When getting a mortgage, there are a few things to consider that will help improve your chances of getting approved. There are three main things to pay attention to; your income, outstanding debts/credit status and down payment.
Income
- Your income is considered when getting a mortgage, especially since it will determine your affordability of a mortgage. The greater the income means a higher potential to carry a greater mortgage. It is important to note that a higher income will also allow the potential for home owners to carry other forms of debt such as credit cards, personal loans, etc.
Debts/Credit Status
- You debt and credit status is considered when getting a mortgage for a couple of reasons. The debts are considered because they are monthly obligations by your income and ultimately influence your overall debt ratios. When you are looking into getting a mortgage, all debts are factored into your debt ratios and will affect your maximum affordability. For example, two people making the same income can have different mortgage affordability in instances where one has other debts and the other has none. Also, credit status is important because it influence the interest rate, which in turn influences the monthly payment for the mortgage. Your credit status is a snapshot of your repayment behaviour and lenders will use this information to assess the risk and set their prices according.
Downpayment
- Down payment is important when getting a mortgage because it determines the size of the mortgage required. In Ontario, the minimum down payment requirement is 5% of the purchase price; however it is better for homeowners in the long run to produce a greater down payment. A mortgage is a large financial commitment, and home owners pay hundreds of thousands of dollars over the course of their lives. The greater the down payment will in turn require a smaller mortgage. The goal of every home owner is to be mortgage free and pay the least amount of interest possible.
These are just the main things to consider when getting a mortgage but there are other factors that must be taken into account, such as individual circumstances. These factors are also influencers of each other and cause different scenarios for homeowners. So if you are in the process of getting mortgage or would like to get more information, please contact us so that we can help make sense of this for you!