Get Pre-Approved for a Mortgage

There are many benefits to getting pre-approved for a mortgage, not the least of which is looking like a serious buyer. As an experienced realtor with over 10 years of experience working with clients in the Barrie & District Area, I will help you save money and time, assist you in finding the best interest rate and ensure that your home buying experience is enjoyable and stress free. Continue reading below for more information on the pre-approval process.

With current market conditions, it is always a good idea to get pre-approved. Taking the time to get pre-approved signifies to your agent, sellers and mortgage lenders that you are a serious buyer and may help you to close a deal sooner or to beat out other buyers if you go into competing offers. It also helps to save you time, if you know what price range you can afford then you will only look at homes that are within that price range. Please keep in mind that getting pre-approved does not garauntee that you will qualify for a certain mortgage when the time comes. In some cases mortgage lenders don't review your particular financial situation and are merely approving you for their general guidelines, so be wary. 



1. Credit Score

When getting pre-approved one of the areas that lenders will review is your credit score. It is necessary to review your financial health and for lenders to know the potential risks invovled in lending you money. A score between 680 and 900 would qualify you to borrow from an "A" level lender, meaning that you should be able to qualify for most mortgages from varying lenders. Scores between 600 and 680 might still qualify you to borrow from an "A" lender, depending on the instituition and your other financial qualifications, if your score is below 600 you will only qualify for "B" level lenders.

2. Down Payment

The down payment is a one time, lump sum of money that you will put towards paying for your house. In Canada, the minimum amount for a down payment on a residential property is 5%. Generally lenders prefer a down payment of 20%, if your down payment is below 20% then you will be required to get mortgage default insurance which will protect the lender in case you default on your payments. The amount of money you have available for a down payment will be reviewed by a mortgage lender and will affect the amount of money you are able to borrow for a mortgage.

For properties between $500,000 and $999,999 the down payment process is different. For the first $500,000 you would put down 5% for the down payment, anything over $500,000 would need 10% down for the down payment. Therefore a property that costs $600,000 you would need to put at least $35,000 down for the down payment.

($500,000 x 5% = $25,000) + ($100,000 x 10% = $10,000) = $35,000

3. Debt Service Ratio

Your Debt Service Ratio is calculated by lenders using 2 different calculations. Using the Debt Service Ratio calculations lenders are able to determine the largest monthly mortgage payments you can afford while also taking in to account your other debts and financial commitments. The calculation takes in to account your income, expenses and other debts, the use of these calculations can help to minimize the risk of defaulting on your mortgage payments.

4. Supporting Documents

The supporting documents that are required will vary from lender to lender. Below is a detailed list of supporting documents that you might be required to submit to your mortgage lender in order to get approved.

*Proof of income (pay stubs and letter from your employer, or a notice of assessment if you are self employed)
*Length of time with employer
*Proof of down payment and ability to pay closing costs (recent financial statements of bank accounts and investments)
*Proof of any other assets like a car, cottage or boat
*Information about other debts including:
*Credit cards or lines of credit
*Spousal or child support payments
*Student loans
*Car leases or loans
*Personal loans


How to Get a Mortgage in Canada...

see below for an in depth video about canadian mortgages

***Information curtesy of ratehub, for more information on the pre-approval process please check out their website***