score.
There are also different lender options to explore with your mortgage broker if you have a lower credit score.
Preparation is the key to qualifying for a mortgage. Take expert advice from your mortgage broker before you start your mortgage application. If you are familiar with the process and have taken the necessary steps to qualify, your mortgage approval will be much easier.