Issuu on Google+

Tips to Qualify for a Home Loan


Introduction It’s an understood rule of society that in order to buy a home, you must take out a home loan or mortgage. However, to get to that point you must first qualify for the loan. Not everyone can march into a lending institution and just get a mortgage.


Introduction Anyone who wants a home loan for any type of home must meet the requirements of the lending institution and follow some important steps to get the home they want. Here is some information and tips to help you get the home loan you want.


What Can You Afford? According to the Canada Mortgage and Housing Corporation, figuring out how much you can afford is the first step to qualifying for a home loan. All it takes is a few basic calculations to help you determine what amount will fit into your current lifestyle.


What Can You Afford? The first number that’s figured out is your Gross Debt Service, or GDS. This determines the maximum amount of home-relayed expenses you can afford to pay on a monthly basis. This number shouldn’t be higher than 32 percent of your gross monthly household income. The second calculation is called the Total Debt Service, or TDS. This estimates the maximum debt load that you’re able to carry each month, with the magic number being less than 40 percent of your gross monthly household income.


Important Factors Select Mortgage Corporation states that four main factors are involved when attempting to qualify for a mortgage in Canada. •Income Stability – Anyone who has applied for a home loan in the past knows that a stable income is key. Whether you are looking for something in the higher-end Markham, Ontario real estate market, or something more modest, you need a stable income. Don’t be surprised if your lender asks for pay stubs or a couple years of tax assessments.


Important Factors •

Credit History – Most lenders want to see a credit score of 680 or higher, and if yours isn’t ideal you may be eligible for programs to help build it back up again. Every lender or broker will take a look at your credit history as part of the qualification process.

Property Choice – As Select Mortgage explains, your choice of property plays a role because it is basically the lender’s security against the amount of the loan. Lenders want to know that the property is worth the loan amount, and that it could sell quickly if it ever came to that.


Important Factors •

Down Payment – In today’s market, it isn’t always necessary to have a down payment, but in certain situations it is a requirement to qualify for the mortgage. In a ‘conventional’ mortgage, 20 percent is the normal amount and the lender won’t take out default insurance.


The Pre-Approval Process Most prospective homeowners these days get preapproved for their mortgage before they go out looking for a home. It ends up saving a lot of time, and again, whether you’re in the Markham, Ontario real estate market or a small town in Northern Ontario the concept is the same. Essentially, being pre-approved means that you have gone through the qualifying steps and you know how much of a loan you can get before you look for a home, rather than after you find one you like.


The Pre-Approval Process According to the Financial Consumer Agency of Canada, with a pre-approval you can: • Lock in an interest rate before you find a house in case they rise in the meantime. • Figure out your mortgage payments ahead of time and work them into your budget. • Only look for homes that you know you can afford.


The Pre-Approval Process It is important to keep in mind that the amount you are preapproved for is the maximum and you don’t necessarily have to take on a mortgage that high. It’s also important to remember that the deal will still have to be approved, because even though you’ve been approved for an amount, the lender will want to know the property matches up.


The Pre-Approval Process Your real estate agent will often help you get started in the pre-approval process, but the common places to look include: • Banks • Credit Unions • Mortgage Companies • Insurance Companies • Trust Companies

Following all of the tips and going through the pre-approval process will put you in position to buy the home you want, and start living the life you want to live.


Advice With over 26 years selling Markham-area homes, John Procenko Real Estate has the experience to get your home sold. Visit http://www.procenko.com/ for current listings in the Markham area. They are located at 165 Main Street North Markham, ON L3P 1Y3 (905) 472-7155.


Tips to Qualify for a Home Loan